<PAGE>
As filed with the Securities and Exchange Commission on May 11, 1999.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
INTERNET CAPITAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7389 23-2996071
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
--------------------
435 Devon Park Drive
Building 800
Wayne, Pennsylvania 19087
(610) 989-0111
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------------
Walter W. Buckley, III
President and Chief Executive Officer
Internet Capital Group, Inc.
435 Devon Park Drive
Building 800
Wayne, Pennsylvania 19087
(610) 989-0111
(Name, address including zip code, and telephone number, including area code, of
agent for service)
--------------------
With copies to:
<TABLE>
<S> <C>
Christopher G. Karras, Esq. Bruce K. Dallas, Esq.
Dechert Price & Rhoads Davis Polk & Wardwell
4000 Bell Atlantic Tower 450 Lexington Avenue
1717 Arch Street New York, New York 10017
Philadelphia, Pennsylvania 19103 (212) 450-4000
(215) 994-4000
</TABLE>
--------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price (1) Registration Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.001 per share $210,000,000 $58,380
================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
--------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Explanatory Note
This Registration Statement contains two forms of prospectus. One will be
used in connection with an offering of the registrant's common stock to the
general public and the other will be used in the Directed Share Subscription
Program offering of the registrant's common stock to shareholders of Safeguard
Scientifics, Inc. The prospectuses will be identical except that a letter to
shareholders of Safeguard Scientifics, Inc. detailing the procedures for the
Directed Share Subscription Program will be bound to the cover of the prospectus
to be used in that program. The letter to shareholders of Safeguard Scientifics,
Inc. is filed as Exhibit 99.1 to this Registration Statement.
<PAGE>
The Information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting offers to buy these securities in
any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated May 11, 1999
PROSPECTUS
- ----------
Shares
[Internet Capital Group logo appears here]
Common Stock
------------
This is Internet Capital Group, Inc.'s initial public offering of shares of
common stock.
We expect the public offering price to be between $ and $ per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "ICGE."
Investing in our common stock involves risks which are described in the "Risk
Factors" section beginning on page 4 of this prospectus.
------------
Per Share Total
--------- -----
Public Offering Price................................. $ $
Underwriting Discount................................. $ $
Proceeds, before expenses, to Internet
Capital Group, Inc................................... $ $
The underwriters may also purchase up to an additional shares at the
public offering price, less the underwriting discount, within 30 days from the
date of this prospectus to cover over-allotments.
At our request, the underwriters have reserved shares for sale at
the public offering price to our employees, directors and other persons with
relationships with us. See "Underwriting." As part of this offering, we are
offering shares at the public offering price to certain shareholders
of Safeguard Scientifics, Inc. See "The Directed Share Subscription Program."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New York on
or about , 1999.
------------
Merrill Lynch & Co.
BancBoston Robertson Stephens
BT Alex. Brown
NationsBanc Montgomery Securities LLC
Wit Capital Corporation
------------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary........................................................... 1
Risk Factors................................................................. 4
Use Of Proceeds.............................................................. 14
Dividend Policy.............................................................. 14
The Reorganization........................................................... 14
The Directed Share Subscription Program...................................... 14
Capitalization............................................................... 15
Dilution..................................................................... 16
Selected Consolidated Financial Data......................................... 17
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations.............................................................. 18
Our Business................................................................. 26
Management................................................................... 44
Certain Transactions......................................................... 57
Principal Shareholders....................................................... 60
Description Of Capital Stock................................................. 63
Shares Eligible For Future Sale.............................................. 66
Underwriting................................................................. 67
Legal Matters................................................................ 70
Experts...................................................................... 70
Where You Can Find More Information.......................................... 71
Index to Consolidated Financial Statements...................................F-1
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Internet Capital Group and our Partner
Companies, including, among other things:
. Development of an e-commerce market. We define e-commerce as conducting
or facilitating business transactions over the Internet.
. Our ability to identify trends in our markets and the markets of our
Partner Companies and to offer new solutions that address the changing
needs of these markets.
. Our ability to successfully execute our business model.
. Our Partner Companies' ability to compete successfully against direct
and indirect competitors.
. Our ability to acquire interests in additional companies.
. Growth in demand for Internet products and services.
. Adoption of the Internet as an advertising medium.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
-------------
The terms "Internet Capital Group," "our" and "we," as used in this
prospectus, refer to Internet Capital Group, L.L.C. and its wholly-owned
subsidiary, Internet Capital Group Operations, Inc. (formerly known as Internet
Capital Group, Inc.), for periods before the reorganization of Internet Capital
Group, L.L.C. into Internet Capital Group, Inc. and refer to Internet Capital
Group, Inc. and this subsidiary for periods after the reorganization, except
where it is clear that the term refers only to the parent company.
Although we refer to the companies in which we have acquired an equity
interest as our "Partner Companies" and that we have a "partnership" with these
companies, we do not act as an agent or legal representative for any of our
Partner Companies, we do not have the power or authority to legally bind any of
our Partner Companies and we do not have the types of liabilities for our
Partner Companies that a general partner of a partnership would have.
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
We intend to furnish our shareholders with annual reports containing
consolidated financial statements audited by an independent accounting firm.
<PAGE>
PROSPECTUS SUMMARY
This summary is not complete and may not contain all of the information
that may be important to you. You should read the entire prospectus carefully,
including the financial data and related notes, before making an investment
decision. Unless otherwise specifically stated, the information in this
prospectus has been adjusted to reflect the automatic conversion of all
outstanding convertible notes into shares of common stock, but does not take
into account the possible sale of additional shares of common stock to the
underwriters by us pursuant to the underwriters' right to purchase additional
shares to cover over-allotments. In addition, unless otherwise indicated, all
information in this prospectus gives effect to the reorganization described in
"The Reorganization" that was effected before this offering.
Internet Capital Group, Inc.
Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.
Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources.
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board. Currently, our Advisory Board consists of individuals with
executive-level experience in general management, sales and marketing and
information technology at such leading companies as Cisco Systems, Coca-Cola
Company, Exodus Communications, IBM, MasterCard, Merrill Lynch and Microsoft. We
believe that building successful B2B e-commerce companies enhances the ability
of our collaborative network to facilitate innovation and growth among our
Partner Companies.
The substantial growth in B2B e-commerce creates tremendous market
opportunities for new emerging companies. International Data Corporation
estimates that the B2B e-commerce market will grow from $35 billion in 1998 to
more than $1.1 trillion by 2003. We focus on two types of B2B e-commerce
companies, which we call market makers and infrastructure service providers.
. Market makers bring buyers and sellers together by creating Internet-
based markets for the exchange of goods, services and information.
Market makers enable more effective and lower cost commerce for
traditional businesses by providing access through the Internet to a
broader range of buyers and sellers. Market makers typically operate in
a specific industry and tailor their business models to match a target
market's distinct characteristics. Our Partner Company network currently
includes significant interests in 13 market makers: Arbinet, BidCom,
Collabria, CommerX, ComputerJobs.com, Deja.com, e-Chemicals, Internet
Commerce Systems, ONVIA.com, PlanSponsor Exchange, RapidAutoNet,
Universal Access and VerticalNet.
. Infrastructure service providers sell software and services to
businesses engaged in e-commerce. Many businesses need assistance in
designing business practices to take advantage of the Internet and in
building and managing the technological infrastructure needed to support
B2B e-commerce. Our Partner Company network currently includes
significant interests in 16 infrastructure service providers:
Benchmarking Partners, Blackboard, Breakaway Solutions, ClearCommerce,
Context Integration, Entegrity Solutions, LinkShare, MessageQuest,
PrivaSeek, SageMaker, ServiceSoft, Sky Alland Marketing, SMART
Technologies, Syncra Software, US Interactive and Vivant!.
We have grown rapidly since our inception in 1996. In 1998, we added twelve
B2B e-commerce companies to our network and from the beginning of 1999 to April
30, 1999, we added eight B2B e-commerce companies to our network.
<PAGE>
Our principal executive office is located at 435 Devon Park Drive, Building
800, Wayne, Pennsylvania 19087 and our telephone number is (610) 989-0111. We
also maintain offices in San Francisco, California, and Boston, Massachusetts.
We maintain a site on the World Wide Web at www.ICGE.com. The information on our
Web site is not part of this prospectus.
This Offering
The offering information provided below assumes that the underwriters'
over-allotment option is not exercised and excludes:
. shares of common stock reserved for issuance under our 1999 Equity
Compensation Plan, under which options to purchase 9,631,500 shares were
outstanding as of April 30, 1999 at a weighted average exercise price of
$2.30 per share, and
. warrants outstanding to purchase shares at an exercise price
of $ per share.
Common stock offered................................ shares
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... We intend to use the
offering proceeds for
repayment of outstanding
debt, acquisitions and
working capital.
Risk factors........................................ See "Risk Factors" and the
other information included
in this prospectus for a
discussion of factors you
should carefully consider
before deciding to invest
in shares of our common
stock.
Nasdaq National Market symbol....................... ICGE
The Directed Share Subscription Program
As part of this offering, we are offering shares of our common stock to
certain shareholders of Safeguard Scientifics, Inc. in a directed share
subscription program. The program is described in greater detail below under the
heading "The Directed Share Subscription Program."
2
<PAGE>
Summary Consolidated Financial Data
The following summary historical and pro forma consolidated financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited
Consolidated Financial Statements and related Notes thereto included elsewhere
in this prospectus. The summary pro forma information does not purport to
represent what our results would have been if these events had occurred at the
dates indicated. The pro forma consolidated statement of operations data
reflects our being taxed as a C-corporation since January 1, 1998, although we
have been taxed as a C-corporation since February 2, 1999. The pro forma
consolidated balance sheet data reflects the issuance of shares of our common
stock at $ per share from January through March, 1999 and the issuance of $90
million of our convertible notes in May, 1999. The pro forma as adjusted
consolidated balance sheet data reflects the automatic converion of our
convertible notes into shares of our common stock upon completion of this
offering and the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share and after deduction of
estimated underwriting discounts and commissions and estimated offering
expenses.
<TABLE>
<CAPTION>
March 4, 1996
(inception) to
December 31, Year Ended December 31,
--------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenue
Partner Company Operations................................. $ 285,140 $ 791,822 $ 3,134,769
General ICG Operations..................................... -- -- --
----------------- ----------------- -----------------
$ 285,140 $ 791,822 $ 3,134,769
================= ================= =================
Operating Loss
Partner Company Operations................................. $ (789,762) $ (4,663,796) $(16,065,225)
General ICG Operations..................................... (1,360,821) (2,054,118) (3,512,586)
----------------- ----------------- -----------------
$(2,150,583) $ (6,717,914) $(19,577,811)
================= ================= =================
Net Income (Loss)
Partner Company Operations................................. $ (796,202) $ (4,778,902) $(16,150,496)
General ICG Operations..................................... (1,266,283) (1,800,726) 30,049,424
----------------- ----------------- -----------------
$(2,062,485) $ (6,579,628) $ 13,898,928
================= ================= =================
Pro forma income tax provision.............................. $ 5,142,603
Pro forma net income........................................ 8,756,325
Pro forma net income per share -- basic and diluted.........
Pro forma shares used in computing net income per share.....
Basic......................................................
Diluted....................................................
December 31, 1998
-----------------------------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
----------------- ----------------- -----------------
Consolidated Balance Sheet Data:
Cash and cash equivalents................................... $26,840,904 $116,840,904
Working capital............................................. 20,452,438 110,452,438
Total assets................................................ 96,785,975 186,785,975
Long-term debt.............................................. 351,924 351,924
Convertible subordinated notes.............................. -- 90,000,000
Total shareholders' equity.................................. 80,724,378 80,724,378
</TABLE>
3
<PAGE>
RISK FACTORS
Investing in our common stock will provide you with an equity ownership
interest in Internet Capital Group. As one of our shareholders, your investment
will be subject to risks inherent to our business. The price of our common stock
may decline. You should carefully consider the following factors as well as
other information contained in this prospectus before deciding to invest in
shares of our common stock.
RISKS PARTICULAR TO INTERNET CAPITAL GROUP
We have a limited operating history upon which you may evaluate us
We were formed in March 1996. Although we have grown significantly since
then, we have a limited operating history upon which you may evaluate our
business and prospects. We and our Partner Companies are among the many
companies that have entered into the relatively new B2B e-commerce market. Many
of our Partner Companies are in the early stages of their development. Our
business and prospects must be considered in light of the risk, expense and
difficulties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets such as
B2B e-commerce. If we are unable to effectively allocate our resources and help
grow existing Partner Companies, our stock price may be adversely affected and
we may be unable to execute our strategy of developing a collaborative network
of Partner Companies.
Our business depends upon the performance of our Partner Companies, which is
uncertain
Economic, governmental, industry and internal company factors outside our
control affect each of our Partner Companies. A significant portion of our
assets is comprised of ownership interests in our Partner Companies. In
particular, the value of our holdings in VerticalNet could represent a
significant portion of our market capitalization. If our Partner Companies do
not succeed, the value of our assets will decline. Some of the risks relating to
our Partner Companies are described below under "Risks Particular to Our Partner
Companies."
Our business model is unproven
Our strategy is based on an unproven business model. Our business model
depends on the willingness of companies to join our collaborative network and
the ability of the collaborative network to assist our Partner Companies. Our
business model depends on our ability to share information within our network of
Partner Companies. If competition develops among our Partner Companies, we may
be unable to fully benefit from the sharing of information within our network of
Partner Companies. If we cannot convince companies of the value of our business
model, our ability to attract new companies will be adversely affected and our
strategy of building a collaborative network may not succeed.
We may have to take certain actions to avoid registration under the Investment
Company Act of 1940
We believe that we are primarily and actively engaged in the business of e-
commerce through our Partner Companies and have applied to the Securities and
Exchange Commission for an exemptive order from the Investment Company Act of
1940. If we receive the exemptive order, we would not be regulated by this Act
as long as we continue to be primarily engaged in e-commerce through majority-
owned subsidiaries or controlled companies. However, we cannot be certain that
the Securities and Exchange Commission will grant this exemption. If it does
not, we may need to make significant changes to our business activities.
Generally, a company must register under the Investment Company Act and
comply with significant restrictions on operations and transactions with
affiliates if its investment securities exceed 40% of the company's total
assets, or if it holds itself out as being primarily engaged in the business of
investing, owning or holding securities. Under an alternative test, a company is
not required to register under the Investment Company Act if not more than 45%
of its total assets consist of, and not more than 45% of its net income is
derived from, securities other than government securities and securities of
majority-owned subsidiaries and companies primarily controlled by it. We are
currently unable to rely on this alternative test as a result of net income
generated from the sale of two minority interests and instead are relying on a
one-year temporary exemption from the registration requirements of the
Investment Company Act.
4
<PAGE>
By May 2000 if the exemptive order has not been obtained, or earlier if we
believe the current temporary exemption is no longer available, we may need to
take certain actions to avoid the requirement to register as an investment
company. For example, we may be compelled to acquire additional income or loss
generating assets that we might not otherwise have acquired, be forced to forego
opportunities to acquire interests in companies that would be important to our
strategy or be forced to forego the sale of minority interests we would
otherwise want to sell. In addition, we may need to sell some assets which are
considered to be investment securities, including interests in Partner
Companies. It is not feasible for us to register as an investment company
because the Investment Company Act regulations are inconsistent with our
strategy of actively managing, operating and promoting collaboration among our
network of Partner Companies.
Fluctuations in our quarterly results may adversely affect our stock price
We expect that our quarterly results will fluctuate significantly due to
many factors, including:
. the operating results of our Partner Companies;
. completed acquisitions;
. changes in our methods of accounting for our Partner Company interests,
which may result from changes in our ownership percentages of our
Partner Companies;
. sales of equity securities by our Partner Companies, which could cause
us to recognize gains or losses under applicable accounting rules;
. the development of the B2B e-commerce market;
. intense competition;
. management of our growth and the growth of our Partner Companies; and
. divestitures of interests in our Partner Companies.
We believe that period-to-period comparisons of our operating results are not
meaningful. Additionally, if our operating results in one or more quarters do
not meet securities analysts' or your expectations, the price of our common
stock could decrease.
Our success is dependent on our key personnel and the key personnel of our
Partner Companies
We believe that our success will depend on continued employment by us and
our Partner Companies of senior management and key technical personnel. Our
success also depends on the continued assistance of our Advisory Board members,
who will from time to time leave our Advisory Board. If one or more members of
our senior management, our Partner Companies' senior management or our Advisory
Board were unable or unwilling to continue in their present positions, our
business and operations could be disrupted.
Many of our management personnel have worked for us for less than one year.
Our efficiency may be limited while these employees and future employees are
being integrated into our operations. In addition, we may be unable to find and
hire additional qualified management and professional personnel to help lead us
and our Partner Companies.
The success of some of our Partner Companies also depends on their having
highly trained technical and marketing personnel. Our Partner Companies will
need to continue to hire additional personnel as their businesses grow. A
shortage in the number of trained technical and marketing personnel could limit
the ability of our Partner Companies to increase sales of their existing
products and services and launch new product offerings.
We have had a history of operating losses and expect continued operating losses
in the foreseeable future
For the year ended December 31, 1998, we realized net income of $13.9
million primarily due to $34.4 million of non-operating income from the sale of
certain minority interests. During that same year, net operating losses totaled
$19.6 million. In addition, we incurred operating losses of $6.7 million in 1997
5
<PAGE>
and $2.2 million in 1996. We expect to continue to incur operating losses for
the foreseeable future and, if we ever have operating profits, we may not be
able to sustain them.
Our expenses will increase as we build an infrastructure to implement our
business model. For example, we expect to hire additional employees, expand
information technology systems and lease more space for our corporate offices.
In addition, we plan to significantly increase our operating expenses to:
. broaden our Partner Company support capabilities;
. explore acquisition opportunities and alliances with other companies;
and
. facilitate business arrangements among our Partner Companies.
Expenses may also increase due to the potential effect of goodwill amortization
and other charges resulting from completed and future acquisitions. If any of
these and other expenses are not accompanied by increased revenue, our
operating losses will be greater than we anticipate.
Our Partner Companies are growing rapidly and we may have difficulty assisting
them in managing their growth
Our Partner Companies have grown, and we expect them to continue to grow,
rapidly by adding new products and services and hiring new employees. This
growth is likely to place significant strain on their resources and on the
resources we allocate to assist our Partner Companies. In addition, our
management may be unable to convince our Partner Companies to adopt our ideas
for effectively and successfully managing their growth.
We may compete with some of our shareholders and Partner Companies, and our
Partner Companies may compete with each other
We may compete with some of our shareholders and Partner Companies for
Internet-related opportunities. After this offering, Comcast Corporation,
Compaq Computer Corporation, General Electric Capital Corporation and Safeguard
Scientifics, Inc. will beneficially own %, %, % and
% of our common stock, respectively. These shareholders may compete with
us to acquire interests in B2B e-commerce companies. Comcast Corporation,
General Electric Capital Corporation and Safeguard Scientifics, Inc. currently
each have a designee as a member of our board of directors, which may give these
companies access to our business plan and knowledge about potential
acquisitions. In addition, we may compete with our Partner Companies to acquire
interests in B2B e-commerce companies, and our Partner Companies may compete
with each other for acquisitions or other B2B e-commerce opportunities. In
particular, VerticalNet seeks to expand, in part through acquisition, its number
of B2B communities. VerticalNet, therefore, may seek to acquire companies that
we would find attractive. While we may partner with VerticalNet on future
acquisitions, we have no current contractual obligations to do so. We do not
have any contracts or other understandings with our shareholders or Partner
Companies that would govern the resolution of these potential conflicts. Such
competition, and the complications posed by the designated directors, may deter
companies from partnering with us and may limit our business opportunities.
We face competition from potential acquirors of Internet-related companies
We face competition from other capital providers including publicly-traded
Internet companies, venture capital companies and large corporations. Many of
these competitors have greater financial resources and brand name recognition
than we do. These competitors may limit our opportunity to acquire interests in
new Partner Companies. If we cannot acquire interests in attractive companies,
our strategy to build a collaborative network of Partner Companies may not
succeed.
Our success could be impaired by future market conditions
Our strategy involves creating value for our shareholders and the employees
of our Partner Companies by helping our Partner Companies grow and access the
capital markets. We are therefore dependent on the market for Internet-related
companies in general and for initial public offerings of those companies in
particular. To date, there have been a substantial number of Internet-related
initial public offerings and additional offerings are expected to be made in the
future. If the market for Internet-related companies and initial public
offerings were to
6
<PAGE>
weaken for an extended period of time, the ability of our Partner Companies to
grow and access the capital markets will be impaired, and we may need to provide
additional capital to our Partner Companies.
We may be unable to obtain maximum value for our Partner Company interests
We have significant positions in our Partner Companies. While we generally
do not anticipate selling our interests in our Partner Companies, if we were to
divest all or part of them, we may not receive maximum value for these
positions. For Partner Companies with publicly-traded stock, we may be unable to
sell our interest at then-quoted market prices. Furthermore, for those Partner
Companies that do not have publicly traded stock, the realizable value of our
interests may ultimately prove to be lower than the carrying value currently
reflected in our consolidated financial statements.
We may not have opportunities to acquire interests in additional companies
We may be unable to identify companies that complement our strategy, and
even if we identify a company that complements our strategy, we may be unable to
acquire an interest in the company for many reasons, including:
. a failure to agree on the terms of the acquisition, such as the amount
or price of our acquired interest;
. incompatibility between us and management of the company;
. competition from other acquirors of B2B e-commerce companies;
. a lack of capital to acquire an interest in the company; and
. the unwillingness of the company to partner with us.
If we cannot acquire interests in attractive companies, our strategy to build a
collaborative network of Partner Companies may not succeed.
Our business may be disrupted or adversely affected by future acquisitions
We have acquired, and plan to continue to acquire, significant interests in
Internet-related companies that complement our business strategy. In the future,
we may acquire larger percentages or larger interests in companies than we have
in the past, or we may seek to acquire 100% ownership of companies. These larger
acquisitions may place significantly greater strain on our resources, ability to
manage such companies and ability to integrate them into our collaborative
network. Future acquisitions are subject to the following risks:
. Our acquisitions may cause a disruption in our ongoing support of our
Partner Companies, distract our management and other resources and make
it difficult to maintain our standards, controls and procedures.
. We may acquire interests in companies in Internet-related markets in
which we have little experience.
. We may not be able to facilitate collaboration between our Partner
Companies and new companies that we acquire.
. To fund future acquisitions we may be required to incur debt or issue
equity securities, which may be dilutive to existing shareholders.
Our systems and those of our Partner Companies and third parties may not be Year
2000 compliant which could disrupt our operations and the operations of our
Partner Companies
Many computer programs have been written using two digits rather than four
digits to define the applicable year. This poses a problem at the end of the
century because these computer programs may recognize a date using "00" as the
year 1900, rather than the year 2000. This in turn could result in major system
failures or miscalculations and is generally referred to as the Year 2000 issue.
We may realize exposure and risk if our
7
<PAGE>
systems and the systems on which our Partner Companies are dependent to conduct
their operations are not Year 2000 compliant. Our potential areas of exposure
include products purchased from third parties, computers, software, telephone
systems and other equipment used internally. If our present efforts and the
efforts of our Partner Companies to address the Year 2000 compliance issues are
not successful, or if distributors, suppliers and other third parties with which
we and our Partner Companies conduct business do not successfully address such
issues, our business and the businesses of our Partner Companies may not be
operational for a period of time. If the Web-hosting facilities of our Partner
Companies are not Year 2000 compliant, their production Web sites would be
unavailable and they would not be able to deliver services to their users.
RISKS PARTICULAR TO OUR PARTNER COMPANIES
Fluctuation in the market price of VerticalNet common stock may affect the
market price of our common stock
VerticalNet is one of our Partner Companies. As of April 30, 1999, our
holdings in VerticalNet were valued at approximately $700 million. This could
represent a significant portion of our market capitalization. The market price
of VerticalNet's common stock has been highly volatile. Fluctuations in the
market price of VerticalNet's common stock are likely to impact the market price
of our common stock.
VerticalNet's results of operations, and accordingly the price of its
common stock, may be adversely affected by the following factors:
. lack of acceptance of the Internet as an advertising medium;
. inability to develop a large base of users of its Web sites who possess
demographic characteristics attractive to advertisers;
. lower advertising rates;
. slow development of the e-commerce market;
. lack of acceptance of its Internet content;
. loss of key content providers;
. intense competition;
. loss of key personnel; and
. inability to manage growth.
The success of our Partner Companies depends on the development of the B2B e-
commerce market, which is uncertain
All of our Partner Companies rely on the Internet for the success of their
businesses. The development of the e-commerce market is in its early stages. If
widespread commercial use of the Internet does not develop, or if the Internet
does not develop as an effective medium for the provision of products and
services, our Partner Companies may not succeed.
Our long-term success depends on widespread market-acceptance of B2B e-
commerce. A number of factors could prevent such acceptance, including the
following:
. the unwillingness of businesses to shift from traditional processes to
B2B e-commerce processes;
. the necessary network infrastructure for substantial growth in usage of
B2B e-commerce may not be adequately developed;
. increased government regulation or taxation may adversely affect the
viability of B2B e-commerce;
8
<PAGE>
. insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times for the
users of B2B e-commerce; and
. concern and adverse publicity about the security of B2B e-commerce
transactions.
There is intense competition for the internet products and services our Partner
Companies offer
Competition for Internet products and services is intense. As the market
for B2B e-commerce grows, we expect that competition will intensify. Barriers to
entry are minimal, and competitors can offer products and services at a
relatively low cost. Our Partner Companies compete for a share of a customer's:
. purchasing budget for services, materials and supplies with other online
providers and traditional distribution channels;
. dollars spent on consulting services with many established information
systems and management consulting firms; and
. advertising budget with online services and traditional off-line media,
such as print and trade associations.
In addition, some of our Partner Companies compete to attract and retain a
critical mass of buyers and sellers. Several companies offer competitive
solutions that compete with one or more of our Partner Companies. We expect that
additional companies will offer competing solutions on a stand-alone or combined
basis in the future. Furthermore, our Partner Companies' competitors may develop
Internet products or services that are superior to, or have greater market
acceptance than, the solutions offered by our Partner Companies. If our Partner
Companies are unable to compete successfully against their competitors, our
Partner Companies may fail.
Many of our Partner Companies' competitors have greater brand recognition
and greater financial, marketing and other resources than our Partner Companies.
This may place our Partner Companies at a disadvantage in responding to their
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives.
Some of our Partner Companies may be unable to protect their proprietary rights
and may infringe on the proprietary rights of others
Proprietary rights are important to the success and competitive position of
many of our Partner Companies. Although our Partner Companies seek to protect
their proprietary rights, their actions may be inadequate to protect any
trademarks and other proprietary rights. In addition, effective copyright and
trademark protection may be unenforceable or limited in certain countries, and
the global nature of the Internet makes it impossible for some of our Partner
Companies to control the dissemination of their work and use of their services.
Some of our Partner Companies also license content from third parties and it is
possible that they could become subject to infringement actions based upon the
content licensed from those third parties. Our Partner Companies generally
obtain representations as to the origin and ownership of such licensed content;
however, this may not adequately protect them. Any of these claims, with or
without merit, could subject our Partner Companies to costly litigation and the
diversion of their technical and management personnel. If our Partner Companies
incur costly litigation and their personnel are not effectively deployed, the
expenses incurred by our Partner Companies will increase and their profits, if
any, will decrease.
Our Partner Companies that publish or distribute content over the Internet may
be subject to legal liability
Some of our Partner Companies may be subject to legal claims relating to
the content on their Web sites, or the downloading and distribution of this
content. Claims could involve matters such as defamation, invasion of privacy
and copyright infringement. Providers of Internet products and services have
been sued in the past, sometimes successfully, based on the content of material.
In addition, some of the content provided by our Partner Companies on their Web
sites is drawn from data compiled by other parties, including governmental and
commercial sources, and our Partner Companies re-enter the data. This data may
have errors. If any of our Partner Companies' Web site content is improperly
used or if any of our Partner Companies supply incorrect information, it could
result in unexpected liability. Any of our Partner Companies that incur this
type of unexpected liability
9
<PAGE>
may not have insurance to cover the claim or its insurance may not provide
sufficient coverage. If our Partner Companies incur substantial cost because of
this type of unexpected liability, the expenses incurred by our Partner
Companies will increase and their profits, if any, will decrease.
Our Partner Companies' computer and communications systems may fail
Some of our Partner Companies' businesses depend on the efficient and
uninterrupted operation of their computer and communications hardware systems.
Any system interruptions that cause our Partner Companies' Web sites to be
unavailable to Web browsers may reduce the attractiveness of our Partner
Companies' Web sites to third party content providers. If third party content
providers are unwilling to use our Partner Companies' Web sites, our business,
financial condition and operating results could be adversely affected.
Interruptions could result from natural disasters as well as power loss,
telecommunications failure and similar events.
Capacity limits on some of our Partner Companies' technology, transaction
processing systems and network hardware and software may be difficult to project
and they may not be able to expand and upgrade their systems to meet increased
use.
As traffic on our Partner Companies' Web sites continues to increase, they
must expand and upgrade their technology, transaction processing systems and
network hardware and software. Our Partner Companies may be unable to accurately
project the rate of increase in use of their Web sites. In addition, our Partner
Companies may not be able to expand and upgrade their systems and network
hardware and software capabilities to accommodate increased use of their Web
sites. If our Partner Companies are unable to appropriately upgrade their
systems and network hardware and software, the operations and processes of our
Partner Companies may be disrupted.
Our Partner Companies may not be able to attract a loyal base of users to their
Web sites
Some of our Partner Companies rely on the content of their Web sites to
attract business. Our success depends upon the ability of these Partner
Companies to deliver compelling Internet content to their targeted users. If our
Partner Companies are unable to develop Internet content that attracts a loyal
user base, the revenues and profitability of our Partner Companies could be
impaired. Internet users can freely navigate and instantly switch among a large
number of Web sites. Many of these Web sites offer original content. Thus, our
Partner Companies may have difficulty distinguishing the content on their Web
sites to attract a loyal base of users.
Our Partner Companies may be unable to acquire or maintain easily identifiable
Web site addresses or prevent third parties from acquiring Web site addresses
similar to theirs
Some of our Partner Companies hold various Web site addresses relating to
their brands. These Partner Companies may not be able to prevent third parties
from acquiring Web site addresses that are similar to their addresses, which
could adversely affect the use by businesses of our Partner Companies' Web
sites. In these instances, our Partner Companies may not grow as we expect. The
acquisition and maintenance of Web site addresses generally is regulated by
governmental agencies and their designees. The regulation of Web site addresses
in the United States and in foreign countries is subject to change. As a result,
our Partner Companies may not be able to acquire or maintain relevant Web site
addresses in all countries where they conduct business. Furthermore, the
relationship between regulations governing such addresses and laws protecting
trademarks is unclear.
Some of our Partner Companies are dependent on barter transactions that do not
generate cash revenue
During 1998, revenue from barter transactions constituted a significant
portion of some of our Partner Companies' revenue. Barter revenue may continue
to represent a significant portion of their revenue in future periods. Barter
transactions do not generate any cash revenue and are entered into by our
Partner Companies to promote their brands without any expenditure of cash
resources.
10
<PAGE>
RISKS RELATING TO THE INTERNET INDUSTRY
Concerns regarding security of transactions and transmitting confidential
information over the Internet may have an adverse impact on our business
We believe that concern regarding the security of confidential information
transmitted over the Internet prevents many potential customers from engaging in
online transactions. If our Partner Companies that depend on such transactions
do not add sufficient security features to their future product releases, our
Partner Companies' products may not gain market acceptance or there may be
additional legal exposure to them.
Despite the measures some of our Partner Companies have taken, the
infrastructure of each of them is potentially vulnerable to physical or
electronic break-ins, viruses or similar problems. If a person circumvents the
security measures imposed by any one of our Partner Companies, he or she could
misappropriate proprietary information or cause interruption in operations of
the Partner Company. Security breaches that result in access to confidential
information could damage the reputation of any one of our Partner Companies and
expose the Partner Company affected to a risk of loss or liability. Some of our
Partner Companies may be required to make significant investments and efforts to
protect against or remedy security breaches. Additionally, as e-commerce becomes
more widespread, our Partner Companies' customers will become more concerned
about security. If our Partner Companies are unable to adequately address these
concerns, they may be unable to sell their goods and services.
Our Partner Companies operate in markets characterized by rapid technology
change
The markets in which our Partner Companies operate are characterized by
rapid technological change, frequent new product and service introductions and
evolving industry standards. Significant technological changes could render
their existing Web site technology or other products and services obsolete. The
e-commerce market's growth and intense competition exacerbate these conditions.
If our Partner Companies are unable to successfully respond to these
developments or do not respond in a cost-effective way, our business, financial
condition and operating results will be adversely affected. To be successful,
our Partner Companies must adapt to their rapidly changing markets by
continually improving the responsiveness, services and features of their
products and services and by developing new features to meet the needs of their
customers. Our success will depend, in part, on our Partner Companies' ability
to license leading technologies useful in their businesses, enhance their
existing products and services and develop new offerings and technology that
address the needs of their customers. Our Partner Companies will also need to
respond to technological advances and emerging industry standards in a cost-
effective and timely manner.
Government regulations and legal uncertainties may place financial burdens on
our business and the businesses of our Partner Companies
As as April 30, 1999, there were few laws or regulations directed
specifically at e-commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection of and use of data from Web
site visitors and related privacy issues, pricing, content, copyrights, online
gambling, distribution and the quality of goods and services. The enactment of
any additional laws or regulations may impede the growth of the Internet and B2B
e-commerce, which could decrease the revenue of our Partner Companies and place
additional financial burdens on our business and the businesses of our Partner
Companies.
Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. For example, Congress recently
enacted laws regarding online copyright infringement and the protection of
information collected online from children. Although these laws may not have a
direct adverse effect on our business or those of our Partner Companies, they
add to the legal and regulatory burden faced by B2B e-commerce companies.
RISKS RELATING TO THE OFFERING
Shares eligible for future sale by our current shareholders may decrease the
price of our common stock
If our shareholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following the offering, then the market price of our common stock could fall.
Restrictions under the securities laws and certain lock-up agreements limit the
number of shares of common stock available for sale in the public market. The
holders of shares of common stock, options exercisable into an
aggregate of shares of common stock, and warrants exercisable
into an aggregate of shares of common stock have agreed not to sell
any of these securities for 180 days after the offering without the prior
written consent of Merrill Lynch. In addition, the holders of the convertible
notes that will automatically convert into shares of common stock
upon the closing of this offering have also agreed to such restrictions.
However, Merrill Lynch may, in its sole discretion, release all or any portion
of the securities subject to the lock-up agreements.
The holders of 72,479,549 shares of common stock, the holders of warrants
to purchase shares of common stock and the holders of convertible notes that
will automatically convert into shares of common stock upon
the closing of this offering have demand or piggy-back registration rights.
However, the holders of these securities that have demand registration rights
have agreed not to demand that their securities be registered for 180 days after
the offering without the prior written consent of Merrill Lynch. We also may
shortly file a registration statement to register all shares of common stock
under our stock option plans. After such registration statement is
11
<PAGE>
effective, common stock issued upon exercise of stock options under our benefit
plans will be eligible for resale in the public market without restriction.
The interests of certain of our significant shareholders may conflict with our
interests and the interests of our other shareholders
As a result of their combined stock ownership, Safeguard Scientifics
(Delaware), Inc. and Safeguard 98 Capital L.P., together, will be in a position
to affect significantly our corporate actions such as mergers or takeover
attempts in a manner that could conflict with the interests of our public
shareholders. After the offering, Safeguard Scientifics (Delaware), Inc. and
Safeguard 98 Capital L.P., together, will beneficially own % of our
common stock.
Anti-takeover provisions and our right to issue preferred stock could make a
third-party acquisition of us difficult
Our certificate of incorporation provides that our board of directors may
issue preferred stock without shareholder approval. In addition, our bylaws
provide for a classified board, with each board member serving a three-year
term. The issuance of preferred stock and the existence of a classified board
could make it more difficult for a third-party to acquire us without the
approval of our board.
Our common stock has never been publicly traded so we cannot predict the extent
to which a trading market will develop for our common stock
There has not been a public market for our common stock. We cannot predict
the extent to which a trading market will develop or how liquid that market
might become. The initial public offering price will be determined by
negotiations between representatives of the underwriters and us, and may not be
indicative of prices that will prevail in the trading market.
Our common stock price is likely to be highly volatile
The market price for our common stock is likely to be highly volatile as
the stock market in general and the market for Internet-related stocks and the
stock of VerticalNet in particular, has been highly volatile. The trading prices
of many technology and Internet-related company stocks have reached historical
highs within the last year and have reflected relative valuations substantially
above historical levels. During the same period, the stocks of these companies
have also been highly volatile and have recorded lows well below such historical
highs. We cannot assure you that our common stock will trade at the same levels
of other Internet stocks or that Internet stocks in general will sustain their
current market prices.
The following factors will add to our common stock price's volatility:
. actual or anticipated variations in our quarterly operating results and
those of our Partner Companies;
. new sales formats or new products or services offered by us, our Partner
Companies and their competitors;
. changes in our financial estimates and those of our Partner Companies by
securities analysts;
. conditions or trends in the Internet industry in general and the B2B e-
commerce industry in particular;
. announcements by our Partner Companies and their competitors of
technological innovations;
. announcements by us or our Partner Companies or our competitors of
significant acquisitions, strategic partnerships or joint ventures;
. changes in the market valuations of our Partner Companies and other
Internet companies;
. our capital commitments;
12
<PAGE>
. additions or departures of our key personnel and key personnel of our
Partner Companies; and
. sales of our common stock.
Many of these factors are beyond our control. These factors may decrease the
market price of our common stock, regardless of our operating performance.
13
<PAGE>
USE OF PROCEEDS
Based on an assumed initial public offering price of $ per share,
our net proceeds from the sale of the shares of our common stock will
be approximately $ ($ if the underwriters' over-
allotment option is exercised in full), after deduction of underwriting
discounts and commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to increase our working
capital, to create a public market for our common stock, to facilitate our
future access to public equity markets and to provide us with increased
visibility and credibility. We intend to use the net proceeds from the offering
to repay any balance outstanding on our revolving bank credit facility, acquire
interests in Internet-related companies and for general corporate purposes,
including working capital. Our bank credit facility matures in April 2000 and
bears interest, at our option, at prime and/or LIBOR plus 2.5%. At April 30,
1999, there was no outstanding balance under the bank credit facility. We use
monies borrowed under the bank credit facility primarily to acquire interests in
new or existing Partner Companies. Pending use of the net proceeds for the above
purposes, we intend to invest the funds in interest-bearing, investment-grade
securities, certificates of deposit, or direct or guaranteed obligations of the
United States.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock, and we do
not intend to pay dividends in the foreseeable future. We plan to retain any
earnings for use in the operation of our business and to fund future growth.
THE REORGANIZATION
Internet Capital Group, Inc. is a successor to a business originally
founded in March 1996 as a Delaware limited liability company under the name
Internet Capital Group, L.L.C. As a limited liability company, Internet Capital
Group, L.L.C. was treated for income tax purposes as a partnership with taxes on
the income generated by Internet Capital Group L.L.C. paid by its members.
Internet Capital Group, L.L.C. merged into Internet Capital Group, Inc., with
Internet Capital Group, Inc. surviving (the "Reorganization"). In connection
with the Reorganization and as required by its limited liability company
agreement to satify the members' tax liabilities, Internet Capital Group, L.L.C.
declared a $10.7 million distribution to its members. Internet Capital Group,
Inc. has assumed all liabilities of Internet Capital Group, L.L.C., including
the distribution to members of Internet Capital Group, L.L.C. Also as part of
the Reorganization, Internet Capital Group, Inc. issued shares of
common stock to the members of Internet Capital Group, L.L.C. The separate
existence of Internet Capital Group, L.L.C. ceased on February 2, 1999.
THE DIRECTED SHARE SUBSCRIPTION PROGRAM
As part of this offering, we are offering shares of our common
stock in a directed share subscription program to shareholders of Safeguard
Scientifics, Inc., one of our principal and founding shareholders. Only persons
who owned at least shares of Safeguard Scientifics, Inc. common
stock as of , 1999 are eligible to participate in the program.
Such shareholders may subscribe for one share of our common stock for every ten
shares of Safeguard Scientifics, Inc. common stock held by them, and may not
transfer the opportunity to subscribe to another person except involuntarily by
operation of law. Sales under the program will close on the same day as other
sales under this offering. If any of the shares offered under the program are
not purchased by the shareholders of Safeguard Scientifics, Inc., then Safeguard
Scientifics, Inc. or one or more of its designees will purchase these shares.
The purchase price under the program, whether paid by Safeguard Scientifics,
Inc. or its shareholders, will be the same price per share as set forth on the
cover page of this prospectus.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
(i) on an actual basis, (ii) on a pro forma basis to reflect the issuance of
shares of our common stock at per share from January through
March, 1999 and the issuance of $90 million of our convertible notes in May,
1999, and (iii) on a pro forma basis, as adjusted to reflect the automatic
conversion of our convertible notes into shares of our common stock upon
completion of this offering and the sale of shares of our common stock in
this offering at an assumed initial public offering price of $ per share and
after deduction of estimated underwriting discounts and commissions and
estimated offering expenses.
The calculation of shareholders' equity reflects our Reorganization on
February 2, 1999. Common stock data also assumes that the underwriters' over-
allotment option is not exercised and excludes shares of common stock reserved
for issuance under our (i) 1999 Equity Compensation Plan, under which options to
purchase 9,631,500 shares were outstanding as of April 30, 1999 at a weighted
average exercise price of $2.30 per share, and (ii) warrants outstanding to
purchase shares at an exercise price of $ per share.
<TABLE>
<CAPTION>
December 31, 1998
-----------------------------------------------------------
Pro Forma
As
Actual Pro Forma Adjusted
----------------- ----------------- -----------------
<S> <C> <C> <C>
Long-term debt............................................... $ 351,924 $ 351,924 $
Convertible subordinated notes............................... -- 90,000,000
Shareholders' equity:
Preferred stock, $.001 par value; no shares authorized
--actual, pro forma and pro forma as adjusted............... -- --
Common stock, $.001 par value; 130,000,000 shares
authorized, 66,043,625 shares issued and outstanding -
actual; shares issued and outstanding--pro
forma; shares issued and outstanding--pro forma as
adjusted ................................................... 66,044 66,044
Additional paid-in capital................................... 74,935,262 74,935,262
Retained earnings............................................ 5,256,815 5,256,815
Unamortized deferred compensation............................ (1,266,814) (1,266,814)
Accumulated other comprehensive income....................... 1,733,071 1,733,071
----------------- ----------------- -----------------
Total shareholders' equity................................... 80,724,378 80,724,378
----------------- ----------------- -----------------
Total capitalization....................................... $81,076,302 $171,076,302 $
================= ================= =================
</TABLE>
15
<PAGE>
DILUTION
Our pro forma net tangible book value at December 31, 1998, after giving
effect to the conversion of all outstanding convertible notes into shares
of common stock upon completion of this offering, was approximately $
, or $ per share. Pro forma net tangible book value per
share is equal to our total tangible assets less our total liabilities,
divided by the total number of shares of our common stock outstanding. After
giving effect to the sale of shares of our common stock
offered hereby at an assumed initial public offering price of $ per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, our as adjusted pro forma net
tangible book value at December 31, 1998 would have been approximately $
, or $ per share. This represents an immediate increase in net
tangible book value of $ per share to existing shareholders and an
immediate dilution of $ per share to new investors purchasing
shares of our common stock in this offering. The following table illustrates
the per share dilution to the new investors.
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share ............................................. $
Pro forma net tangible book value per share at December 31, 1998............................ $
Increase per share attributable to this offering............................................
As adjusted pro forma net tangible book value per share after the offering...................
----------
Dilution per share to new investors in this offering......................................... $
==========
</TABLE>
The following table summarizes on a pro forma basis, as of December 31,
1998, the total number of shares of our common stock purchased from us,
the total cash consideration paid and the average price per share paid by the
existing shareholders and by the new investors in this offering at an assumed
initial public offering price of $ per share and before deducting estimated
underwriting discounts and commissions and our estimated offering expenses:
<TABLE>
<CAPTION>
Average
Total Price Per
Shares Purchased Consideration Share
------------------------------------ --------------------------- ------------
Number Percent Amount Percent
------------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Existing shareholders.....
New investors (1).........
------------------ --------------- ------------ ------------
Total................
================== =============== ============ ============
</TABLE>
(1) This number of shares assumes that the underwriters' over-allotment option
is not exercised. If the over-allotment option is exercised in full, we will
issue and sell an additional shares.
The foregoing discussion and tables assume no exercise of any stock options
outstanding as of December 31, 1998. As of December 31, 1998, there were options
outstanding to purchase a total of 6,697,000 shares of our common stock at a
weighted average exercise price of $1.99 per share and 3,773,000 shares reserved
for future grant under our 1999 Equity Compensation Plan. To the extent that any
of these shares are issued, there will be further dilution to new investors. See
"Capitalization," "Management--Employee Benefit Plans" and Note 8 to
Consolidated Financial Statements.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data in
conjunction with our Consolidated Financial Statements, including the Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus. The consolidated
statement of operations data from March 4, 1996, the date of our inception,
through December 31, 1996 and for the years ended December 31, 1997 and 1998,
and consolidated balance sheet data at December 31, 1997 and 1998 have been
derived from the consolidated financial statements, that have been audited by
KPMG LLP, independent auditors, included elsewhere in this prospectus. The
consolidated balance sheet data at December 31, 1996 has been derived from the
consolidated financial statements that have been audited by KPMG LLP,
independent auditors, which are not included in this prospectus.
<TABLE>
<CAPTION>
March 4, 1996
(inception) to
December 31, Year Ended December 31,
--------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue..................................................... $ 285,140 $ 791,822 $ 3,134,769
----------------- ----------------- -----------------
Operating expenses
Cost of revenue........................................... 427,470 1,767,017 4,642,528
Sales and marketing....................................... 268,417 2,300,365 7,894,662
General and administrative................................ 1,652,481 3,442,241 7,619,169
Minority interest......................................... (427,185) 106,411 (5,381,640)
Equity (income) loss...................................... 514,540 (106,298) 7,937,861
----------------- ----------------- -----------------
Total operating expenses.................................. 2,435,723 7,509,736 22,712,580
----------------- ----------------- -----------------
Operating loss.............................................. (2,150,583) (6,717,914) (19,577,811)
Other income, net........................................... -- -- 32,552,151
Interest income, net........................................ 88,098 138,286 924,588
----------------- ----------------- -----------------
Net income (loss)........................................... $(2,062,485) $(6,579,628) $ 13,898,928
================= ================= =================
Pro forma information (unaudited):
Pro forma net income
Net income as reported.................................... $ 13,898,928
Pro forma income tax provision............................ (5,142,603)
-----------------
Pro forma net income...................................... $ 8,756,325
=================
Pro forma net income per share
Basic.....................................................
Diluted...................................................
Pro forma shares used in computing net income per share
Basic.....................................................
Diluted...................................................
December 31,
-----------------------------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
Consolidated Balance Sheet Data:
Cash and cash equivalents.................................. $ 3,215,256 $ 5,967,461 $ 26,840,904
Working capital............................................ 4,883,129 2,390,762 20,452,438
Total assets............................................... 13,629,407 31,481,016 96,785,975
Long-term debt............................................. 167,067 399,948 351,924
Total shareholders' equity................................. 12,858,856 26,634,675 80,724,378
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion should be read in conjunction with our audited
Consolidated Financial Statements and related Notes thereto included elsewhere
in this prospectus.
General
Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.
Because we acquire significant interests in Internet-related companies,
many of which generate operating losses, we have experienced, and expect to
continue to experience, significant volatility in our quarterly results. We do
not know if we will report net income in any period, and we expect that we
will report operating losses in many quarters for the foreseeable future.
Effect of Various Accounting Methods on our Results of Operations
The various interests that we acquire in our Partner Companies are
accounted for under three broad methods: consolidation, equity method and cost
method. The applicable accounting method is generally determined based on our
voting interest in a Partner Company.
Consolidation. Partner Companies in which we directly or indirectly own
more than 50% of the outstanding voting securities are generally accounted for
under the consolidation method of accounting. Under this method, a Partner
Company's results of operations are reflected within our Consolidated Statements
of Operations. Participation of other Partner Company shareholders in the
earnings or losses of a consolidated Partner Company is reflected in the caption
"Minority interest" in our Consolidated Statements of Operations. Minority
interest adjusts our consolidated results of operations to reflect only our
share of the earnings or losses of the consolidated Partner Company. VerticalNet
was our only consolidated Partner Company through December 31, 1998.
Equity Method. Partner Companies whose results we do not consolidate, but
over whom we exercise significant influence, are accounted for under the equity
method of accounting. Whether or not we exercise significant influence with
respect to a Partner Company depends on an evaluation of several factors
including, among others, representation on the Partner Company's Board of
Directors and ownership level, which is generally a 20% to 50% interest in the
voting securities of the Partner Company, including voting rights associated
with our holdings in common, preferred and other convertible instruments in the
Partner Company. Under the equity method of accounting, a Partner Company's
results of operations are not reflected within our Consolidated Statements of
Operations; however, our share of the earnings or losses of the Partner Company
is reflected in the caption "Equity (income) loss" in the Consolidated
Statements of Operations. As of December 31, 1998, we accounted for nine of our
Partner Companies under the equity method of accounting.
The net effect of a Partner Company's results of operations on our net
results of operations is generally the same under either the consolidation
method of accounting or the equity method of accounting, as under these methods
only our share of the earnings or losses of a Partner Company is reflected in
our net results of operations in the Consolidated Statements of Operations.
Cost Method. Partner Companies not accounted for under the consolidation or
the equity method of accounting are accounted for under the cost method of
accounting. Under this method, our share of the earnings or losses of these
companies is not included in our Consolidated Statements of Operations.
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Effect of Various Accounting Methods on the Presentation of our Financial
Statements
The presentation of our financial statements may differ from period to
period primarily due to whether or not we apply the consolidation method of
accounting or the equity method of accounting. For example, since our inception
we consolidated VerticalNet's financial statements with our own. However, due to
their initial public offering in February 1999, our ownership interest in
VerticalNet decreased to 37%. Therefore, we will be applying the equity method
of accounting beginning in the three months ended March 31, 1999. The
presentation of our financial statements will look substantially different as a
result of our no longer consolidating VerticalNet.
To understand our results of operations and financial position without the
effect of consolidating VerticalNet, Note 11 to our Consolidated Financial
Statements summarizes our Parent Company Statements of Operations and Balance
Sheets for the same periods presented in the Consolidated Financial Statements.
These statements differ from the Consolidated Financial Statements by treating
VerticalNet as if it were accounted for under the equity method of accounting.
Our share of VerticalNet's losses is included in "Equity (income) loss" in the
Parent Company Statements of Operations and the losses recorded in excess of
carrying value of VerticalNet are included in "Non-current liabilities" in the
Parent Company Balance Sheets.
Operations Overview
VerticalNet was our only consolidated Partner Company through December 31,
1998. All of our consolidated revenue and a significant portion of our
consolidated operating expenses since our inception on March 4, 1996 through
December 31, 1998 were attributable to VerticalNet.
As of April 30, 1999, VerticalNet owned and operated 37 industry-specific
trade communities. Advertising revenue and Web site development fees
represented all of VerticalNet's revenue in 1996 and 1997. In 1998, most of
VerticalNet's revenue was generated from selling advertisements to industry
suppliers in its trade communities.
VerticalNet sells storefront and banner advertising and event sponsorships
in its trade communities. The duration of a storefront advertisement is
typically for a period of one year, while banner advertisements are typically
for a period of three months. All advertising revenue is recognized ratably in
the period in which the advertisement is displayed, provided that the collection
is reasonably assured. VerticalNet also generates revenue from career services,
education, and e-commerce, specifically the sale of books and third party
software for which they receive a transaction fee, and from barter transactions.
A significant portion of our operations are conducted through corporations
in which we hold a significant minority ownership interest accounted for under
the equity method of accounting. As of December 31, 1998, we accounted for nine
of our Partner Companies under the equity method of accounting. Under this
method, the results of operations of these entities are not reflected within our
Consolidated Statements of Operations; however, our share of such companies'
earnings or losses is reflected in the caption "Equity (income) loss" in the
Consolidated Statements of Operations.
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Results of Operations
Our consolidated results of operations are composed of Partner Company
Operations and General ICG Operations. Partner Company Operations includes the
effect of consolidating VerticalNet and recording our share of earnings or
losses of Partner Companies accounted for under the equity method of accounting.
General ICG Operations represents the expenses of providing strategic and
operational support to our Partner Companies, as well as the related
administrative costs related to these expenses. General ICG Operations also
includes the effect of transactions and other events incidental to our ownership
interests in our Partner Companies and our operations in general.
<TABLE>
<CAPTION>
March 4, 1996
(inception) through
December 31, Year Ended December 31,
--------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Summary of Consolidated Net Income (Loss)
Partner Company Operations................................. $ (796,202) $(4,778,902) $(16,150,496)
General ICG Operations..................................... (1,266,283) (1,800,726) 30,049,424
----------------- ----------------- -----------------
Net income (loss) - Consolidated Total..................... $(2,062,485) $(6,579,628) $ 13,898,928
================= ================= =================
Partner Company Operations
Revenue................................................... $ 285,140 $ 791,822 $ 3,134,769
----------------- ----------------- -----------------
Operating expenses
Cost of revenue......................................... 427,470 1,767,017 4,642,528
Sales and marketing..................................... 268,417 2,300,365 7,894,662
General and administrative.............................. 291,660 1,388,123 4,106,583
----------------- ----------------- -----------------
Operating loss -- Partner Company Operations before
minority interest and equity income (loss).............. (702,407) (4,663,683) (13,509,004)
Minority interest......................................... 427,185 (106,411) 5,381,640
Equity income (loss)...................................... (514,540) 106,298 (7,937,861)
----------------- ----------------- -----------------
Operating loss -- Partner Company Operations.............. (789,762) (4,663,796) (16,065,225)
Other income, net......................................... -- -- --
Interest expense, net..................................... (6,440) (115,106) (85,271)
----------------- ----------------- -----------------
Net loss -- Partner Company Operations.................... $ (796,202) $(4,778,902) $(16,150,496)
================= ================= =================
General ICG Operations
General and administrative................................ $ 1,360,821 $ 2,054,118 $ 3,512,586
----------------- ----------------- -----------------
Operating loss - General ICG Operations................... (1,360,821) (2,054,118) (3,512,586)
Other income, net......................................... -- -- 32,552,151
Interest income, net...................................... 94,538 253,392 1,009,859
----------------- ----------------- -----------------
Net income (loss) - General ICG Operations................ $(1,266,283) $(1,800,726) $ 30,049,424
================= ================= =================
Consolidated Total
Revenue................................................... $ 285,140 $ 791,822 $ 3,134,769
----------------- ----------------- -----------------
Operating expenses
Cost of revenue......................................... 427,470 1,767,017 4,642,528
Sales and marketing..................................... 268,417 2,300,365 7,894,662
General and administrative.............................. 1,652,481 3,442,241 7,619,169
Minority interest....................................... (427,185) 106,411 (5,381,640)
Equity (income) loss.................................... 514,540 (106,298) 7,937,861
----------------- ----------------- -----------------
Operating loss............................................ (2,150,583) (6,717,914) (19,577,811)
Other income, net......................................... -- -- 32,552,151
Interest income, net...................................... 88,098 138,286 924,588
----------------- ----------------- -----------------
Net income (loss) - Consolidated Total.................... $(2,062,485) $(6,579,628) 13,898,928
================= =================
Pro forma income tax provision............................ (5,142,603)
-----------------
Pro forma net income...................................... $ 8,756,325
=================
</TABLE>
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Results of Operations-Partner Company Operations
VerticalNet-Analysis of Three Year Period Ended December 31, 1998
For the periods ended December 31, 1996, December 31, 1997 and December 31,
1998, VerticalNet was our only consolidated Partner Company. The following is a
discussion of VerticalNet's results of operations for the three year period
ended December 31, 1998:
Revenue. Revenue was $.3 million for the year ended December 31, 1996,
$.8 million for the year ended December 31, 1997 and $3.1 million for the year
ended December 31, 1998. The increase in revenue was due primarily to an
increase in the number of advertisers as a result of VerticalNet's marketing
efforts and the increase in the number of industry-specific trade communities
from 16 as of December 31, 1997 to 33 as of December 31, 1998.
Cost of Revenue. Cost of revenue was $.4 million in 1996, $1.8 million in
1997 and $4.6 million in 1998. Cost of revenue consists of editorial,
operational, and product development expenses. The increase in cost of revenue
was due to increased staffing and the costs of enhancing the features, content
and services of VerticalNet's industry-specific trade communities, as well as
increasing the overall number of trade communities.
Sales and Marketing Expenses. Sales and marketing expenses were $.3 million
for the year ended December 31, 1996, $2.3 million for the year ended December
31, 1997 and $7.9 million for the year ended December 31, 1998. The increase in
sales and marketing expenses was primarily due to increasing the number of sales
and marketing personnel, increasing sales commissions and increased expenses
related to promoting VerticalNet's industry-specific trade communities.
General and Administrative Expenses. General and administrative expenses
were $.3 million for the year ended December 31, 1996, $1.4 million for the year
ended December 31, 1997 and $4.1 million for the year ended December 31, 1998.
The increase in general and administrative expenses was due primarily to
increased staffing levels, higher facility costs, professional fees to support
the growth of VerticalNet's infrastructure and goodwill amortization related to
VerticalNet's 1998 acquisitions.
Equity (Income) Loss
A significant portion of our operations are conducted through companies in
which we hold a significant minority ownership interest. These companies are
accounted for under the equity method of accounting. Equity (income) loss
fluctuates with the number of companies accounted for under the equity method,
our ownership percentage in these companies, and the results of operations of
these companies. In the periods ended December 31, 1996 and 1997, only Sky
Alland was accounted for under the equity method. Sky Alland's results of
operations in 1997 improved compared to 1996.
The significant change in equity (income) loss from 1997 to 1998 reflects a
decrease in the results of operations at Sky Alland and the effect of Partner
Companies in which we acquired an interest during 1998. One of these companies,
Syncra Software, Inc., represented approximately $4.3 million of our $7.9
million equity loss in 1998. As of December 31, 1998, we accounted for nine of
our Partner Companies under the equity method of accounting. Most of these
companies are in a very early stage of development and incurred substantial
losses in 1998, and our share of these losses was substantial.
As mentioned previously, our ownership interest in VerticalNet will no
longer be consolidated in our financial statements but will be accounted for
under the equity method of accounting in 1999 as a result of our lower ownership
interest in VerticalNet following the completion of their initial public
offering in February 1999. VerticalNet incurred losses in each of the years in
the three year period ended December 31, 1998, and may incur losses in the
future. In addition, due to the early stage of development of the companies in
which we acquire interests, existing and new Partner Companies accounted for
under the equity method are expected to incur substantial losses. Our share of
these losses is expected to be substantial in 1999.
While VerticalNet and most of the companies accounted for under the equity
method of accounting have generated losses in each of the years in the three-
year period ended December 31, 1998, and therefore in most cases
21
<PAGE>
did not incur tax liabilities, these companies may generate taxable income in
the future. Our share of these companies' net income would be reduced to the
extent of our share of these companies' tax expense.
Results of Operations - General Operations
General and Administrative
Our general and administrative costs consist primarily of employee
compensation, outside services such as legal, accounting and consulting, and
travel-related costs. We commenced operations in March 1996 with offices in
Wayne, Pennsylvania and San Francisco, California. As the number of our
employees grew to support our operations and those of our Partner Companies, our
general and administrative costs increased. In late 1998, we opened an office in
Boston, Massachusetts, and in early 1999, we significantly increased the number
of our employees. We plan to continue to hire new employees, open new offices,
and build our overall infrastructure. While general and administrative costs
increased 71% from 1997 to 1998, we expect these costs will more than double
from 1998 to 1999.
Other Income
Other income consists of the effect of transactions and other events
incidental to our ownership interests in our Partner Companies and our
operations in general. Other income is expected to include, among other items,
gains or losses on the sales of all or a portion of minority interests, gains or
losses on the sales of stock by our public Partner Companies to reflect the
change in our share of the net equity of these companies, and impairment charges
related to our ownership interests in Partner Companies. We continually evaluate
the carrying value of our ownership interests in each of our Partner Companies
for possible impairment based on achievement of business plan objectives and
milestones, the value of each ownership interest in the Partner Company relative
to carrying value, the financial condition and prospects of the Partner Company,
and other relevant factors.
Other income consisted of the following:
<TABLE>
<CAPTION>
Year Ended
December 31,1998
-------------------
<S> <C>
Sale of Matchlogic to Excite............................... $12,822,162
Sales of Excite holdings................................... 16,813,844
Sale of WiseWire to Lycos.................................. 3,324,238
Sales of Lycos holdings.................................... 1,471,907
Partner Company impairment charge.......................... (1,880,000)
-------------------
$32,552,151
===================
</TABLE>
In February 1998, we exchanged all of our holdings of Matchlogic, Inc. for
763,820 shares of Excite, Inc. which resulted in a gain at the date of exchange
of $12.8 million. Throughout the remainder of 1998, we sold 716,082 shares of
Excite which resulted in $30.2 million of proceeds and $16.8 million of gains.
In April 1998, we exchanged all of our holdings of WiseWire for 196,130
shares of Lycos, Inc. which resulted in a gain at the date of the transaction of
$3.3 million. Throughout the remainder of 1998, we sold 173,756 shares of Lycos
which resulted in $6.2 million of proceeds and $1.5 million of gains.
The remaining holdings of Excite and Lycos are marked to market at December
31, 1998 with the difference between carrying value and market value recorded in
"Accumulated other comprehensive income" in the shareholders' equity section of
our Consolidated Balance Sheet in accordance with Statement of Financial
Accounting Standards No. 115.
In December 1998, we recorded an impairment charge of $1.9 million for the
decrease in value of one of our Partner Companies.
As a result of the initial public offering of VerticalNet completed in
February 1999, we expect to record a gain in 1999 of approximately $28 million
relating to the increase in our share of VerticalNet's net equity.
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<PAGE>
Interest Income
Our cash and cash equivalents are invested primarily in money market
accounts. During 1998, we received $38.2 million of proceeds from the sale of
our common stock and $36.4 million of proceeds from the sales of a portion of
our holdings in Excite and Lycos. The increase in interest income in 1998 was
primarily due to the significant increase in our cash and cash equivalents
throughout 1998 as a result of these transactions.
Income Taxes
From our inception on March 4, 1996 to February 2, 1999, we were organized
as a limited liability company and were treated as a partnership for income tax
purposes. As a result of our reorganization as a corporation, we will be subject
to corporate federal and state income taxes. For informational purposes, the
Consolidated Statement of Operations for the year ended December 31, 1998
reflects pro forma income on an after-tax basis assuming we had been taxed as a
C corporation since January 1, 1998. We did not have any net operating loss
carry forwards at December 31, 1998.
Liquidity and Capital Resources
We have funded our operations with a combination of equity proceeds,
proceeds from the sales of a portion of our Excite and Lycos holdings,
borrowings under bank credit facilities, and proceeds from the issuance of
convertible notes.
We received equity commitments of $40 million in 1996, of which $13.7
million and $20.1 million was received in 1996 and 1997, respectively, and $6.2
million of which was funded with an in-kind contribution of holdings of a
Partner Company in 1996. We received additional commitments of $70 million in
1998, of which $38 million and $32 million was received in 1998 and 1999,
respectively.
Sales of Excite and Lycos stock in 1998 generated proceeds of $36.4
million.
In April, 1999 we entered into a $50 million revolving bank credit
facility. In connection with the facility, we issued 200,000 warrants
exercisable for seven years at $10 per share. The facility matures in April
2000, is subject to a .25% unused commitment fee, bears interest, at our option,
at prime and/or LIBOR plus 2.5%, and is secured by substantially all of our
assets (including all of our holdings in VerticalNet). Borrowing availability
under the facility is based on the fair market value of our holdings of publicly
traded Partner Companies (currently only VerticalNet) and the value, as defined
in the facility, of our private Partner Companies. If the market price of
VerticalNet experiences a significant decline, availability under the credit
facility could be reduced significantly and could have an adverse effect on our
ability to borrow under the facility and could require an immediate repayment of
a portion of our outstanding borrowings, if any. Based on the provisions of the
borrowing base, borrowing availability at April 30, 1999 was $32.6 million, of
which none was outstanding.
In May, 1999 we issued $90 million of three-year convertible notes. The
notes bear interest at an annual rate of 4.99% during the first year and at the
prime rate for the remaining two years. Prior to May 2000, the notes will
automatically convert into shares of our common stock at our initial public
offering price upon consummation of an initial public offering. If the notes are
converted, all accrued interest is waived. We issued warrants to the holders of
these notes to purchase shares of our common stock. The warrant holders will be
entitled to purchase, at the initial public offering price, the number of shares
of our common stock determined by dividing $18 million by the initial public
offering price. The warrants expire in May, 2002.
Proceeds from our initial public offering, proceeds from the issuance of
our convertible notes, availability under our revolving bank credit facility,
proceeds from the sales from time to time of all or a portion of our minority
interests and other internal sources of cash flow are expected to be sufficient
to fund our cash requirements through June 2000, including commitments to new or
existing Partner Companies and general operations requirements. We are
contingently obligated for approximately $3.2 million of guarantee commitments,
and have committed capital of $2 million to an existing Partner Company to be
funded in 1999.
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<PAGE>
From its inception through its initial public offering, VerticalNet funded
its operations through a combination of equity, investor and bank borrowings,
and leases. These sources included amounts both advanced and guaranteed by us.
VerticalNet raised $58.3 million in its initial public offering. VerticalNet
believes that these initial public offering funds, together with its existing
cash and cash equivalents, should be sufficient to fund its operations through
March, 2000. We have no obligation to provide additional funding to VerticalNet,
and we have no obligations with respect to its outstanding debt arrangements.
Consolidated working capital increased to $20.5 million at December 31,
1998, compared to $2.4 million at December 31, 1997. The increase was primarily
due to the net effect of the proceeds from the equity we raised in 1998 and the
proceeds from the sales of a portion of our Excite and Lycos holdings, offset by
the ownership interests we acquired in 1998.
Cash used in operating activities increased in 1997 and 1998 compared to
each of the prior years primarily due to VerticalNet's increased losses in each
of those years.
Cash used in investing activities primarily reflects the acquisition of
ownership interests in and advances to new or existing Partner Companies, offset
in 1998 by the proceeds of $36.4 million from the sales of a portion of our
available-for-sale securities, Excite and Lycos. We utilized $56.6 million,
including $9 million contributed to VerticalNet, to acquire interests in new or
existing Partner Companies in 1998 and we expect this amount to more than double
in 1999. In 1998, we acquired interests in the following Partner Companies:
Blackboard, CommerX, ComputerJobs.com, Context Integration, Deja.com, e-
Chemicals, Entegrity Solutions, LinkShare, MessageQuest, PrivaSeek,
RapidAutoNet, SageMaker, ServiceSoft, Syncra Software, US Interactive,
VerticalNet and Vivant!. Our operations are not capital intensive, and capital
expenditures in any year normally will not be significant in relation to our
overall financial position. We expect to commit funds in 1999 to the buildout of
our larger new corporate headquarters in Wayne, Pennsylvania and the development
of our information technology infrastructure. There were no material capital
asset purchase commitments as of April 30, 1999.
Recent Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements
to have a significant impact on our results of operations, financial position or
cash flows.
Year 2000 Readiness Disclosure
Many computer programs have been written using two digits rather than four
digits to define the applicable year. This poses a problem at the end of the
century because these computer programs may recognize a date using "00" as the
year 1900, rather than the year 2000. This in turn could result in major system
failures or miscalculations and is generally referred to as the Year 2000 issue.
We currently use the information technology systems and many non-
information technology systems of Safeguard Scientifics, Inc., one of our
principal shareholders. Safeguard has completed its assessment of its computer
information systems. Safeguard has replaced all computer systems and software
which were determined to be Year 2000 non-compliant. Safeguard is in the process
of surveying its vendors of non-information systems including telecommunications
and security systems, and expects to complete remediation, if necessary, during
1999. If Safeguard determines that its non-information systems are non-compliant
and are at risk to not be remedied in time, it intends to develop a contingency
plan. We will not incur any material expenses in connection with Safeguard's
Year 2000 efforts. We plan to survey our vendors of the non-information
technology systems that we use independently of Safeguard and we expect to
complete remediation, if necessary, during 1999. If we determine that these
systems are non-compliant and are at risk to not be remedied in time, we will
develop a contingency plan.
The Year 2000 readiness of our only consolidated subsidiary, VerticalNet,
is described below. Our Partner Companies are in varying stages of assessing,
remediating and testing their internal systems and assessing Year 2000 readiness
of their vendors, business partners, and customers. Our Partner Companies are
also in varying stages of developing contingency plans to operate in the event
of a Year 2000 problem. The total cost and time which will be incurred by our
Partner Companies on the Year 2000 readiness effort has not been determined.
There can be no assurance that all necessary work will be completed in time, or
that such costs will not materially
24
<PAGE>
adversely impact one or more of such Partner Companies. In addition, required
spending on the Year 2000 effort will cause customers of most of our Partner
Companies to reallocate at least part of their information systems budgets.
Although some of our Partner Companies have offerings which may be useful in
such efforts, such reallocations could materially adversely affect the results
of operations of our Partner Companies.
VerticalNet
VerticalNet may realize exposure and risk if the systems on which it is
dependent to conduct its operations are not Year 2000 compliant. VerticalNet's
potential areas of exposure include products purchased from third parties,
information technology including computers and software, and non-information
technology including telephone systems and other equipment used internally.
Additionally, all of the internally-developed production and operation systems
for VerticalNet's Web sites are undergoing a complete re-engineering. All new
programs are being tested and validated for Year 2000 compliance.
VerticalNet has taken steps to ensure that telephone systems and other non-
information technology are Year 2000 compliant. VerticalNet has replaced its
telephone and voicemail systems with new systems which are Year 2000 compliant.
VerticalNet believes all non-information technology upon which it is materially
dependent is Year 2000 compliant. Additionally, with respect to information
technology, VerticalNet expects to resolve any Year 2000 compliance issues
primarily through normal upgrades of its software or, when necessary, through
replacement of existing software with Year 2000 compliant applications. The cost
of these upgrades or replacements is included in VerticalNet's capital
expenditure budget and is not expected to be material to VerticalNet's financial
position or results of operations. VerticalNet estimates that its total cost to
become Year 2000 compliant will not exceed $250,000, which it expects will be
funded from working capital or borrowings under its bank line of credit.
However, such upgrades and replacements may not be completed on schedule or
within estimated costs or may not successfully address VerticalNet's Year 2000
compliance issues.
VerticalNet has completed its Year 2000 compliance assessment plan. This
plan includes assessing both its information and non-information technology as
well as its internally-developed production and operation systems. Based on this
assessment, VerticalNet believes that all non-information technology, all
internally-developed production and operations systems and 80% of its technology
are Year 2000 compliant. VerticalNet believes that the remaining 20% of its
information technology that is not Year 2000 compliant is not critical to its
business. VerticalNet intends to complete the replacement or remediation of
these non-compliant technologies, as well as the testing of any replacement or
corrected technologies, by the end of the second quarter of 1999.
In addition, VerticalNet is in the process of seeking verification from its
key distributors, vendors and suppliers that they are Year 2000 compliant or, if
they are not presently compliant, to provide a description of their plans to
become so. VerticalNet has received certification from 80% of its distributors,
vendors and suppliers that they are either Year 2000 compliant or are taking the
necessary steps to become Year 2000 compliant. To the extent that vendors fail
to provide certification that they are Year 2000 compliant by July, 1999,
VerticalNet will seek to terminate and replace those relationships.
In the event that VerticalNet's production and operational facilities that
support its Web sites are not Year 2000 compliant, small portions of its Web
site may become unavailable. VerticalNet's review of its systems has shown that
there is no single application that would make its Web sites totally unavailable
and VerticalNet believes that it can quickly address any difficulties that may
arise.
In the event that VerticalNet's Web-hosting facilities are not Year 2000
compliant, its Web sites would be unavailable and it would not be able to
deliver services to its users.
VerticalNet does not currently have a contingency plan to deal with the
worst-case scenario that might occur if technologies it is dependent upon are
not Year 2000 compliant and fail to operate effectively after the Year 2000.
VerticalNet intends to develop a plan for this scenario by the end of the second
quarter of 1999.
If VerticalNet's present efforts to address the Year 2000 compliance issues
are not successful, or if distributors, suppliers and other third parties with
which it conducts business do not successfully address such issues, its
business, operating results and financial position could be materially and
adversely affected.
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OUR BUSINESS
Internet Capital Group
Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.
Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources.
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board. Currently, our Advisory Board consists of individuals with
executive-level experience in general management, sales and marketing and
information technology at such leading companies as Cisco Systems, Coca-Cola
Company, Exodus Communications, IBM, Mastercard, Merrill Lynch and Microsoft. We
believe that building successful B2B e-commerce companies enhances the ability
of our collaborative network to facilitate innovation and growth among our
Partner Companies.
Industry Overview
Growth of the Internet
People and businesses are increasingly relying on the Internet to access
and share information as well as to purchase and sell products and services.
International Data Corporation estimates that at the end of 1998 more than 142
million people were using the Internet to communicate, participate in discussion
forums and obtain information about goods and services. IDC projects that this
user base will grow to 502 million people by the end of 2003. A rapidly growing
number of businesses use the Internet to market and sell their products and
streamline business operations. According to Forrester Research, 50% of all
United States businesses will be online by 2002.
Growth of B2B E-Commerce
The Internet's substantial growth creates tremendous market opportunities
for companies that connect buyers and sellers, and companies that create
applications and systems for traditional businesses wishing to engage in e-
commerce. Historically, B2B e-commerce has occurred through electronic data
interchange over proprietary networks, which are costly and available only to a
limited number of participants. The Internet provides an open platform with
common communication protocols to build efficient, cost-effective networks that
facilitate e-commerce. As Internet-based network reliability, speed and security
have improved in recent years and as more businesses have connected to the
Internet, traditional businesses are beginning to use the Internet to conduct e-
commerce and exchange information with customers, suppliers and distributors.
While the business-to-consumer e-commerce market currently is significant in
size, estimated by IDC to have been $15 billion in goods and services in 1998,
the B2B e-commerce market is larger and is predicted to grow dramatically. IDC
projects that the B2B e-commerce market will grow from $35 billion in goods and
services in 1998 to over $1.1 trillion by 2003.
We believe that the B2B e-commerce market is beginning a period of rapid
development and growth for the following reasons:
. Expanded Access to New and Existing Customers and Suppliers. Traditional
businesses have relied on their sales forces and purchasing departments
to develop and maintain customer and supplier relationships. This model
is constrained by the time and cost required to exchange current
information regarding requirements, prices and product availability, and
the difficulty of cost-effectively locating new customers and suppliers
and managing existing relationships. Traditional businesses can leverage
the Internet to obtain real-time, accurate information regarding
requirements, prices and products to a global audience, including
suppliers, customers and business
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partners. This makes it easier for businesses to attract new customers
and suppliers, improve service and increase revenue.
. Increased Efficiency and Reduced Cost. Traditional businesses can
utilize the Internet to automate their internal operations, including
manufacturing, finance, sales and purchasing functions. The Internet can
also be used to increase information flow and access throughout an
organization. This increases operational efficiency by reducing the
time, costs and resources required to transact business, lowering
inventory levels and procurement costs, and improving responsiveness to
customers and suppliers.
Market Opportunities for Emerging B2B E-Commerce Companies
We believe that there are significant opportunities for companies that can
assist traditional businesses in using the Internet to create more efficient
markets and enable e-commerce. We call these companies B2B e-commerce companies.
We focus on two types of B2B e-commerce companies: market makers and
infrastructure service providers.
. Market Makers. Market makers bring buyers and sellers together by
creating Internet-based markets for the exchange of goods, services and
information. Market makers enable more effective and lower cost commerce
for traditional businesses by providing access through the Internet to a
broader range of buyers and sellers. Market makers typically operate in
a specific industry and tailor their business models to match a target
market's distinct characteristics. To understand the different types of
markets, we divide market makers into three categories: distributor,
network and community.
. Distributor. Distributor markets are characterized by comparatively
inefficient distribution channels. To service these markets,
distributor market makers act as principals in transactions,
distributing goods and services between buyers and sellers who
connect with each other over the Internet. Distributor market makers
may charge a fee based on the value of the transactions facilitated.
. Network. Network markets are characterized by comparatively efficient
distribution channels. Although network market makers do not act as
principals in transactions, they automate existing business processes
so as to make them more efficient. Network market makers may generate
revenue by charging fees for transactions conducted on their Web
sites, and may charge a fee for access to their Web-based services.
. Community. Community market makers bring together buyers and sellers
that are typically businesses and professionals with common
interests. Existing relationships among these businesses and
professionals are unstructured, but community market makers
facilitate interaction and transactions among them by providing an
electronic community. Community market makers may charge a fee for
facilitated transactions and receive advertising revenue.
. Infrastructure Service Providers. Infrastructure service providers sell
software and services to businesses engaged in e-commerce. Many
businesses need assistance in designing business practices to take
advantage of the Internet, and in building and managing the
technological infrastructure needed to support B2B e-commerce.
Infrastructure service providers help businesses in the following ways:
. Strategic Consulting and Systems Integration. Consultants assist
traditional businesses in developing their e-commerce strategies.
Systems integrators develop and implement a technological
infrastructure that enables e-commerce. Systems integrators also
integrate e-commerce applications with existing enterprise
applications. Strategic consultants and systems integrators typically
charge their clients on a project-by-project basis.
. Software Providers. Software providers design and sell software
applications, tools and related services that support e-commerce and
integrate business functions. Software providers may sell or license
their products.
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. Outsourced Service Providers. Outsourced service providers offer
software applications, infrastructure and related services designed
to help traditional businesses reduce cost, improve operational
efficiency and decrease time to market. Outsourced service providers
may charge fees on a per-use or periodic basis.
Challenges Facing Emerging B2B E-Commerce Companies
We believe that emerging B2B e-commerce companies face certain challenges,
including:
. Developing a Successful Business Model. B2B e-commerce companies must
develop business models that capitalize on the Internet's capabilities
to provide solutions to traditional companies in target industries. B2B
e-commerce companies require industry expertise because each industry
has distinct characteristics including existing distribution channels,
levels of concentration and fragmentation among buyers and sellers,
procurement policies, product information and customer support
requirements. B2B e-commerce companies also require Internet expertise
in order to apply its capabilities to their target industries.
. Building Corporate Infrastructure. Many B2B e-commerce companies have
been recently formed and require sales and marketing, executive
recruiting and human resources, information technology, and finance and
business development assistance. These companies also require capital as
significant resources may be required to build technological
capabilities and internal operations.
. Finding the Best People. Entrants into the B2B e-commerce market require
management with expertise in the applicable market, an understanding of
the Internet's capabilities, the ability to manage rapid growth and the
flexibility to adapt to the changing Internet marketplace. We believe
that very few people have these skills, and those that do are highly
sought after. To be successful, companies must attract and retain highly
qualified personnel.
We believe that the most successful B2B e-commerce companies will rapidly
identify market demands and move quickly to satisfy those demands. B2B e-
commerce companies that accomplish this goal may establish new standards, gain
market share, secure critical partnerships and create a brand name, making
competition more difficult for new entrants. In addition, B2B e-commerce
companies must keep abreast of Internet and industry-specific developments and
adapt to a rapidly changing environment.
Our Solution and Strategy
Our goal is to become the premier B2B e-commerce company by establishing an
e-commerce presence in major segments of the economy. We believe that our sole
focus on the B2B e-commerce industry allows us to capitalize rapidly on new
opportunities and to attract and develop leading B2B e-commerce companies. As of
April 30, 1999, we owned interests in 29 B2B e-commerce companies which we refer
to as our Partner Companies.
Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources.
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board.
Our strategy is to:
. create or identify companies with the potential to become industry
leaders;
. acquire significant interests in Partner Companies and incorporate them
into our collaborative network;
. provide strategic guidance and operational support to our Partner
Companies; and
. promote collaboration among our Partner Companies.
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In implementing our strategy, we leverage the collective knowledge and
experience of our Partner Companies, strategic investors and Advisory Board
members. Our Advisory Board consists of over 15 experienced executives from
various backgrounds who provide our network with strategic guidance, sales,
marketing and information technology expertise and industry contacts. Ideally,
we would like to own 40% or more of our Partner Companies, with management and
public shareholders owning the remaining interests, but we believe that we can
have significant influence with lower ownership levels.
Create or Identify Companies With the Potential to Become Market Leaders
Our expertise in the B2B e-commerce market allows us to build or identify
companies that are positioned to succeed. We apply a disciplined analysis that
capitalizes on this competitive advantage. When we evaluate whether to enter a
market by building a company or acquiring an interest in an existing company, we
weigh the following industry and partnership company factors:
. Industry Criteria
. Inefficiency. We consider whether the industry suffers from
inefficiencies that may be alleviated through e-commerce. We also
consider the relative amount of inefficiency, as more inefficient
industries present greater profit potential.
. Competition. We evaluate the amount of competition that a potential
Partner Company faces from e-commerce and traditional businesses.
. Market Maker Profit Potential. When evaluating market makers, we
consider the number and dollar value of transactions in the industry.
In the multi-billion dollar industries that we target, offering even
incremental efficiency improvements presents significant profit
potential.
. Centralized Information Sources. When evaluating market makers, we
consider whether the industry has product catalogs, trade journals
and other centralized sources of information regarding products,
prices, customers and other factors. The availability of this
information makes it easier for a market maker to facilitate
communication and transactions. We generally avoid industries where
this information is not available.
. Infrastructure Service Provider Profit Potential. When evaluating
infrastructure service providers, we examine the size of the market
opportunity, the profit potential in serving the target market and
whether the infrastructure service provider can provide assistance to
our market maker Partner Companies.
. Partnership Company Criteria
. Industry Leader. We partner with a company only if we believe that it
has the products and skills to become a leader in its industry.
. Management Quality. We assess the overall quality and industry
expertise of a potential Partner Company's management.
. Significant Ownership. We consider whether we will be able to obtain
a significant position in the company and exert influence over the
company.
. Network Synergy. We consider the degree to which a potential Partner
Company may contribute to our network, and benefit from our network
and operational resources.
Acquire Interests in Partner Companies
After we identify an attractive potential Partner Company, we negotiate the
acquisition of a significant interest in the company. As a condition to an
acquisition, we require representation on the company's Board of Directors, to
ensure our ability to provide active guidance to the Partner Company. We
structure acquisitions to permit the Partner Company's management and key
personnel to retain an equity stake in the company. As a result of our
experience, we believe that we have the ability to complete acquisitions quickly
and efficiently.
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During our negotiations with potential Partner Companies we emphasize the
value of our collaborative network, which we believe gives us a competitive
advantage over other acquirors in successfully consummating transactions. Our
Partner Companies, strategic investors and Advisory Board members assist in
these discussions and assist in other stages of the acquisition process,
including the initial evaluation of potential Partner Companies and due
diligence.
Provide Strategic Guidance and Operational Support to Our Partner Companies
After we make an acquisition or form a Partner Company, we take an active
role in its affairs by providing both strategic guidance and operational
support:
. Strategic Guidance. We provide strategic guidance to our Partner
Companies regarding market positioning, business model development and
market trends. In addition, we advise Partner Company management and
directors on day-to-day management and operational issues. Our exclusive
focus on the B2B e-commerce market and the knowledge base of our Partner
Companies, strategic investors, management and Advisory Board give us
valuable experience that we share with our Partner Company network.
Advisory Board members who provide strategic guidance to our Partner
Companies include Jeff Ballowe, a former President of Ziff-Davis Inc.
and the current Chairman of Deja.com, Inc., Alex W. Hart, a former Chief
Executive Officer of MasterCard International, Ron Hovsepian, Vice
President of Business Development at IBM Corporation and Yossi Sheffi,
Ph.D., a co-founder of Syncra Software, Inc. and e-Chemicals, Inc. and
currently a Professor at Massachusetts Institute of Technology.
. Operational Support. B2B e-commerce companies often have difficulty
obtaining senior executive level guidance in the many areas of expertise
successful companies need. We assist our Partner Companies by providing
access to skilled managers who guide our Partner Companies in the
following functional areas:
. Sales and Marketing. Several members of our Advisory Board and
management team provide guidance to our Partner Companies' sales,
marketing, product positioning and advertising efforts. These
individuals include Michael H. Forster, a former Senior Vice
President of Worldwide Field Operations at Sybase, Inc. and currently
one of our Senior Partners, Christopher H. Greendale, a former
Executive Vice President at Cambridge Technology Partners and
currently one of our Senior Partners, Rowland Hanson, a former Vice
President of Corporate Communications at Microsoft Corporation and
currently founder of C. Rowland Hanson & Associates, Charles W.
Stryker, Ph.D., President, Marketing Information Solutions, at
IntelliQuest, Inc., and Sergio Zyman, a former Vice President and
Chief Marketing Officer of the Coca-Cola Company.
. Executive Recruiting and Human Resources. Members of our management
team assist our Partner Companies in recruiting key executive talent.
In providing this assistance, we leverage the contacts developed by
our network of Partner Companies, management and Advisory Board. In
addition, we plan to hire several executives to provide dedicated
recruiting and other human resource support to our Partner Companies.
We believe that this is one of the most important functions that we
perform on behalf of our Partner Companies. B2B e-commerce companies
must locate executives with both industry and Internet expertise. The
market for these professionals is highly competitive since few
persons possess the necessary mix of skills and experience.
. Information Technology. Our Chief Technology Officer, Richard G.
Bunker, is dedicated to helping our Partner Companies with their
information systems strategies and solving problems relating to their
current information technology. Members of our Advisory Board who
provide guidance in this area include K.B. Chandrasekhar, Chairman of
the Board of Directors of Exodus Communications, and Peter Solvik,
the Chief Information Officer of Cisco Systems, Inc.
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. Finance. One of our Managing Directors, John N. Nickolas, an
experienced finance executive, is dedicated to providing financial
guidance to our Partner Companies in areas such as corporate finance,
financial reporting, accounting and treasury operations. In providing
these services, Mr. Nickolas leverages the skills and experience of
our internal finance and accounting group, our Partner Company
network and outside consultants.
. Business Development. B2B e-commerce companies may be involved in
evaluating, structuring and negotiating joint ventures, strategic
alliances, joint marketing agreements, acquisitions or other
transactions. We provide assistance to our Partner Companies in all
these areas. Our management team, Advisory Board, strategic investors
and Partner Companies all assist in this function.
Promote Collaboration Among Our Partner Companies
One of the principal goals of our network is to promote innovation and
collaboration among our Partner Companies, which has resulted in shared
knowledge and business contacts among our Partner Companies and the formation of
numerous strategic alliances. We promote collaboration formally by hosting
regularly scheduled seminars relating to Partner Company operational and
business issues. At these seminars, the executives of Partner Companies share
their experiences with each other, our management team and the Advisory Board.
For example, at a recent seminar, thirteen chief executive officers of our
market maker and infrastructure service provider Partner Companies gathered to
discuss e-commerce strategies and business models. On an informal basis, we
promote collaboration by making introductions and recommending Partner Companies
to each other.
Recent examples of collaboration among our Partner Companies include:
. VerticalNet and e-Chemicals are collaborating to provide customer leads
for e-Chemicals. This relationship enables VerticalNet to provide a
greater breadth of services to its customers in the chemicals business
and provides more buyers for the products distributed by e-Chemicals.
. Deja.com, which provides a Web-based community for potential purchasers
to access user comments on a variety of products and services, has
formed a strategic alliance with VerticalNet to provide VerticalNet's
Web sites with discussion content. In addition, Deja.com and
ComputerJobs.com have created a discussion forum that accesses
ComputerJobs.com's database of technology employment opportunities,
increasing ComputerJobs.com's exposure to Deja.com's broad user base.
The collaboration of our Partner Companies is the result of our role as the
hub of our network. Through the network we identify prospective alliances, make
introductions, assist in strategic planning and monitor the ongoing
relationships among our Partner Companies. We encourage and regulate the
information flow among our Partner Companies. We also control the information
flow by determining the composition of the network. If we believe that a Partner
Company is not contributing to our network or has lost its strategic importance,
we may sell our interest in that Partner Company.
Overview of Current Partner Companies
We focus our efforts on building and operating companies in two areas of
the B2B e-commerce market--market makers and infrastructure service providers.
Market Maker Categories
Market makers operate in particular industries, such as chemicals, food or
auto parts. Each industry comprises a distinct market with its own
characteristics. Market makers must tailor their business models to match their
markets. To understand the different types of markets and help our market maker
Partner Companies position themselves, we place market makers into one of three
categories--distributor, network or community.
. Distributor. Distributor markets are characterized by comparatively
inefficient distribution channels. To service these markets, our
distributor Partner Companies act as principals in transactions,
distributing goods and services between buyers and sellers who connect
with each other over the Internet. Our Partner Companies in this
category generate revenue by charging fees for transactions
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conducted on their Web sites. An example of one of our distributor
Partner Companies is e-Chemicals. e-Chemicals believes that traditional
distribution channels for chemicals burden customers with excessive
transaction costs, high administrative costs and inefficient logistics.
To solve these problems, e-Chemicals has developed a Web site through
which it will sell a wide range of industrial chemicals to business
customers. e-Chemicals provides products based on streamlined Web-based
ordering processes, out-sourced logistics systems and online support.
. Network. Network markets are characterized by comparatively efficient
distribution channels. Our network Partner Companies automate existing
business processes so as to make them more efficient. Our Partner
Companies in this category may charge a fee based on the value of the
transactions facilitated and an ongoing fee for access to their Web
sites. An example of one of our network Partner Companies is Internet
Commerce Systems, Inc. Internet Commerce Systems is in the process of
establishing an Internet-based product introduction and promotion
service for the food industry. Internet Commerce Systems' FoodOne system
seeks to replace the traditional practice of weekly distribution of
physical product catalogs and follow-up calls by telemarketers, food
brokers or field salespeople. Internet Commerce Systems believes that it
will increase retail store sales coverage and provide market feedback to
grocery manufacturers while decreasing order entry, sales and marketing
costs.
. Community. Community market makers bring together buyers and sellers
that are typically businesses and professionals with common interests.
Existing relationships among these businesses and professionals are
unstructured, but our Partner Companies stimulate interaction and
facilitate transactions among them by providing an electronic community.
Our Partner Companies may charge a fee for each facilitated transaction
and receive advertising revenue. One example of our community Partner
Companies is VerticalNet. As of April 30, 1999, VerticalNet owned and
operated 37 industry-specific Web sites designed to act as online B2B
communities. These vertical trade communities act as comprehensive
sources of information, interaction and electronic commerce.
Market Maker Profiles
Table of Market Makers. The Partner Companies listed below are integral to
our strategy of owning numerous interests in distributor, network and community
market makers. We believe that establishing an e-commerce presence in major
industrial segments of the economy will enable us to become the premier B2B e-
commerce company. The table shows certain information regarding our market maker
Partner Companies by category as of April 30, 1999. Our ownership positions have
been calculated based on the issued and outstanding common stock of each Partner
Company, assuming the issuance of common stock on the conversion or exercise of
preferred stock and convertible notes, but excluding the effect of options and
warrants.
<TABLE>
<CAPTION>
Our Partner
Ownership Company
Category and Name Industry Description of Business Percentage Since
- --------------------------- ---------------------- ----------------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
Distributor:
CommerX Inc. Plastics Provides Internet-based procurement 34% 1998
www.commerx.com and sales of raw materials, tools and
maintenance and repair products for
the plastics industry.
e-Chemicals, Inc. Chemicals Provides Internet-based sales and 26% 1998
www.e-Chemicals.com distribution of industrial chemicals.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Our Partner
Ownership Company
Category and Name Industry Description of Business Percentage Since
- --------------------------- ---------------------- ----------------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
ONVIA.com, Inc. Small Business Provides small businesses with a wide 19% 1999
www.megadepot.com Services breadth of tailored products and
services over the Internet.
Universal Access, Inc. Telecommunications Provides Internet-based ordering for 11% 1999
www.universal accessinc.com provisioning and access and
transportation exchange services for
network service providers focused on
business customers.
Network:
Arbinet Telecommunications Provides an Internet-based trading 16% 1999
www.arbinet.com floor and clearinghouse for
telecommunications carriers to
purchase bandwidth.
BidCom Construction Provides Internet-based project 25% 1999
www.bidcom.com planning and management services for
the construction industry.
Collabria Inc. Printing Provides Internet-based procurement 10% 1999
www.collabria.com and production services for the
commercial printing industry.
ComputerJobs.com, Inc. Technology Provides Internet-based job screening 33% 1998
www.computerjobs.com Employment and resume posting for information
technology professionals, corporations
and staffing firms.
Internet Commerce Systems, Food Provides Internet-based product 43% 1999
Inc. introduction and promotion services to
www.icsfoodone.com wholesale and retail food distributors.
RapidAutoNet Corporation Auto Parts Provides Internet-based auto parts 15% 1998
www.rapidautonet.com procurement for professional
automotive and truck repair shops.
Community:
Deja.com, Inc. Media Provides a Web-based community for 32% 1997
www.deja.com potential purchasers to access user
comments on a variety of products and
services.
PlanSponsor Exchange Asset Management Provides a Web-based community for 24% 1999
www.plansponsor asset managers to reach fund sponsors.
exchange.com
VerticalNet, Inc. Industrial Services Provides industry-specific Web-based 37% 1996
www.verticalnet.com trade communities for businesses and
professionals.
</TABLE>
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Set forth below is a more detailed summary of some of our market maker
Partner Companies.
ComputerJobs.com, Inc. ComputerJobs.com is a network market maker that
provides Internet-based job advertising and resume posting services for
information technology professionals, corporations and staffing firms.
Identifying and attracting information technology professionals is an expensive
and critical success factor for many businesses. ComputerJobs.com is focused on
improving the online recruitment process for both information technology job
seekers and employers, including staffing firms and corporations. Job seekers
visit ComputerJobs.com's regional-specific Web sites to submit their resume and
pursue job opportunities free of charge. ComputerJobs.com allows jobs seekers to
scan job opportunities by information technology-specific skill requirements,
geographic preferences and other job criteria. Job seekers also have access to
extensive career resources and industry news on the site. By attracting a
significant number of job seekers and their resumes, ComputerJobs.com offers
staffing firms and corporations seeking information technology professionals the
ability to post job openings as well as search and receive daily resumes of
information technology candidates for a monthly fee. ComputerJobs.com pre-
screens job ads and resumes prior to placing them into its database and before
dissemination to its Web sites and clients.
ComputerJobs.com has Web sites for the information technology markets in
Atlanta, the Carolinas, Chicago, Florida, Texas, New York and Washington, D.C.
Based on more than 2,620 responses from recruiters, ComputerJobs.com was ranked
number one by Internet Business Network as the top site in customer satisfaction
in a 1998 study of the top 100 job sites. ComputerJobs.com plans to expand into
additional information technology markets by year end. We identified
ComputerJobs.com through a director of one of our Partner Companies. We are
assisting ComputerJobs.com with overall strategy, operational management,
recruiting, finance and marketing. Douglas A. Alexander, one of our Managing
Directors, is a member of ComputerJobs.com's Board of Directors.
ComputerJobs.com has formed a strategic alliance with Deja.com that has enabled
Deja.com to create a channel for accessing ComputerJobs.com's database of
technology employment opportunities. For 1998, ComputerJobs.com had revenue of
$4.4 million.
Deja.com, Inc. Deja.com, formerly Deja News, is a community market maker
that is the Web's leading source of shared knowledge in the form of user-
generated ratings and discussions. With over 160 million page views per month,
it is the leading purveyor of online discussion, offering access to more than
45,000 discussion forums. These forums are populated by knowledgeable
participants who are interested in sharing their knowledge and experience on a
wide variety of subjects.
Deja.com recently extended its franchise in shared knowledge with the
consumer-driven feature Deja Ratings, a tool that extends the site's ability to
support daily decision-making. Deja Ratings captures consumer opinions on a wide
range of products and services through a scaled voting system that includes
product comparisons. The analytical tools that support decision-making are
supplemented by contextual links to e-commerce retailers and vendors.
Deja.com derives revenue from sponsors and e-commerce partners, and
provides the marketing community with the compelling proposition of reaching a
highly targeted, self-segmenting audience consisting of highly active Internet
consumers intent on investigating considered purchases. Deja.com also delivers
to those marketers a unique means of programming to the specific interests of
their target consumers, all in the context of a commerce-friendly platform.
We have been very active in recruiting Deja.com's management team and
developing its business strategy. In addition, Kenneth A. Fox and Douglas A.
Alexander, two of our Managing Directors, are members of Deja.com's Board of
Directors. Deja.com is in discussions with several Partner Companies to provide
services to its user community. For 1998, Deja.com had revenue of $5.1 million.
Universal Access, Inc. Universal Access is a distributor market maker that
provides Internet-based ordering for provisioning and access and transportation
exchange services for network service providers focused on business customers.
For any network service provider, such as Internet service providers or other
telecommunications carriers, to establish a dedicated connection for its
corporate customers, it must provide provisioning and access. Provisioning is
the initial establishment of a dedicated connection, and access is the
availability of a dedicated connection after provisioning. Prior to significant
deregulation in the
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telecommunications industry, network service providers typically selected one
telecommunications carrier to service their corporate customers. After
deregulation, network service providers faced increasing challenges in dealing
with a growing number of local and long-distance carriers to establish dedicated
connections. These challenges faced by network service providers have been
exacerbated by rapid growth in demand from their business customers for
dedicated Internet access.
Universal Access enables network service providers to deal with a single
provider, rather than multiple local and long distance telecommunications
carriers, for seamless provisioning and access among multiple carriers.
Universal Access' proprietary database contains more than 27 telecommunication
carriers' routing availability, pricing and service capabilities which allows it
to determine the most economical and efficient path for bandwidth connectivity.
By providing single party accountability for all of their provisioning, access,
billing and ongoing network reliability needs, Universal Access enables network
service providers to offer their business customers with faster provisioning and
superior customer service.
Network service providers typically establish high-cost facilities on the
premises of a telecommunications carrier, which makes changing to another
carrier prohibitively expensive. As network service providers expand nationwide,
Universal Access' transport exchange services will allow these network service
providers to locate their equipment with Universal Access, which provides them
the flexibility to change telecommunications carriers. We are actively providing
Universal Access with overall strategy, marketing and finance guidance. Robert
Pollan, one of our Managing Directors, is a member of Universal Access' Board of
Directors. For 1998, Universal Access had revenue of $1.6 million.
VerticalNet, Inc. VerticalNet is a community market maker that provides
industry-specific Web-based trade communities for businesses and professionals.
VerticalNet owns and operates 37 industry-specific Web sites as of April 30,
1999 designed as online B2B communities, known as vertical trade communities.
These vertical trade communities act as comprehensive sources of information,
interaction and e-commerce. VerticalNet's objective is to continue to be a
leading owner and operator of industry-specific vertical trade communities on
the Internet.
VerticalNet's 37 vertical trade communities are:
<TABLE>
<CAPTION>
<S> <C>
Process Group Communication Group
. Adhesives and Sealants Online . Fiber Optics Online (fiberopticsonline.com)
(adhesivesandsealants.com) Design and Production of Fiber Optic
Manufacturing and Production of Adhesive, Networks and Network Components
Sealant, and Grout Materials
. Photonics Online (photonicsonline.com)
. Chemical Online (chemicalonline.com) Design and Manufacturing of Lasers, Optics,
Manufacturing and Processing Chemicals Optoelectronics, Fiber Optics and Imaging
Devices
. Hydrocarbon Online (hydrocarbononline.com)
Hydrocarbons and Petrochemicals Processing . Premises Networks.com (premisesnetworks.com)
Facilities and Network Infrastructure Design
. Oil and Gas Online (oilandgasonline.com) and Administration
Production and Exploration of Oil and Gas
. RF Globalnet (rfglobalnet.com)
. Paint and Coatings Online Information, Bookstore and Educational
(paintandcoatingsonline.com) Center for Radio Frequency, Wireless and
Manufacturing and Production of Paint Coatings, Microwave Engineers
Inks and Thick Film Printable Conductors
. Wireless Design Online (wirelessdesignonline.com)
. Pharmaceutical Online (pharmaceuticalonline.com) Design and Development of Wireless
Development, Design and Manufacturing of Communications Systems and Equipment
Pharmaceuticals
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Environmental Group Advanced Technologies Group
. Pollution Online (pollutiononline.com) . Aerospace Online (aerospaceonline.com)
Industrial Pollution Control Design and Manufacturing of Products and Services
Relating to the Aerospace Industry
. Power Online (poweronline.com)
Power Generation, Electric Utility Deregulation, . Computer OEM Online (computeroemonline.com)
Emissions Control, Alternative Fuels, Power Design and Manufacturing of Computers and
Industry Comperitzed Electronics Devices
. Public Works Online (publicworks.com) . Medical Design Online (medicaldesignonline.com)
Public Works and Municipal Maintenance Design, Manufacturing and Procurement of
Medical Devices
. Solid Waste Online (solidwaste.com)
Solid Waste Disposal . Plant Automation.com (plantautomation.com)
Hardware and Software Used in Industrial
. Water Online (wateronline.com) Manufacturing Including Robotics and
Municipal Water Supply and Municipal Automated Control Systems
Wastewater Treatment
. Test and Measurement (testandmeasurement.com)
Food & Packaging Group Design, Manufacturing and Procurement of
. Bakery Online (bakeryonline.com) Test, Measurement, Data Acquisition, Data
Production and Procurement of Baking Analysis and Instrumentation Equipment
Ingredients
Sciences Group
. Beverage Online (beverageonline.com) . Bioresearch Online (bioresearchonline.com)
Production and Procurement of Equipment used Covers all Aspects of Experimental and
in the Production of Beverages Applied Biology Including Biotechnology,
Genomics and Genetics
. Dairy Network.com (dairynetwork.com)
Production, Procurement and Distribution of . Drug Discovery Online (drugdiscoveryonline.com)
Dairy Products Early-Stage Pharmaceutical Discovery and
Development
. Food Ingredients Online (foodingredientsonline.com)
Manufacturing and Processing of Food . Laboratory Network.com (laboratorynetwork.com)
Ingredients Covers all Aspects of the Research Industry
Focusing on Analytical Instrumentation and
. Food Online (foodonline.com) Materials Science
Manufacturing and Processing of Food Products
Services Group
. Meat and Poultry Online . Property and Casualty.com
(meatandpoultryonline.com) (propertyandcasualty.com)
Production, Procurement and Distribution of Property and Casualty Insurance
Meat and Poultry Products
. Safety Online (safetyonline.com)
. Packaging Network.com (packagingnetwork.com) Industrial and Environmental Safety
Production, Purchase, Design and Marketing of
Packaging for all Consumer and Industrial
Products
Healthcare Group
. Hospital Network.com (hospitalnetwork.com)
Information for Hospital Purchasing Decision-
Makers
. Nurses.com (nurses.com)
Clinical, Professional and Other Information for
Nurses
</TABLE>
Each VerticalNet community is individually branded, focuses on one business
sector and caters to individuals with similar professional interests.
VerticalNet designs each of its vertical trade communities to attract
professionals responsible for selecting and purchasing highly specialized
industry related products and services.
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VerticalNet's communities combine product information, requests for proposals,
discussion forums, electronic commerce opportunities, industry news,
directories, classifieds, job listings, and online professional education
courses.
VerticalNet satisfies a developing market not currently being adequately
served through traditional channels, including trade publishers, trade shows and
trade associations. VerticalNet believes that this market is not currently being
served by Internet companies, which tend to focus on the consumer and not on the
B2B market.
VerticalNet's vertical trade communities take advantage of the Internet's
ability to allow users around the world to contact each other online, allowing
buyers to research, source, contact and purchase from suppliers. Although other
companies offer B2B services on the Internet, VerticalNet believes that it is
currently the only company operating a portfolio of specialized B2B communities.
A portfolio strategy permits VerticalNet to:
. offer consistent content and services in its current vertical trade
communities and replicate these offerings as it launches new
communities;
. realize cost savings and operating efficiencies in its technology,
marketing, infrastructure and management resources; and
. increase its overall audience, making its individual sites more
appealing to a broad array of advertisers and suppliers who sell their
goods and services over the Internet.
VerticalNet currently generates the majority of its revenue from Internet
advertising, including the development of "storefronts." A storefront is a Web
page posted on one of its vertical trade communities that provides information
on an advertiser's products, links a visitor to the advertiser's Web site and
generates sales inquiries from interested visitors. VerticalNet believes that
industry professionals using its vertical trade communities possess the
demographic characteristics that are attractive to its advertisers.
We were first introduced to VerticalNet through one of our major
shareholders. We helped to recruit several of VerticalNet's executive officers,
and worked with them to develop VerticalNet's business strategy. Douglas A.
Alexander, one of our Managing Directors, currently serves as VerticalNet's
Chairman of the Board of Directors and Walter W. Buckley, our President and
Chief Executive Officer, is a member of VerticalNet's Board of Directors. This
year VerticalNet became a public company, trading on the Nasdaq National Market
under the symbol "VERT." VerticalNet has formed a strategic alliance with e-
Chemicals to provide customer leads for e-Chemicals and to expand VerticalNet's
services to its chemical business customers. For 1998, VerticalNet had revenue
of $3.1 million.
Infrastructure Service Provider Categories
Infrastructure service providers assist traditional businesses in the
following ways:
. Strategic Consulting and Systems Integration. Strategic consultants
assist traditional businesses in developing their e-commerce strategies.
Systems integrators develop and implement technological infrastructure
that enables e-commerce. Systems integrators also integrate e-commerce
applications with existing enterprise applications. Strategic
consultants and systems integrators typically bill their clients on a
project-by-project basis.
. Software Providers. Software providers design and sell software
applications that support e-commerce and integrate business functions.
Software providers may sell or license their products.
. Outsourced Service Providers. Outsourced service providers offer
software applications, infrastructure and related services designed to
help traditional businesses reduce cost, improve operational efficiency
and decrease time to market. Outsourced service providers may charge
fees on a per-use or periodic basis.
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Infrastructure Service Provider Profiles
Table of Infrastructure Service Providers. The Partner Companies listed
below are important to our strategy because the growth of our Partner Companies
increases the value of our collaborative network. We believe that infrastructure
service providers will facilitate innovation and growth of our market maker
companies by providing them with critical services. The table shows certain
information regarding our infrastructure service provider Partner Companies by
category as of April 30, 1999. Our ownership positions have been calculated
based on the issued and outstanding common stock of each Partner Company,
assuming the issuance of common stock on the conversion or exercise of preferred
stock and convertible notes, but excluding the effect of options and warrants.
<TABLE>
<CAPTION>
Our Partner
Ownership Company
Category and Name Description of Business Percentage Since
- ---------------------------- ------------------------------------------------------- -------------- --------------
Strategic Consulting and Systems Integration:
<S> <C> <C> <C>
Benchmarking Partners, Inc. Provides e-commerce best practices research and 13% 1996
www.benchmarking.com consulting services to optimize supply and distribution
network management.
Context Integration, Inc. Provides systems integration services focused on 18% 1997
www.context.com customer support, data access and e-commerce.
US Interactive, Inc. Provides a range of consulting and technical 4% 1996
www.usinteractive.com services relating to Internet marketing solutions.
Software Providers:
Blackboard, Inc. Provides universities and corporations with 31% 1998
www.blackboard.com applications that enable them to host classes and
training on the Internet.
ClearCommerce Corp. Provides comprehensive e-commerce solutions 17% 1997
www.clearcommerce.com including transaction and payment processing, credit
card authorization, fraud tracking and reporting
functions.
Entegrity Solutions Provides encryption software to secure transactions 12% 1996
www.entegrity.com and communications between business applications.
SageMaker, Inc. Provides software that combines an enterprise's 22% 1998
www.sagemaker.com external and internal information assets into a
single, Web-based knowledge management platform.
ServiceSoft Technologies, Provides tools and services used by its customers to 12% 1998
Inc. create Internet customer service applications consisting
www.servicesoft.com of self-service, e-mail response and live interaction
products.
SMART Technologies, Inc. Provides enterprise relationship management software 6% 1997
www.smartdna.com that enables customers to interact directly with a
company's back-office systems.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Our Partner
Ownership Company
Category and Name Description of Business Percentage Since
- ---------------------------- ------------------------------------------------------- -------------- --------------
<S> <C> <C> <C>
Syncra Software, Inc. Provides software that improves supply chain 35% 1998
www.syncra.com efficiency through collaboration of trading partners
over the Internet.
Vivant! Corporation Provides process automation, decision support 23% 1998
Management software and services that enable companies to
www.vivantcorp.com strategically manage contractors, consultants and
temporary employees.
Outsourced Service Providers:
Breakaway Solutions, Inc. Provides application service hosting, e-commerce 57% 1999
www.breakaway.com consulting and systems integration services to
middle-market companies.
The LinkShare Corporation Establishes affiliate relationships for online 34% 1998
www.linkshare.com merchants with other Web sites to facilitate
e-commerce.
MessageQuest, Inc. Provides a messaging service for data sharing across 5% 1998
www.messagequest.com separate enterprises. Also provides software,
systems integration services and managed network
services for application integration within
enterprises or with external trading partners and
customers.
PrivaSeek, Inc. Provides consumers with control of their Web-based 16% 1998
www.privaseek.com personal profiles, allowing merchants to offer
consumers incentives for selective disclosure.
Sky Alland Marketing, Inc. Provides services to improve customer communications 35% 1996
www.skyalland.com and relationships.
</TABLE>
Set forth below is a more detailed summary of some of our infrastructure
service provider Partner Companies.
Benchmarking Partners, Inc. Benchmarking Partners is a strategic consulting
and systems integration infrastructure service company that provides e-commerce
best practices research and consulting services to optimize supply and
distribution network management. The use of best business practices enabled by
information technology established by Benchmarking Partners allows companies to
efficiently manage their supply and distribution networks. Benchmarking Partners
improves supply and distribution networks in the following ways:
. Integration: Coordinating diverse business functions such as
manufacturing, logistics, sales and marketing to maximize efficiency.
. Optimization: Developing strategies that increase the efficiency of
supply networks.
. Collaboration: Creating collaborative solutions that incorporate key
trading partners.
Benchmarking Partners' clients include: companies undergoing business
process and information technology transformation; technology solution providers
hoping to gain a better understanding of the market requirements for their
products; and management consultants and systems integrators seeking to refine
their ability to effectively support their clients.
We were introduced to Benchmarking Partners through a member of our board
of directors. We have helped Benchmarking Partners recruit key managers and are
currently helping it build and position
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its best practice e-commerce Web site. Benchmarking Partners assisted us in
assessing enterprise software markets and provides information technology advice
to other Partner Companies. Benchmarking Partners is also working with Sky
Alland Marketing and US Interactive to develop Internet business application
opportunities. For 1998, Benchmarking Partners had revenue of $15.9 million.
Breakaway Solutions, Inc. Breakaway Solutions is an outsourced service
provider infrastructure service company that is an application service provider
and e-commerce consulting and systems integration services provider to middle-
market companies. Through its application service hosting solutions, Breakaway
Solutions implements, operates and supports software applications that can be
accessed and used over the Internet. Breakaway Solutions also offers custom
developed, e-commerce related B2B interactive marketing and other solutions.
By focusing on Internet-based solutions, Breakaway has created a library of
components that can be redeployed by multiple clients. This allows Breakaway
Solutions to provide rapid, cost-effective service to clients.
We first met Breakaway Solutions through one of our shareholders and
Advisory Board members. We helped Breakaway Solutions to complete its management
team and merge with one of our other Partner Companies. In addition, Breakaway
Solutions is a strategic partner for installing ClearCommerce's Web-based
transaction and order processing solutions. Breakaway Solutions is also in
discussions to provide its services to ONVIA.com.
MessageQuest, Inc. MessageQuest is an outsourced service provider
infrastructure service company that delivers systems integration services,
software, and managed networked services to enterprises seeking to enable
mission-critical business processes within their enterprise or with their
external trading partners and customers. The range of computing environments and
software applications utilized across a typical Fortune 500 enterprise is vast
and growing, often involving multiple legacy and client/server environments,
characterized by heterogeneous computer platforms and various proprietary
information formats. Additionally, the recent growth of the Internet and the use
of intranets has increased the complexity of data sharing among heterogeneous
business applications. MessageQuest currently employs 200 professionals
dedicated to providing software and system integration services around IBM's MQ
series, a messaging-based middleware software solution that facilitates data
sharing among an enterprise's disparate applications, databases and operating
systems.
MessageQuest's recently launched managed network service leverages its
extensive domain expertise in providing middleware solutions that facilitate
data sharing to provide a highly secure, assured information delivery system
between corporations for use over any network, including the Internet. This
managed network service provides an open platform that seamlessly bridges legacy
e-commerce services, such as electronic data interchange and proprietary value-
added networks, with today's best-of-breed Internet technologies. By offering
multi-platform and multi-network interoperability and extensive customer
support, MessageQuest provides its customers with low cost, rapidly-implemented
messaging services. We believe that the services and software provided by
MessageQuest can be used throughout our Partner Company network, including our
market makers interested in tighter integration with their suppliers and
customers. We have assisted MessageQuest in recruiting senior management and
repositioning it to offer managed network services. To support the introduction
of managed network services, we provided the company with strategic planning,
sales and marketing support and introductions to potential business partners.
Government Regulations and Legal Uncertainties
As of April 30, 1999, there were few laws or regulations directed
specifically at e-commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection of and use of data from Web
site visitors and related privacy issues, pricing, content, copyrights, online
gambling, distribution and the quality of goods and services. The enactment of
any additional laws or regulations may impede the growth of the Internet and B2B
e-commerce, which could decrease the revenue of our Partner Companies and place
additional financial burdens on them.
Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. For example, Congress recently
enacted laws regarding online copyright infringement and the protection of
information collected online from children. Although these laws may not have a
direct adverse effect on our
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<PAGE>
business or those of our Partner Companies, they add to the legal and regulatory
burden faced by B2B e-commerce companies. Other specific areas of legislative
activity are:
. Taxes. Congress recently enacted a three-year moratorium, ending on
October 21, 2001, on the application of "discriminatory" or "special"
taxes by the states on Internet access or on products and services
delivered over the Internet. Congress further declared that there will
be no federal taxes on e-commerce until the end of the moratorium.
However, this moratorium does not prevent states from taxing activities
or goods and services that the states would otherwise have the power to
tax. Furthermore, the moratorium does not apply to certain state taxes
that were in place before the moratorium was enacted.
. Online Privacy. Both Congress and the Federal Trade Commission are
considering regulating the extent to which companies should be able to
use and disclose information they obtain online from consumers. If any
regulations are enacted, B2B e-commerce companies may find certain
marketing activities restricted. Also, the European Union has directed
its member nations to enact much more stringent privacy protection laws
than are generally found in the United States, and has threatened to
prohibit the export of certain personal data to United States companies
if similar measures are not adopted. Such a prohibition could limit the
growth of foreign markets for United States B2B e-commerce companies.
The Department of Commerce is negotiating with the Federal Trade
Commission to provide exemptions from the European Union regulations,
but the outcome of these negotiations is uncertain.
. Regulation of Communications Facilities. To some extent, the rapid
growth of the Internet in the United States has been due to the relative
lack of government intervention in the marketplace for Internet access.
Lack of intervention may not continue in the future. For example,
several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal
Communications Commission in the same manner as other telecommunications
services. Additionally, local telephone carriers have petitioned the
Federal Communications Commission to regulate Internet service providers
in a manner similar to long distance telephone carriers and to impose
access fees on such providers. Some Internet service providers are
seeking to have broadband Internet access over cable systems regulated
in much the same manner as telephone services, which could slow the
deployment of broadband Internet access services. Because of these
proceedings or others, new laws or regulations could be enacted which
could burden the companies that provide the infrastructure on which the
Internet is based, thereby slowing the rapid expansion of the medium and
its availability to new users.
. Other Regulations. The growth of the Internet and e-commerce may lead to
the enactment of more stringent consumer protection laws. The Federal
Trade Commission may use its existing jurisdiction to police e-commerce
activities, and it is possible that the Federal Trade Commission will
seek authority from Congress to regulate certain online activities. The
Federal Trade Commission has already issued for public comment proposed
regulations governing the collection of information online from
children.
Generally applicable laws may affect us and our Partner Companies. The
exact applicability of many of these laws to B2B e-commerce, however, is
uncertain.
Employees
As of April 30, 1999, excluding our Partner Companies, we had 21 employees,
all of whom work with us on a full-time basis. We consider our relationships
with our employees to be good. None of our employees are covered by collective
bargaining agreements.
Legal Proceedings
We are not a party to any material legal proceedings.
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<PAGE>
Competition
Competition From our Shareholders and Within our Network
We may compete with our shareholders and Partner Companies for Internet-
related opportunities. After this offering, Comcast Corporation, Compaq Computer
Corporation, General Electric Capital Corporation and Safeguard Scientifics,
Inc. will beneficially own %, %, % and % of our
common stock, respectively. These shareholders may compete with us to acquire
interests in B2B e-commerce companies. Comcast Corporation, General Electric
Capital Corporation and Safeguard Scientifics, Inc. currently each have a
designee as a member of our board of directors, which may give such companies
access to our business plan and potential acquisitions. In addition, we may
compete with our Partner Companies to acquire interests in B2B e-commerce
companies, and our Partner Companies may compete with each other for
acquisitions or other B2B e-commerce opportunities. In particular, VerticalNet
seeks to expand, in part through acquisition, its number of B2B communities.
VerticalNet, therefore, may seek to acquire companies that we would find
attractive. While we may partner with VerticalNet on future acquisitions, we
have no current contractual obligations to do so. We do not have any contracts
or other understandings with our shareholders or Partner Companies that would
govern the resolution of these potential conflicts. Such competition, and the
complications posed by the designated directors, may deter companies from
partnering with us and may limit our business opportunities.
Competition Facing our Partner Companies
Competition for Internet products and services is intense. As the market
for B2B e-commerce grows, we expect that competition will intensify. Barriers to
entry are minimal, and competitors can offer products and services at a
relatively low cost. Our Partner Companies compete for a share of a customer's:
. purchasing budget for services, materials and supplies with other online
providers and traditional distribution channels;
. dollars spent on consulting services with many established information
systems and management consulting firms; and
. advertising budget with online services and traditional off-line media,
such as print and trade associations.
In addition, some of our Partner Companies compete to attract and retain a
critical mass of buyers and sellers. Several companies offer competitive
solutions that compete with one or more of our Partner Companies. We expect that
additional companies will offer competing solutions on a stand-alone or combined
basis in the future. Furthermore, our Partner Companies' competitors may develop
Internet products or services that are superior to, or have greater market
acceptance than, the solutions offered by our Partner Companies. If our Partner
Companies are unable to compete successfully against their competitors, our
Partner Companies may fail.
Many of our Partner Companies' competitors have greater brand recognition
and greater financial, marketing and other resources than our Partner Companies.
This may place our Partner Companies at a disadvantage in responding to their
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives.
Competition for Partner Companies
We face competition from other capital providers including publicly-traded
Internet companies, venture capital companies and large corporations. Many of
these competitors have greater financial resources and brand name recognition
than we do. These competitors may limit our opportunity to acquire interests in
new Partner Companies. If we cannot acquire interests in attractive companies,
our strategy to build a collaborative network of Partner Companies may not
succeed.
Facilities
Our corporate headquarters are located at 435 Devon Park Drive, Building
800 in an office facility located in Wayne, Pennsylvania, where we lease
approximately 3,650 square feet. We plan to move into a larger corporate
42
<PAGE>
headquarters in Wayne, Pennsylvania during the second half of 1999. We also
maintain offices in Boston, Massachusetts and San Francisco, California.
43
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MANAGEMENT
Executive Officers and Directors
Our executive officers, key employees and directors, their ages and their
positions as of April 30, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Walter W. Buckley, III (2) 39 President, Chief Executive Officer and Director
Douglas A. Alexander 37 Managing Director
Richard G. Bunker 37 Managing Director and Chief Technology Officer
Kenneth A. Fox 28 Managing Director and Director
David D. Gathman 51 Chief Financial Officer, Secretary and Treasurer
Victor Hwang 30 Managing Director
Henry N. Nassau (3) 44 Managing Director and General Counsel
John N. Nickolas 32 Managing Director and Assistant Treasurer
Robert A. Pollan 38 Managing Director
Michael H. Forster 56 Senior Partner
Christopher H. Greendale 47 Senior Partner
Robert E. Keith, Jr. (2) 58 Chairman and Director
Julian A. Brodsky (2) 65 Director
E. Michael Forgash (1) 41 Director
Thomas P. Gerrity (1) 57 Director
Scott E. Gould 34 Director
</TABLE>
- --------------------------
(1) Member of the audit committee
(2) Member of the compensation committee
(3) Mr. Nassau has agreed to join us as soon as reasonably possible. He is
currently counsel to the law firm of Dechert Price & Rhoads.
Walter W. Buckley, III, is a co-founder and has served as our President and
Chief Executive Officer and as one of our directors since March, 1996. Prior to
co-founding us, Mr. Buckley worked for Safeguard Scientifics, Inc. as Vice
President of Acquisitions from 1991 to February, 1996. Mr. Buckley directed many
of Safeguard Scientifics' investments and was responsible for developing and
executing Safeguard Scientifics' multimedia and Internet investment strategies.
Mr. Buckley serves as a director of VerticalNet, Inc., Sky Alland Marketing,
Who? Vision Systems, Inc., Syncra Software, Inc., PrivaSeek, Inc., Breakaway
Solutions, Inc. and e-Chemicals, Inc.
Douglas A. Alexander has served as one of our Managing Directors since
September, 1997. Prior to joining us, Mr. Alexander co-founded Reality Online,
Inc. in 1986 and sold it to Reuters Group in 1994. Mr. Alexander continued to
serve as President and Chief Executive Officer of Reality Online after its
acquisition by Reuters Group until September, 1997 while concurrently acting as
a key contributor to Reuter's global Internet initiatives. Mr. Alexander is
Chairman of the board of VerticalNet, Inc. and serves as a director of
Blackboard, Inc., ComputerJobs.com, Inc., Deja.com, Inc., The LinkShare
Corporation and SageMaker, Inc.
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<PAGE>
Richard G. Bunker has served as one of our Managing Directors and has been
our Chief Technology Officer since April, 1999. Prior to joining us, Mr. Bunker
was President and Chief Executive Officer of Reality Online, a Reuters company,
from September, 1997 to April, 1999. Before becoming President and Chief
Executive Officer, Mr. Bunker served in various senior management positions at
Reality Online. While President and Chief Executive Officer of Reality Online,
Mr. Bunker built the company into a leading builder and host online securities
trading company. He also served as Senior Vice President and Chief Information
Officer of SEI Investments from January, 1994 to March, 1996, and Vice President
of the investment management and trading technology group at State Street Global
Advisors from October, 1992 to January, 1994.
Kenneth A. Fox is a co-founder and has served as one of our Managing
Directors since our inception in March, 1996. Mr. Fox has also served as one of
our directors since February, 1999. Prior to co-founding us, Mr. Fox served as
Director of West Coast Operations for Safeguard Scientifics, Inc. and Technology
Leaders II, L.P., a venture capital partnership, from 1994 to 1996. In this
capacity, Mr. Fox led the development of and managed the West coast operations
for these companies. Mr. Fox serves as a director of BidCom, ClearCommerce
Corporation, CommerX, Inc., Context Integration, Inc., Deja.com,
Inc., Entegrity Solutions Corporation, ONVIA.com, Inc., RapidAutoNet, SMART
Technologies, Inc. and Vivant! Corporation.
David D. Gathman has served as our Chief Financial Officer, Secretary and
Treasurer since January, 1999. Prior to joining us, Mr. Gathman was Chief
Financial Officer and Executive Vice President, Finance and Administration of
Integrated Systems Consulting Group, Inc. from January, 1997 through its merger
with First Consulting Group, Inc. in December, 1998. He also served as Chief
Operating Officer, Vice President, Secretary and Assistant Treasurer of
Integrated Systems Consulting Group, Inc. from April, 1994 to December, 1998 and
as a director of the company. Mr. Gathman brings to us over 30 years of finance-
related experience, the last 16 of which were focused in the information
technology industry.
Victor Hwang has served as one of our Managing Directors since March, 1999.
Prior to joining us, Mr. Hwang served from January, 1999 to March, 1999 as a
General Partner of Softbank Holdings, responsible for developing an investment
fund targeting late-stage private Internet companies. From August, 1995 to
January, 1999, Mr. Hwang also served as an investment banker at Goldman, Sachs &
Co., where he was involved in numerous financing and merger transactions for a
broad range of Internet, software, semiconductor, communications and hardware
companies. While at Goldman Sachs & Co., Mr. Hwang's clients included e-Bay,
GeoCities and Yahoo!. Mr. Hwang obtained a Masters of Business Administration
from the Graduate Business School of Stanford University where he was in
attendance from September, 1993 to June, 1995.
Henry N. Nassau has agreed to join us as one of our Managing Directors and
as our General Counsel as soon as reasonably possible. Mr. Nassau is currently
counsel to the law firm of Dechert Price & Rhoads where he was a Partner from
September, 1987 to May, 1999 and was Chair of the Business Department from
January, 1998 to May, 1999. At Dechert Price & Rhoads, Mr. Nassau engaged in the
practice of corporate law, concentrating on mergers and acquisitions.
John N. Nickolas has served as one of our Managing Directors and has been
our Assistant Treasurer since January, 1999. Prior to joining us, Mr. Nickolas
served from October, 1994 to December, 1998 in various
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finance and accounting positions for Safeguard Scientifics, Inc., most recently
serving as Corporate Controller from December, 1997 to December, 1998. Mr.
Nickolas brings to us extensive financial experience including corporate
finance, financial reporting, accounting and treasury operations. Before joining
Safeguard Scientifics, Inc., Mr. Nickolas was Audit Manager and held various
other positions at KPMG LLP from July, 1990 to October, 1994.
Robert A. Pollan has served as one of our Managing Directors since June,
1998. Prior to joining us, Mr. Pollan served as a Chief Technology Officer and
Vice President of Business Development at General Electric Capital Corporation
from August, 1995 to June, 1998. During his tenure at General Electric Capital
Corporation, Mr. Pollan co-founded and served as President of two supply chain
ventures focused on remote telemetry and third-party logistics, returnable
packaging leasing and logistics. He led several acquisitions in Europe, Asia and
the United States. Mr. Pollan was co-founder and, from September, 1991 to July,
1995, Managing Director of OFR, Ltd., an advisory firm focused on the
organizational and financial restructuring of industrial enterprises in Central
Europe. While in Central Europe, Mr. Pollan founded the first Polish industrial
group and advised the World Bank and a number of Eastern European governments.
Mr. Pollan serves as a director of CommerX, Inc., Internet Commerce Systems,
Inc. and Universal Access, Inc.
Michael H. Forster has served as one of our Senior Partners since June,
1998. Before joining us, Mr. Forster served as Senior Vice President of
Worldwide Field Operations for Sybase, Inc. from April, 1996 to March, 1999.
Prior to this position with the company, Mr. Forster was Sybase's Senior Vice
President and President of the company's Information Connection Division from
April, 1994 to March, 1996. Mr. Forster has over 30 years of sales, marketing
and general management experience in the information technology industry. Mr.
Forster serves as a director of Tangram Enterprise Solutions, MessageQuest, Inc.
SageMaker, Inc. and Syncra Software, Inc.
Christopher H. Greendale has served as one of our Senior Partners since
January, 1999. Prior to joining us, Mr. Greendale served as an independent
management consultant from January, 1998 to December, 1998. Prior to becoming a
consultant, Mr. Greendale served as Executive Vice President of Cambridge
Technology Partners, a company he co-founded in 1991. Cambridge Technology
Partners is a systems integrator that initiated fixed price, fixed time, rapid
systems development. Mr. Greendale has extensive experience in sales and
marketing, and general management in the information technology industry.
Robert E. Keith, Jr. has served as the Chairman of our Board of Directors
since our inception in March, 1996. Mr. Keith is also Managing General Partner
of Technology Leaders II, L.P. and has had principal operating responsibility
for Technology Leaders II, L.P. since 1988. Mr. Keith also serves as a director
of American Education Centers, Inc., Cambridge Technology Partners
(Massachusetts), Inc., Diablo Research Corporation, LLC, Interactive Media
Systems, Inc., Masterpack International, Inc., MultiGen-Paradigm, Inc., National
Media Corporation, Naviant Technology Solutions, Inc., Sansource, Inc., US
Interactive, Inc., and Whisper Communications, Inc. and is Vice Chairman of the
Board of Safeguard Scientifics, Inc.
Julian A. Brodsky has served as one of our directors since May, 1996. Mr.
Brodsky is a founder of Comcast Corporation, a developer of broadband cable
networks, cellular and personal communications systems and has served as a
director of Comcast since 1969 and Vice Chairman since 1988. He serves as Vice
President and a director of Sural. Mr. Brodsky serves as a director of Comcast
Cable Communications, Inc., Comcast Cellular Corporation, Comcast UK, Cable
Partners Limited, the RBB Fund, Inc. and Chairman of Comcast Interactive Capital
Group, Inc.
E. Michael Forgash has served as one of our directors since May, 1998. Mr.
Forgash has been Vice President, Operations of Safeguard Scientifics, Inc. since
January, 1998. Prior to joining Safeguard Scientifics, Mr. Forgash was President
and Chief Executive Officer of Creative Multimedia from August, 1996 to October,
1997. Prior to that, Mr. Forgash was President at Continental HealthCare Systems
from November, 1994 to July, 1996. Mr. Forgash also serves as a director of US
Interactive, Inc., 4anything.com, Inc., eMerge Vision, Who? Vision Systems, Inc.
and Integrated Visions, Inc.
Dr. Thomas P. Gerrity has served as one of our directors since December,
1998. Dr. Gerrity has also served as Dean of The Wharton School of the
University of Pennsylvania since July, 1990. Dr. Gerrity is also a member of the
board of directors of Fiserv, Inc., Fannie Mae, CVS Corporation, Sunoco, Inc.,
Reliance Group Holdings, Inc., Knight-Ridder, Inc. and Ikon Office Solutions,
Inc. and a trustee of MAS Funds.
Scott E. Gould has served as one of our directors since December, 1998. Mr.
Gould is Vice President of General Electric Equity Capital Group, Inc., a
wholly-owned subsidiary of General Electric Corporation, in charge of Supply
Chain Technology, Logistics and Transportation Investing since August, 1997.
Prior to joining General Electric Equity Capital Group, Mr. Gould was Director
of Strategic Planning & Information from January, 1996 to August, 1997 and
Director of Finance from February, 1994 to January, 1996 for DSC Logistics, a
logistics outsourcer and software company. Mr. Gould also works with the boards
of McHugh Software International and IFCO Returnable Packaging Systems.
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Advisory Board
Our Advisory Board members provide our Partner Companies with strategic
guidance in general management, sales and marketing, and information technology
management. Our Advisory Board members and their backgrounds are:
General Management Guidance
Jeff Ballowe has served on our Advisory Board since February, 1998. Mr.
Ballowe served as President, Interactive Media and Development Group, of Ziff-
Davis, Inc.'s Internet publications until the end of 1997. Mr. Ballowe was
instrumental in transforming Ziff-Davis from a national magazine publisher to an
international integrated media company. Prior to joining Ziff-Davis, Mr. Ballowe
worked as a marketing executive at various technology and marketing services
companies. Mr. Ballowe serves as Chairman of the Board of Directors of Deja.com,
Inc. and as director of drkoop.com, Inc., Xoom.com, Inc., Ziff-Davis TV Inc. and
VerticalNet, Inc.
Alex W. "Pete" Hart has served on our Advisory Board since March, 1998. Mr.
Hart is a consultant in consumer financial services specializing in emerging
payment and distribution systems. Mr. Hart has served in numerous positions,
including Chief Executive Officer, of Advanta Corporation from March, 1994 to
October, 1997. Prior to joining Advanta Corporation, Mr. Hart served as
President and Chief Executive Officer of MasterCard International. Mr. Hart
serves as a director of Sanchez Computer Associates, Who? Vision Systems,
4anything.com, HNC Software, Integrated Vision and Destiny Systems and on the
advisory board of ONVIA.com and Qpass.
Ron Hovsepian has served on our Advisory Board since October, 1998. Mr.
Hovsepian is the Vice President, Business Development, Distribution Industry,
for IBM Corporation. Prior to this position, Mr. Hovsepian was General Manager
of IBM's Global Retail and Distribution Industry Solution Organization, and had
global responsibility for IBM's retail store system and the consumer driven
supply chain solution units. Mr. Hovsepian joined IBM as a Marketing
Representative in 1983.
Martha Rogers, Ph.D., has served on our Advisory Board since 1996. Dr.
Rogers is a Professor at the Duke University Fuqua School of Business. Dr.
Rogers has served as Founding Partner of Marketing 1 to 1/Peppers and Rogers
Group since 1994. Marketing 1 to 1/Peppers and Rogers Group is a management
consulting firm that focuses on thought leadership and strategy in the growing
fields of interactivity, marketing, technology, relationship management and
business development. Dr. Rogers frequently appears on a variety of radio and
television programs, including C-SPAN's "American Perspectives" covering
business trends and features.
Yossi Sheffi has served on our Advisory Board since July, 1998. Dr. Sheffi
is a Professor at Massachusetts Institute of Technology where he serves as
Director of the Center for Transportation Studies. His teaching and research
areas include logistics, optimization, supply chain management and e-commerce.
Dr. Sheffi is the author of a textbook and over fifty technical publications. In
1997, Dr. Sheffi co-founded Syncra Software, Inc. and in 1998, he co-founded e-
Chemicals, Inc. Dr. Sheffi is Chairman of the Boards of Directors of Syncra
Software, Inc. and e-Chemicals, Inc.
Sales and Marketing Guidance
Rowland Hanson has served on our Advisory Board September, 1996. Mr. Hanson
is founder and President of C. Rowland Hanson & Associates which provides
strategic planning, marketing and communications to a variety of software
companies. Mr. Hanson has also been involved in the founding, development and
sale or merger of several software companies. Prior to founding C. Rowland
Hanson & Associates, Mr. Hanson served as Vice President of Corporate
Communications at Microsoft Corporation, where he is credited with developing
and executing the company's original branding strategy. Mr. Hanson serves as a
director of Webforia and Sequel Technology.
Tom Kippola has served on our Advisory Board since February, 1997. Mr.
Kippola is the Managing Partner of The Chasm Group, which provides market
strategy consulting and training and speaking services for start-up, growing and
established information technology companies. Mr. Kippola is co-author of the
Gorrilla Game: An Investor's Guide to Picking Winners in High Technology. Prior
to his consulting career, Mr. Kippola was director of marketing for a service
automation
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software vendor. Mr. Kippola has co-authored a book entitled The Gorilla Game:
An Investor's Guide to Picking Winners in High-Technology. Mr. Kippola serves as
a director of Whisper Communications, Inc. and Thru-Put Technologies. In
addition, Mr. Kippola is an advisory board member of Rubric, Smart Technologies,
Inc., RTMS, Inc. and Voyager Capital.
Geoffrey A. Moore has served on our Advisory Board since February, 1997.
Mr. Moore is Chairman of the Board and founder of The Chasm Group, where he
continues to provide market development and business strategy services to many
leading high-technology companies. He is also a venture partner with Mohr
Davidow Ventures where he provides market strategy advice to the high-tech
portfolio companies. Prior to finding The Chasm Group, Mr. Moore was a principal
and partner at Regis McKenna, Inc., a leading high-tech marketing strategy and
communications company. Mr. Moore serves as a director of many companies,
including Documentation Inc. and Objectivity, Inc.
John A. Miller, Jr. has served on our Advisory Board since July, 1996. Mr.
Miller has served as President and Chief Executive Officer of Miller Consulting
Group since founding the company in 1996. Miller Consulting Group is a strategy-
driven public relations firm that integrates market positioning with tactical
public relations for emerging information technology companies. Prior to
founding the Miller Consulting Group, Mr. Miller founded Miller Communications,
which launched Compaq Computer Corporation, Lotus Corporation and more than 75
other emerging information technology firms throughout the 1980s.
Don Peppers has served on our Advisory Board since August, 1996. Mr.
Peppers is a partner at Marketing 1 to 1/Pepper and Rogers Group, a management
consulting firm. Mr. Peppers is a co-author with Dr. Martha Rogers, of several
books on customer relationship management and one-on-one marketing. Mr. Peppers
serves as a director of DoubleClick, a network of Web advertising sites and ad
serving services, and Modem Media-Poppe Tyson, an interactive marketing and
advertising agency.
Charles W. Stryker, Ph.D., has served on our Advisory Board since
September, 1997. Dr. Stryker has served as President, Marketing Information
Solutions for IntelliQuest, Inc. Dr. Stryker is a recognized leader in the
information solutions industry with his record as founder of Trinet, Inc., MkIS
User Forum, Information Technology Forum, and President of National Accounts
Division of American Business Information.
Sergio Zyman has served on our Advisory Board since February, 1999. Mr.
Zyman is founder of The Z Group, a broad consulting and venture firm. Prior to
his consulting career, Mr. Zyman served as Vice President and Chief Marketing
Officer of the Coca-Cola Company. During Mr. Zyman's tenure with Coca-Cola, he
had responsibility for the introduction of Cherry Coke, Diet Coke, Fruitopia and
the new Coke initiative. Since leaving Coca-Cola, Mr. Zyman has also authored a
book entitled The End of Marketing As We Know It. Mr. Zyman serves as a director
of Gap, Inc., Netcentives, Inc. and VC Television Network Corp.
Information Technology Management Guidance
K.B. Chandrasekhar has served on our Advisory Board since April, 1999. Mr.
Chandrasekhar is Chairman of the Board of Exodus Communications, a company he
co-founded in 1994. Exodus Communications is a leading server hosting company
for Internet sites. Since establishing its first Internet data center in 1996,
Exodus Communications has expanded to nine cities with more than 1,000 employees
and 1,000 customers. Prior to co-founding Exodus Communications, Mr.
Chandrasekhar founded Fouress, Inc., a network software design and development
firm.
Esther Dyson has served on our Advisory Board since May, 1996. Ms. Dyson is
Chief Executive Officer of EDventure Holdings, Inc. EDventure Holdings is a
company focused on emerging information technology worldwide, and on the
emerging computer markets of Central and Eastern Europe. EDventure publishes
Release 1.0, a monthly newsletter and sponsors two annual technology forums. Ms.
Dyson serves as a director of Scala Business Solutions N.V., Poland Online, New
World Publishing, Global Business Network, Graphisoft, PRT Group, Inc., Accent,
Medscape Inc. and Cygnus Solutions. Ms. Dyson also serves on the advisory board
of Perot Systems Corporation.
John McKinley has served on our Advisory Board since July, 1998. Mr.
McKinley is Chief Technology Officer of Merrill Lynch. With Merrill Lynch, Mr.
McKinley has responsibility for 8,200 information technology
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professionals and is responsible for driving e-commerce initiatives throughout
the company. Prior to joining Merrill Lynch, Mr. McKinley served as Chief
Technology and Information Officer for General Electric Capital Corporation. Mr.
McKinley serves as a director of Proxicom Inc., a leading Internet-focused
systems integration firm. Mr. McKinley also serves on the Executive Client
Advisory Board of AT&T Corporation.
William Powar has served on our Advisory Board since June, 1998. Mr. Powar
is a principal of Venture Architects, a company he founded in January, 1997.
Venture Architects is a consulting firm that provides strategic guidance and
business development expertise to companies in the e-commerce industry. Prior to
founding Venture Architects, Mr. Powar served 22 years with Visa USA and Visa
International developing new markets and businesses. From 1994 through 1996, Mr.
Powar directed Visa's venture investments and strategic alliances. Mr. Powar
serves as a director of MobiNetix Systems, Inc.
Pete Solvik has served on our Advisory Board since August, 1996. Mr. Solvik
has served as Senior Vice President and Chief Information Officer of Cisco
Systems, Inc. since January, 1999, as Vice President and CIO from 1995 to 1999,
and as Director of Information Systems and CIO from 1995 to 1995. Under Mr.
Solvik's leadership, Cisco Systems has been recognized as one of the most
innovative and successful large corporations in the use of the Internet. Mr.
Solvik serves as a director of Context Integration, Inc., SMART Technologies,
Inc., Cohera Corp. and Asera Inc.
We expect to change the composition of our Advisory Board from time to time
to better match the evolving needs of our Partner Companies.
Classes of the Board
Our board of directors are divided into three classes that serve staggered
three-year terms as follows:
<TABLE>
<CAPTION>
CLASS EXPIRATION MEMBER
- ---------------------- ------------------------ ------------------------------
<S> <C> <C>
Class I 2000 Messrs. Gould and Brodsky
Class II 2001 Messrs. Fox, Keith and Forgash
Class III 2002 Messrs. Buckley and Gerrity
</TABLE>
Board Committees
The compensation committee reviews and makes recommendations to the Board
regarding the compensation to be provided to our Chief Executive Officer and our
directors. In addition, the compensation committee reviews compensation
arrangements for our other executive officers. The compensation committee also
administers our equity compensation plans. The current members of the
compensation committee are Messrs. Buckley, Brodsky and Keith.
The audit committee reviews and monitors our corporate financial reporting,
external audits, internal control functions and compliance with laws and
regulations that could have a significant effect on our financial condition or
results of operations. In addition, the audit committee has the responsibility
to consider and recommend the appointment of, and to review fee arrangements
with, our independent auditors. The current members of the audit committee are
Messrs. Forgash and Gerrity.
Director Compensation and Other Arrangements
We do not pay cash compensation to our directors, however they are
reimbursed for the expenses they incur in attending meetings of the board or
board committees. Non-employee directors are eligible to receive options to
purchase common stock awarded under our 1999 Equity Compensation Plan. See "--
Stock Option Plans."
Compensation Committee Interlocks and Insider Participation
Upon completion of this offering, our compensation committee will make all
compensation decisions. Messrs. Buckley, Brodsky and Keith have served as the
only members of the compensation committee since we formed the committee in
October, 1998. Prior to that time, our full board made compensation decisions.
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Messrs. Alexander and Buckley serve on the compensation committee of
VerticalNet. As of April 30, 1999, our holdings in VerticalNet were valued at
approximately $700 million. This could represent a significant portion of our
market capitalization. None of our other executive officers, directors or
compensation committee members currently serve, or in the past served, on the
compensation committee of any other company the directors or executive officers
of which served on our compensation committee.
Executive Compensation
The following table provides certain summary information concerning the
compensation earned by our chief executive officer and the other executive
officers employed by us during the fiscal year ended December 31, 1998. Since
January 1, 1999, we have employed five additional executive officers--Messrs.
Bunker, Gathman, Hwang, Nassau and Nickolas--each of whom are expected to
receive more than $100,000 in compensation in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------------------------- -----------------
Shares
Other Underlying
Name and Principal Position Salary Bonus Compensation(1) Options
- --------------------------- ------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Walter W. Buckley, III
President and Chief Executive Officer........... $159,769 $ 96,000 --
Douglas A. Alexander
Managing Director............................... $225,000 $100,000 --
Kenneth A. Fox
Managing Director............................... $119,538 $ 75,000 --
Robert A. Pollan
Managing Director............................... $133,808 $ 50,000 --
</TABLE>
- ----------------------
(1) The value of certain perquisites and other personal benefits is not included
in the amounts disclosed because it did not exceed for any officer in the
table above the lesser of either $50,000 or 10% of the total annual salary
and bonus reported for such officer.
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The following tables set forth certain information concerning grants to
purchase shares of our common stock of each of the officers named in the summary
compensation table above during the year ended December 31, 1998.
Option Grants During the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Potential Realizable Value at
Number of Percentage of Assumed Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise Option Term (3)
Options Employees in Price per Expiration
Name Granted (1) 1998 Share (2) Date 5% 10%
- ------------------------------------------------- ------------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Walter W. Buckley, III..........
Douglas A. Alexander............
Kenneth A. Fox..................
Robert A. Pollan................
</TABLE>
- ---------------------------
(1) All options granted to employees are immediately exercisable and are either
incentive stock options or nonqualified stock options and generally vest
over five years at the rate of 20% of the shares subject to the option per
year. Unvested shares are subject to a right of repurchase upon termination
of employment. Options expire ten years from the date of grant.
(2) We granted options at an exercise price equal to the fair market value of
our common stock on the date of grant, as determined by our board of
directors.
(3) These amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration dates based upon an assumed initial public offering price
of $ per share. These assumptions are not intended to
forecast future appreciation of our stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock.
The following table sets forth certain information concerning option
exercises by our Named Officers.
Year-End December 31, 1998 Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-The
Unexercised Options at Fiscal Money Options at Fiscal
Shares Year End Year-End (1)
Acquired on Value --------------------------------------------------------------
Name Exercise (#) Realized ($) Exercisable(2) Unexercisable Exercisable Unexercisable
- -------------------------------- -------------- -------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Walter W. Buckley, III.......... -- -- --
Douglas A. Alexander............ -- -- --
Kenneth A. Fox.................. -- -- --
Robert A. Pollan................ -- -- --
</TABLE>
(1) Based on an assumed initial public offering price of $ per
share, less the exercise price, multiplied by the number of shares
underlying the option.
(2) All the options listed below were exercised in May, 1999.
Employee Benefit Plans
Membership Profit Interest Plan
In 1996, the board of managers of Internet Capital Group, L.L.C. approved
the Membership Profit Interests Plan, which we refer to as our restricted stock
issuances after the Reorganization. Under the terms of the Membership Profit
Interest Plan, certain employees, consultants and advisors who are designated
by Messrs. Buckley and Fox received grants of units of membership interests in
Internet Capital Group, L.L.C. These units of membership interest cannot be
transferred until the rights of the holder in the units vest. Twenty percent of
each of these holder's units of membership interest vest each year over a five
year period beginning on the vesting date
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established by our board. If any holder's relationship with us is terminated,
his or her units of membership interest that have not vested are forfeited to
us.
Following the Reorganization, all outstanding grants became grants under
our new Membership Profit Interest Plan. As of December 31, 1998 a total of
6,783,625 shares of common stock have been issued under the Membership Profit
Interest Plan, all of which were outstanding, leaving no shares available for
grant at a later date. The board has the power, subject to the limitations
contained in the Membership Profit Interest Plan, to prescribe the terms and
conditions of any award granted under the Membership Profit Interest Plan,
including the total number of shares awarded to each grantee and any applicable
vesting schedule.
Internet Capital Group 1999 Equity Compensation Plan
Our 1998 Equity Compensation Plan and our Managers' Option Plan were
approved by the board of managers of Internet Capital Group, L.L.C. on October
13, 1998. After the Reorganization, we converted the 1998 Equity Compensation
Plan and the Managers' Option Plan into our 1999 Equity Compensation Plan, which
combines the Equity Compensation Plan and the Managers' Option Plan into a
single plan. The 1998 Equity Compensation Plan and Managers' Option Plan
provided for the grant of non-qualified options for membership interests in
Internet Capital Group, L.L.C., restricted stock, stock appreciation rights
("SARs"), and performance awards. Our 1999 Equity Compensation Plan provides
that options outstanding under the 1998 Equity Compensation Plan and Managers'
Option Plan will be considered options issued under the 1999 Plan.
We have adopted the Internet Capital Group, Inc. 1999 Equity Compensation
Plan, as amended and restated, effective as of February 2, 1999. The terms and
provisions of the 1999 Plan are summarized below. This summary, however, does
not purport to be a complete description of the 1999 Plan and is qualified in
its entirety by the terms of the 1999 Plan.
Purpose. The purpose of the 1999 Plan is to provide (i) designated
employees of Internet Capital Group and its subsidiaries, (ii) certain advisors
who perform services for Internet Capital Group or its subsidiaries and (iii)
non-employee members of our board of directors with the opportunity to receive
grants of incentive stock options, non-qualified options, share appreciation
rights, restricted shares, performance shares, dividend equivalent rights and
cash awards. We believe that the 1999 Plan will encourage the participants to
contribute materially to our growth and will align the economic interests of the
participants with those of our shareholders.
General. Subject to adjustment as described below, the plan authorizes
awards to participants of up to 21,000,000 shares of our common stock. No more
than 3,000,000 shares in the aggregate may be granted to any individual in any
calendar year. Such shares may be authorized but unissued shares of our common
stock or may be shares that we have reacquired, including shares we purchase on
the open market. If any options or stock appreciation rights granted under the
plan expire or are terminated for any reason without being exercised, or
restricted shares or performance shares are forfeited, the shares of common
stock underlying that award will again be available for grant under the plan.
Administration of the Plan. A committee appointed by our board of directors
administers the 1999 Plan. The committee has the sole authority to designate
participants, grant awards and determine the terms of all grants, subject to the
terms of the 1999 Plan. As a result of our becoming a publicly-traded company,
the compensation committee of the board of directors will become responsible for
administering and interpreting the plan. Prior to that time, the board of
directors has fulfilled those roles. The compensation committee will consist of
two or more persons appointed by the board of directors from among its members,
each of whom will be a "non-employee director" as defined by Rule 16b-3 under
the Securities Exchange Act of 1934, and an "outside director" as defined by
Section 162(m) of the Internal Revenue Code and related Treasury regulations.
The committee has the full authority to interpret the 1999 Plan and to make
rules, regulations, agreements and instruments for implementing the plan. The
committee's determinations made under the 1999 Plan are to be conclusive and
binding on all persons having any interest in the plan or any awards granted
under the plan.
Eligibility. Grants may be made to any employee of Internet Capital Group,
Inc. or any of its subsidiaries and to any non-employee member of the board of
directors. Key advisors who perform services for us or any of our
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subsidiaries are eligible if they render bona fide services, not as part of the
offer or sale of securities in a capital-raising transaction. As of December 31,
1998, 6,697,000 options were outstanding under the plan.
Options. Incentive stock options may be granted only to employees. The
maximum number of shares that may be subject to incentive stock options over the
life of the Plan is 3,000,000. Non-qualified stock options may be granted to
employees, key advisors and non-employee directors. The exercise price of common
stock underlying an option shall be determined by the compensation committee at
the time the option is granted, and may be equal to, greater than, or less than
the fair market value of such stock on the date the option is granted; provided
that the exercise price of an incentive stock option shall be equal to or
greater than the fair market value of a share of common stock on the date such
incentive stock option is granted, and the exercise price of an incentive stock
option granted to an employee who owns more than 10% of the common stock may not
be less than 110% of such fair market value.
Unless the applicable option agreement provides otherwise, a participant
can exercise an option award at any time, before or after the option has fully
vested, by paying the applicable exercise price in cash, or, with the approval
of the compensation committee, by delivering shares of common stock owned by the
grantee and having a fair market value on the date of exercise equal to the
exercise price of the grants, or by such other method as the compensation
committee shall approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board. In addition,
the plan provides that we may make loans to participants or guarantee loans made
by third parties to the participant for the purpose of assisting participants to
exercise their options. The compensation committee has the authority to set the
terms and conditions that will apply to any loan or guarantee.
Options vest according to the terms and conditions determined by the
compensation committee and specified in the grant instrument. In general, the
options that have already been granted under the plan are subject to a five year
vesting schedule with twenty percent of each grant vesting on each anniversary
of the grant date. The compensation committee will determine the term of each
option up to a maximum of ten years from the date of grant except that the term
of an incentive stock option granted to an employee who owns more than 10% of
the common stock may not exceed five years from the date of grant. The
compensation committee may accelerate the exercisability of any or all
outstanding options at any time for any reason.
Non-Employee Director Option Grants. The 1999 Plan provides that each of
our non-employee directors, other than (i) non-employee directors who at any
time during their membership on our board of directors are employees of
Safeguard Scientifics, Inc. or any of its subsidiaries or affiliates, (ii) non-
employee directors who at any time during their membership on our board of
directors are employees of TL Ventures, Inc. or any of its subsidiaries or
affiliates or (iii) non-employee directors who are granted options under the
general option provisions of the 1999 Plan, is entitled to receive an option to
purchase 47,000 shares of our common stock, vesting in equal installments over
four years, upon his initial election to our board of directors, and a service
grant to purchase 20,000 shares every two years, vesting in equal installments
over two years. The plan also allows our board of directors to grant an option
to any of the eligible non-employee directors who were members of the board of
directors immediately following the execution of the Reorganization to
compensate any of those non-employee directors for the cancellation of
outstanding options held immediately prior to the Reorganization. No non-
employee director may be granted more than 107,000 shares of our common stock
under the automatic and conversion grants described above. Such automatic and
conversion grants will otherwise be generally subject to the terms provided for
options under the 1999 Plan.
Restricted Stock. The compensation committee shall determine the number of
restricted shares granted to a participant, subject to the maximum plan limit
described above. Grants of restricted shares will be conditioned on such
performance requirements, vesting provisions, transfer restrictions or other
restrictions and conditions as the compensation committee may determine in its
sole discretion. The restrictions shall remain in force during a restriction
period set by the compensation committee. If the grantee is no longer employed
by us during the restriction period or if any other conditions are not met, the
restricted shares grant will terminate as to all shares covered by the grant for
which the restrictions are still applicable, and those shares must be
immediately returned to us.
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Stock Appreciation Rights. The compensation committee may grant stock
appreciation rights (SARs) to any participant, subject to the maximum plan limit
described above. At any time, the compensation committee may grant an SAR award,
either separately or in connection with any option; provided, that if an SAR is
granted in connection with an incentive stock option, it must be granted at the
same time that the underlying option is granted. The compensation committee will
determine the base amount of the SAR at the time that it is granted and will
establish any applicable vesting provisions, transfer restrictions or other
restrictions as it may determine is appropriate in its sole discretion. When a
participant exercises an SAR, he or she will receive the amount by which the
value of the stock has appreciated since the SAR was granted, which may be
payable to the participant in cash, shares, or a combination of cash and shares,
as determined by the compensation committee.
Performance Share Awards. The compensation committee may grant performance
share awards to any employee or key advisor. A performance share award
represents the right to receive an amount based on the value of our stock, but
may be payable only if certain performance goals that are established by the
compensation committee are met. If the compensation committee determines that
the applicable performance goals have been met, a performance share award will
be payable to the participant in cash, shares or a combination of cash and
shares, as determined by the compensation committee.
Dividend Equivalent Rights. The compensation committee may grant dividend
equivalent rights to any participant. A dividend equivalent right is a right to
receive payments in amounts equal to dividends declared on shares of our common
stock with respect to the number of shares and payable on such dates as
determined by the compensation committee. The compensation committee shall
determine all other terms applicable to dividend equivalent rights.
Cash Awards. The compensation committee may grant cash awards to employees
under the 1999 Plan. Such awards shall be in such amounts and subject to such
performance goals and other terms and conditions as the compensation committee
determines.
Amendment and Termination of the Plan. The compensation committee may amend
or terminate the plan at any time. The plan will terminate on the tenth
anniversary of its effective date, unless the compensation committee terminates
it earlier or extends it with the approval of the shareholders.
Adjustment Provisions. In the event that certain reorganizations of
Internet Capital Group or similar transactions or events occur, the maximum
number of shares of stock available for grant, the maximum number of shares that
any participant in the 1999 Plan may be granted, the number of shares covered by
outstanding grants, the kind of shares issued under the 1999 Plan and the price
per share or the applicable market value of such grants shall be adjusted by the
committee to reflect changes to our common stock as a result of such occurrence
to prevent the dilution or enlargement of rights of any individual under the
1999 Plan.
Change of Control and Reorganization. Upon a Change of Control, as defined
in the 1999 Plan, the compensation committee may determine that (i) outstanding
grants, whether in the form of options and stock appreciation rights shall
immediately vest and become exercisable; and (ii) the restrictions and
conditions on all outstanding restricted stock or performance share awards shall
immediately lapse. In addition, the compensation committee may (i) require that
grantees surrender their outstanding options and stock appreciation rights in
exchange for payment by us, in cash or common stock, in an amount equal to the
amount by which the then fair market value of the shares of common stock subject
to the grantee's unexercised options or stock appreciation rights exceeds the
exercise price of those options, and/or (ii) after giving grantees an
opportunity to exercise their outstanding options and stock appreciation rights,
terminate any or all unexercised options and stock appreciation rights.
Upon a Reorganization, as defined in the 1999 Plan, where we are not the
surviving entity or where we survive only as a subsidiary of another entity,
unless the compensation committee determines otherwise, all outstanding option
or SAR grants shall be assumed by or replaced with comparable options or rights
by the surviving corporation. In addition, the compensation committee may (i)
require that grantees surrender their outstanding options in exchange for
payment by us, in cash or common stock, at an amount equal to the amount by
which the then fair market value of the shares of common stock subject to the
grantee's unexercised options
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exceeds the exercise price of those options, and/or (ii) after accelerating all
vesting and giving grantees an opportunity to exercise their outstanding options
or SARs, terminate any or all unexercised options and SARs.
Federal Tax Consequences of Stock Options. In general, neither the grant
nor the exercise of an incentive stock option will result in taxable income to
an option holder or a deduction to Internet Capital Group. To receive special
tax treatment as an incentive stock option under the Internal Revenue Code as to
shares acquired upon exercise of an incentive stock option, an option holder
must neither dispose of such shares within two years after the incentive stock
option is granted nor within one year after the exercise of the option. In
addition, the option holder must be an employee of Internet Capital Group or one
of its subsidiaries at all times between the date of grant and the date three
months, or one year in the case of disability, before the exercise of the
option. Special rules apply in the case of the death of the option holder.
Incentive stock option treatment under the Internal Revenue Code generally
allows the sale of our common stock received upon the exercise of an incentive
stock option to result in any gain being treated as a capital gain to the option
holder, but we will not be entitled to a tax deduction. However, the exercise of
an incentive stock option, if the holding period rules described above are
satisfied, will give rise to income includable by the option holder in his or
her alternative minimum tax in an amount equal to the excess of the fair market
value of the stock acquired on the date of the exercise of the option over the
exercise price.
If the holding rules described above are not satisfied, gain recognized on
the disposition of the shares acquired upon the exercise of an incentive stock
option will be characterized as ordinary income. Such gain will be equal to the
difference between the exercise price and the fair market value of the shares at
the time of exercise. Special rules may apply to disqualifying dispositions
where the amount realized is less than the value at exercise. We will generally
be entitled to a deduction equal to the amount of such gain included by an
option holder as ordinary income. Any excess of the amount realized upon such
disposition over the fair market value at exercise will generally be long-term
or short-term capital gain depending on the holding period involved.
Notwithstanding the foregoing, in the event that the exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules may apply.
No income will be recognized by an option holder at the time a non-
qualified stock option is granted. Generally, ordinary income will, however, be
recognized by an option holder at the time a vested non-qualified stock option
is exercised in an amount equal to the excess of the fair market value of the
underlying common stock on the exercise date over the exercise price. We will
generally be entitled to a deduction for federal income tax purposes in the same
amount as the amount included in ordinary income by the option holder with
respect to his or her non-qualified stock option. Gain or loss on a subsequent
sale or other disposition of the shares acquired upon the exercise of a vested
non-qualified stock option will be measured by the difference between the amount
realized on the disposition and the tax basis of such shares, and will generally
be long-term capital gain depending on the holding period involved. The tax
basis of the shares acquired upon the exercise of any non-qualified stock option
will be equal to the sum of the exercise price of such non-qualified stock
option and the amount included in income with respect to such option.
Notwithstanding the foregoing, in the event that exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules apply.
Unless the holder of an unvested non-qualified stock option makes an 83(b)
election as described below, there generally will be no tax consequences as a
result of the exercise of an unvested option until the stock received upon such
exercise is no longer subject to a substantial risk of forfeiture or is
transferable. Generally, when the shares have vested, the holder will recognize
ordinary income, and we will be entitled to a deduction, equal to the difference
between the fair market value of the stock at such time and the exercise price
paid by the holder for the stock. Subsequently realized changes in the value of
the stock generally would be treated as long-term or short-term capital gain or
loss, depending on the length of time the shares were held prior to disposition
of such shares. In general terms, if a holder were to make an 83(b) election
under Section 83(b) of the Internal Revenue Code upon the exercise of the
unvested option, the holder would recognize ordinary income on the date of the
exercise of such option, and we would be entitled to a deduction, equal to (i)
the fair market value of the stock received pursuant to such exercise as though
the stock were (A) not subject to a substantial risk of forfeiture or (B)
transferable, minus (ii) the exercise price paid for the stock. If an 83(b)
election were made, there would generally be no tax consequences to the holder
upon the vesting of the stock, and all subsequent appreciation in the stock
would generally be eligible for capital gains treatment.
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Additional special tax rules may apply to those option holders who are
subject to the rules set forth in Section 16 of the Securities Exchange Act or
1934, as amended. The foregoing tax discussion is a general description of
certain expected federal income tax results under current law, and all affected
individuals should consult their own advisors if they wish any further details
or have special questions.
Section 162(m). Section 162(m) of the Internal Revenue Code may preclude us
from claiming a federal income tax deduction if we pay total remuneration in
excess of $1.0 million to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
generally include amounts received upon the exercise of stock options granted
under the plan and the value of shares received when restricted shares become
transferable or such other time when income is recognized. An exception does
exist, however, for performance-based compensation which includes amounts
received upon the exercise of stock options pursuant to a plan approved by
shareholders that meets certain requirements. We intend to present the 1999 Plan
to the shareholders for their approval before completing this offering. The 1999
Plan is intended to make grants of stock options and stock appreciation rights
that meet the requirements of performance-based compensation. Other awards have
been structured with the intent that such awards may qualify as such performance
based compensation if so determined by the compensation committee.
Internet Capital Group, Inc. Equity Compensation Loan Program
In accordance with the 1998 Plan, the 1999 Plan and the applicable employee
option agreements, and in consideration of certain restrictive covenants, we
have offered to loan each employee who has been awarded a non-qualified stock
option under the 1999 Plan an amount necessary to pay the exercise price of
their outstanding options and an amount to pay some portion of the income tax
that such employee will owe upon the exercise of such options. These loans will
generally be available to those eligible employees who elect to exercise their
options on or prior to May 5, 1999. The loans will be full recourse, will bear
an interest rate of 5.22%, and will be for five-year terms. In addition, each
eligible employee will pledge the number of shares acquired pursuant to the
exercise of the applicable option as collateral for the loan. If an eligible
employee sells any shares acquired pursuant to the option exercise, such
eligible employee is obligated under the terms of the loan to use the proceeds
of such sale to repay any outstanding balance of the loan. If the eligible
employee's employment by the Company is terminated for any reason, such eligible
employee must repay the full outstanding loan balance to the Company within 90
days of such termination. Also, if the Company determines that a grantee
breaches any of the terms of the restrictive covenants noted above, such
eligible employee must immediately repay any outstanding loan balance to the
Company.
Internet Capital Group, Inc. Long-Term Incentive Plan
Our long-term incentive plan supports our growth strategy since the plan
permits participants to share directly in the growth of our Partner Companies.
Each year, we will allocate up to 12% of each acquisition made during the year
for the benefit of the participants in the long-term incentive plan. The plan
permits the compensation committee to award grants in the form of interests in
limited partnerships established by us to hold the interests acquired by us in a
given year, restricted stock in a Partner Company, or share units which entitle
a participant to share in the appreciation of the value of the stock of a
Partner Company above established threshold levels. We intend primarily to grant
limited partnership interests to plan participants to more closely align the
participants' interests with our interests.
All grants are subject to vesting over a period of years and the attainment
of specified threshold levels. Partnership interests are generally paid out in
stock of a Partner Company after a fixed period of years. The compensation
committee can accelerate vesting and payout upon the attainment of the threshold
value. Restricted stock awards are subject to certain restrictions and are held
in escrow until the attainment of the established threshold levels. Share units
are payable in cash or in stock of a Partner Company after a fixed period of
years, subject to acceleration by the compensation committee if the threshold
levels are achieved.
Internet Capital Group 401(k) Plan
We sponsor the Internet Capital Group 401(k) Plan, a defined contribution
plan that is intended to qualify under Section 401(a) of the Code. All employees
who are at least 21 years old and have been employed by us for
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one month are eligible to participate in our 401(k) Plan. An eligible employee
of the Company may begin to participate in our 401(k) Plan on the first day of
the plan quarter after satisfying our 401(k) Plan's eligibility requirements. A
participating employee may make pre-tax contributions of a percentage (not less
than 1% and not more than 15%) of his or her eligible compensation, subject to
the limitations under the federal tax laws. Employee contributions and the
investment earnings thereon are fully vested at all times. We may make
discretionary contributions to the 401(k) Plan but we have never done so.
CERTAIN TRANSACTIONS
During 1998 and 1999, we leased our corporate offices in Wayne,
Pennsylvania from Safeguard Scientifics, Inc. From January 31, 1998 to April 30,
1999, our monthly lease payments to Safeguard Scientifics, Inc. totaled
approximately $40,000. Prior to this offering, Safeguard Scientifics, Inc.,
beneficially owned 25.8% of our common stock. We believe that our lease in Wayne
with Safeguard Scientifics, Inc. is on terms no less favorable to us than those
that would be available to us in an arm's-length transaction with a third party.
In the second half of 1999, we intend to lease new corporate office space
in Wayne, Pennsylvania from Safeguard Scientifics, Inc. We expect that our new
lease with Safeguard Scientifics, Inc. will be on terms no less favorable to us
than those terms that would be available to us in an arm's-length transaction
with a third party.
During 1998 and 1999, we paid Safeguard Scientifics for telephone and
accounting services, health and general insurance coverage, and other services.
From January 31, 1998 to April 30, 1999, our payments to Safeguard Scientifics
totaled approximately $158,000 for these services. We believe that the services
provided to us are on terms no less favorable to us than those that would be
available to us in an arm's-length transaction with a third party.
In March, 1999 we leased office space in Boston, Massachusetts from
Safeguard Scientifics, Inc. We pay Safeguard Scientifics, Inc. $4,636 each month
under the lease. We believe that our lease in Boston with Safeguard Scientifics,
Inc. is on terms no less favorable to us than those that would be available to
us in an arm's-length transaction with a third party.
After 180 days from the date of this prospectus, each of Comcast ICG, Inc.,
CPQ Holdings, Inc., Internet Assets, Inc., Safeguard 98 Capital L.P., Safeguard
Scientifics (Delaware), Inc., R.A.F. Ventures VII L.P., Technology Leaders II
L.P. and Technology Leaders II Offshore C.V. will have the right to demand on no
more than two occasions that we register the shares of our common stock held by
them prior to this offering and all shares of our common stock held by them
after exercise of any warrants issued to these shareholders prior to this
offering. Prior to this offering, these shareholders, together, are the holders
of 48,725,000 shares of our common stock and warrants to purchase
shares of our common stock.
In January, 1998 we loaned Douglas A. Alexander, one of our Managing
Directors, $117,669. Mr. Alexander used the proceeds from the loan to purchase a
portion of our interest in VerticalNet at our cost. Mr. Alexander agreed to pay
the principal amount of the loan with interest at an annual rate equal to the
prime rate plus 1% within 30 days of the date we request payment. On January 5,
1999, Mr. Alexander paid us $128,820, representing the outstanding principal
amount of the loan plus accrued interest.
In April, 1999, in connection with our obtaining a bank credit facility,
Safeguard Scientifics, Inc. delivered a letter to the agent for the banks
stating that it intends to take any action that may in the future be necessary
to promptly cure certain defaults that could occur under our bank credit
facility.
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In May, 1999 we issued $90 million of three-year convertible notes to our
largest shareholders, directors, executive officers, certain members of the
immediate families of our executive officers and others in a round of financing
led by Comcast ICG. The notes bear interest at an annual rate of 4.99% during
the first year and at the prime rate for the remaining two years. The notes
mature on May 10, 2002. If this offering occurs prior to May, 2000, the notes
will automatically convert into shares of our common stock at our initial public
offering price and all accrued interest will be waived. We issued warrants to
the holders of these notes to purchase shares of our common stock. The warrant
holders will be entitled to purchase, at the initial public offering price, the
number of shares of our common stock determined by dividing $18 million by the
initial public offering price. The warrants expire in May, 2002.
The following table sets forth the names of the holders of certain
convertible notes and warrants, their relationship to us and the amounts of each
of their convertible notes.
<TABLE>
<CAPTION>
Relationship to Amount of
Name of Holder Internet Capital Group Convertible Note
- ------------------------------------------ ------------------------------------ ------------------
<S> <C> <C>
Ann B. Alexander.......................... family member of executive officer $ 63,000
Bradley Alexander......................... family member of executive officer 155,000
Douglas E. Alexander...................... family member of executive officer 160,000
Susan R. Buckley.......................... family member of executive officer 50,000
Walter W. Buckley, Jr..................... family member of executive officer 200,000
Walter W. Buckley, III.................... executive officer and director 577,000
Comcast ICG, Inc.......................... principal shareholder 15,000,000
E. Michael Forgash........................ director 100,000
Kenneth A. Fox............................ executive officer and director 1,000,000
David D. Gathman.......................... executive officer 25,000
Thomas P. Gerrity......................... director 77,000
Internet Assets, Inc...................... principal shareholder 1,525,000
Robert E. Keith, Jr....................... director 46,000
Robert A. Pollan.......................... executive officer 31,000
R.A.F. Ventures VII, L.P.................. principal shareholder 915,000
</TABLE>
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<PAGE>
In May, 1999, some of our officers and directors exercised options to
purchase our common stock. Instead of paying us cash, the officers and directors
delivered promissory notes to us in the aggregate amount of $18,105,000. The
promissory notes bear interest at the rate of 5.22% and mature on May 5, 2004.
The following table sets forth the names of the holders of the promissory notes,
their relationship to us and the amounts owed to us by each of these holders.
<TABLE>
<CAPTION>
Relationship to Amount of
Name of holder Internet Capital Group Promissory Note
- ---------------------------- ------------------------------ ------------------
<S> <C> <C>
Walter W. Buckley, III...... executive officer and $2,600,000
director
Douglas A. Alexander........ executive officer 2,500,000
Richard G. Bunker........... executive officer 1,350,000
Kenneth A. Fox.............. executive officer and 2,500,000
director
David D. Gathman............ executive officer 1,300,000
Victor Hwang................ executive officer 4,005,000
John N. Nickolas............ executive officer 800,000
Robert A. Pollan............ executive officer 2,650,000
Thomas P. Gerrity....,...... director 400,000
</TABLE>
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of April 30, 1999, and as adjusted to reflect
the sale of shares offered hereby, and by (i) each person (or group of
affiliated persons) who is known by us to own more than five percent of the
outstanding shares of our common stock, (ii) each of our directors and our
executive officers named in the summary compensation table and (iii) all of
our executive officers and directors as a group.
<TABLE>
<CAPTION>
5% Beneficial Owners, Directors, Number of Shares Percent of Shares Outstanding (3)
-------------------------------------------
Nominees for Director, Named Officers Beneficially Owned (1)(2) Before the Offering After the Offering
- ---------------------------------------------------------- --------------------------- --------------------- --------------------
<S> <C> <C> <C>
Comcast ICG, Inc. (4).................................... 10,623,500
c/o Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102
CPQ Holdings, Inc. (5)................................... 5,000,000
c/o Compaq Computer Corporation
20555 SH 249
Building 11
Houston, Texas 77070
Internet Assets, Inc. (6)................................ 5,000,000
Sahab Tower
Fahad Alsalim Street, 10th Floor
P.O. Box 3216
Safat, 13033, Kuwait
Safeguard 98 Capital L.P. (7)............................ 21,125,000
103 Springer Building
3400 Silverside Road
Wilmington, Delaware 19810
Safeguard Scientifics (Delaware), Inc. (8)............... 21,125,000
103 Springer Building
3400 Silverside Road
Wilmington, Delaware 19810
R.A.F. Ventures VII, L.P. (9)............................ 6,536,550
One Pitcairn Place, Suite 2100
165 Township Line Road
Jenkintown, Pennsylvania 19046-3953
Douglas Alexander (10)...................................
Julian A. Brodsky (11)...................................
Walter W. Buckley, III (12)..............................
E. Michael Forgash (13)..................................
Kenneth A. Fox (14)......................................
Dr. Thomas P. Gerrity (15)...............................
Scott E. Gould...........................................
Robert E. Keith, Jr. (16)................................
Robert Pollan (17).......................................
All executive officers and directors as a group (14
persons) (10) (11) (12) (13) (14) (15) (16) (17)......
</TABLE>
- ------------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Unless otherwise noted, we
believe that all persons named in the table have sole voting and sole
investment power with
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respect to all shares beneficially owned by them. All figures include shares
of Common Stock issuable upon the exercise of options or warrants
exercisable within 60 days of April 30, 1999.
(2) Includes $ of convertible notes which automatically convert to shares
of common stock issued at the initial public offering price. See "Certain
Transactions" for a description of the convertible notes.
(3) Options or warrants that are exercisable for common stock and other
ownership rights in common stock that vest within 60 days of April 30, 1999
are deemed to be outstanding and to be beneficially owned by the person
holding such options or warrants for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.
(4) Includes shares of common stock issuable upon the exercise of
warrants and shares of common stock issuable upon the exercise of
options exercisable within 60 days of April 30, 1999. Excludes options to
purchase shares of common stock which are not currently
exercisable.
(5) Includes shares of common stock issuable upon the exercise of
warrants exercisable within 60 days of April 30, 1999.
(6) Includes shares of common stock issuable upon the exercise of
warrants exercisable within 60 days of April 30, 1999.
(7) Includes 13,000,000 shares held by Safeguard Scientifics (Delaware) Inc. as
to which Safeguard 98 Capital L.P. disclaims beneficial ownership. Assumes
all the shares offered in the directed share subscription program will be
purchased by the shareholders of Safeguard Scientifics, Inc. and not
Safeguard Scientifics, Inc. See "The Directed Share Subscription Program."
(8) Includes 8,125,000 shares held by Safeguard 98 Capital L.P. as to which
Safeguard Scientifics (Delaware) disclaims beneficial ownership. Also
includes 858,000 shares of common stock issued to employees of Safeguard
Scientifics, Inc. for which Safeguard Scientifics (Delaware), Inc. has sole
voting and investment power. Assumes all the shares offered in the directed
share subscription program will be purchased by the shareholders of
Safeguard Scientifics, Inc. and not Safeguard Scientifics, Inc. See "The
Directed Share Subscription Program."
(9) Includes shares held by Kenneth A. Fox, son of Robert A. Fox and
Esther G. Fox, and brother of Debra E., Nancy J. and Amy A. Fox, who
together own 94% of R.A.F. Ventures VII, L.P. as Limited Partners. R.A.F.
Ventures VII, L.P. disclaims beneficial ownership of shares held by Kenneth
A. Fox and Kenneth A. Fox disclaims beneficial ownership of shares held by
R.A.F. Ventures VII, L.P. Also includes shares of common stock
issuable upon the exercise of warrants exercisable within 60 days of April
30, 1999.
(10) Includes shares of common stock issuable upon the exercise of
warrants exercisable within 60 days of April 30, 1999. Also includes
shares of restricted common stock which have not vested pursuant to the
Membership Profit Interest Plan. See "Employee Benefit Plans" for a
description of the Membership Profit Interest Plan.
(11) Julian A. Brodsky is a Director and Vice-Chairman of Comcast Corporation.
Mr. Brodsky disclaims beneficial ownership of shares held by Comcast ICG,
Inc., a subsidiary of Comcast Corporation.
(12) Includes shares of common stock issuable upon the exercise
of warrants exercisable within 60 days of April 30, 1999. Also includes
shares of restricted common stock which have not vested pursuant to the
Membership Profit Interest Plan.
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(13) Includes shares of common stock issuable upon the exercise of
warrants exercisable within 60 days of April 30, 1999. Mr. Forgash is Vice
President-Operations of Safeguard Scientifics, Inc. and disclaims
beneficial ownership of shares owned by Safeguard Scientifics (Delaware),
Inc. and Safeguard 98 Capital L.P.
(14) Includes shares of common stock issuable upon the exercise
of warrants exercisable within 60 days of April 30, 1999. Also includes
shares of restricted common stock which have not yet vested pursuant to the
Membership Profit Interest Plan.
(15) Includes shares of common stock issuable upon the exercise of
warrants exercisable within 60 days of April 30, 1999.
(16) Includes shares of common stock issuable upon the exercise of
warrants exercisable within 60 days of April 30, 1999.
(17) Includes shares of common stock issuable upon the exercise of
warrants exercisable within 60 days of April 30, 1999.
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DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 300,000,000 shares of common
stock, par value $.001 per share, and 10,000,000 shares of preferred stock. Upon
completion of this offering, we will have approximately
shares ( shares if the underwriters' over-allotment option
is exercised in full) of common stock issued and outstanding.
The following is qualified in its entirety by reference to our certificate
of incorporation and bylaws, copies of which are filed as exhibits to the
Registration Statement of which this prospectus is a part.
Common Stock
As of April 30, 1999, there were shares of our common stock
outstanding. As of April 30, 1999, 838,500 shares of our common stock were
reserved for issuance pursuant to our 1998 Equity Compensation Plan Option Plan,
Directors' Option Plan and Membership Participation Plan. In February 1999, our
board of directors approved the Internet Capital Group 1999 Equity Compensation
Plan under which 21,000,000 shares of our common stock are reserved for
issuance. Upon completion of the offering, there will be shares of common stock
outstanding.
The holders of our common stock are entitled to dividends as our board of
directors may declare from funds legally available therefor, subject to the
preferential rights of the holders of our preferred stock, if any. The holders
of our common stock are entitled to one vote per share on any matter to be voted
upon by shareholders. Our certificate of incorporation does not provide for
cumulative voting in connection with the election of directors, and accordingly,
holders of more than 50% of the shares voting will be able to elect all of the
directors. No holder of our common stock will have any preemptive right to
subscribe for any shares of capital stock issued in the future.
Upon any voluntary or involuntary liquidation, dissolution, or winding up
of our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment of creditors and subject to prior
distribution rights of our preferred stock, if any. All of the outstanding
shares of common stock are, and the shares offered by us will be, fully paid and
non-assessable.
Preferred Stock
As of the closing of this offering, no shares of our preferred stock will
be outstanding. Our certificate of incorporation provides that our board of
directors may by resolution establish one or more classes or series of preferred
stock having such number of shares and relative voting rights, designation,
dividend rates, liquidation, and other rights, preferences, and limitations as
may be fixed by them without further shareholder approval. The holders of our
preferred stock may be entitled to preferences over common shareholders with
respect to dividends, liquidation, dissolution, or our winding up in such
amounts as are established by our board of directors resolutions issuing such
shares.
The issuance of our preferred stock may have the effect of delaying,
deferring or preventing a change in control of Internet Capital Group without
further action by the shareholders and may adversely affect voting and other
rights of holders of our common stock. In addition, issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could make it more difficult for a third party to
acquire a majority of the outstanding shares of voting stock. At present, we
have no plans to issue any shares of preferred stock.
Registration Rights
Certain holders of our securities (the "Holders") possess certain
registration rights with respect to our common stock. Certain Holders or their
transferees who are the holders of shares of our common stock
after completion of this offering (the "Strategic Partners") are entitled to
certain demand rights with respect to the registration of such shares under the
Securities Act. The Strategic Partners have agreed to not demand registration of
their common stock for 180 days after the date of this offering. After this 180-
day period, if we propose to register any of our securities under the Securities
Act, either for our own account or the account of other
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<PAGE>
shareholders, the Holders are entitled to notice of such registration and,
subject to certain conditions and limitations, are entitled to include such
shares therein. In addition, at any time, any Strategic Partner may require us,
on not more than two occasions, to file a Registration Statement under the
Securities Act with respect to at least twenty-five percent (25%) of his, her or
its Registrable Securities if the gross offering price would exceed $5.0
million. We are required to use our best efforts to effect such registration,
subject to certain conditions and limitations. If a Holder requests that we file
a registration statement on Form S-3, the Holders may register their common
stock along with any such registration. The expenses incurred in connection with
such registrations will be borne by us, except that we will pay expenses of only
one registration on Form S-3 at a Holder's request per year.
Section 203 of the Delaware General Corporation Law; Certain Anti Takeover,
Limited Liability and Indemnification Provisions
Section 203 of the Delaware General Corporation Law
The following is a description of certain provisions of the Delaware
General Corporation Law, and our certificate of incorporation and bylaws. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Delaware General Corporation Law, and our certificate of
incorporation and bylaws.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 of the Delaware General Corporation Law prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder," unless
the business combination is approved in a prescribed manner. A "business
combination" includes certain mergers, asset sales, and other transactions
resulting in a financial benefit to the "interested stockholder." Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within the past three years did own, 15% of
the corporation's voting stock.
Certain provisions of our certificate of incorporation and bylaws could
have anti-takeover effects. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of our corporate
policies formulated by our board of directors. In addition, these provisions
also are intended to ensure that our board of directors will have sufficient
time to act in what the board of directors believes to be in the best interests
of us and our shareholders. These provisions also are designed to reduce our
vulnerability to an unsolicited proposal for our takeover that does not
contemplate the acquisition of all of our outstanding shares or an unsolicited
proposal for the restructuring or sale of all or part of Internet Capital Group.
The provisions are also intended to discourage certain tactics that may be used
in proxy fights. However, these provisions could delay or frustrate the removal
of incumbent directors or the assumption of control of us by the holder of a
large block of common stock, and could also discourage or make more difficult a
merger, tender offer, or proxy contest, even if such event would be favorable to
the interest of our shareholders.
Classified Board of Directors
Our certificate of incorporation provides for our board of directors to be
divided into three classes of directors, with each class as nearly equal in
number as possible, serving staggered three-year terms (other than directors
which may be elected by holders of preferred stock). As a result, approximately
one-third of our board of directors will be elected each year. The classified
board provision will help to assure the continuity and stability of our board of
directors and our business strategies and policies as determined by our board of
directors. The classified board provision could have the effect of discouraging
a third party from making an unsolicited tender offer or otherwise attempting to
obtain control of us without the approval of our board of directors. In
addition, the classified board provision could delay shareholders who do not
like the policies of our board of directors from electing a majority of our
board of directors for two years.
No Shareholder Action by Written Consent; Special Meetings
Our certificate of incorporation provides that shareholder action can only
be taken at an annual or special meeting of shareholders and prohibits
shareholder action by written consent in lieu of a meeting. Our bylaws provide
that special meetings of shareholders may be called only by our board of
directors or our Chief Executive
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Officer. Our shareholders are not permitted to call a special meeting of
shareholders or to require that our board of directors call a special meeting.
Advance Notice Requirements for Shareholder Proposals and Director Nominees
Our bylaws establish an advance notice procedure for our shareholders to
make nominations of candidates for election as directors or to bring other
business before an annual meeting of our shareholders (the "Shareholder Notice
Procedure"). The Shareholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, our board of directors or its Chairman, or
by a shareholder who has given timely written notice to our Secretary or any
Assistant Secretary prior to the meeting at which directors are to be elected,
will be eligible for election as our directors. The Shareholder Notice Procedure
also provides that at an annual meeting only such business may be conducted as
has been brought before the meeting by, or at the direction of, our board of
directors or its Chairman or by a shareholder who has given timely written
notice to our Secretary of such shareholder's intention to bring such business
before such meeting. Under the Shareholder Notice Procedure, if a shareholder
desires to submit a proposal or nominate persons for election as directors at an
annual meeting, the shareholder must submit written notice to Internet Capital
Group not less than 90 days nor more than 120 days prior to the first
anniversary of the previous year's annual meeting. In addition, under the
Shareholder Notice Procedure, a shareholder's notice to Internet Capital Group
proposing to nominate a person for election as a director or relating to the
conduct of business other than the nomination of directors must contain certain
specified information. If the chairman of a meeting determines that business was
not properly brought before the meeting, in accordance with the Shareholder
Notice Procedure, such business shall not be discussed or transacted.
Number of Directors; Removal; Filling Vacancies
Our certificate of incorporation and bylaws provide that our board of
directors will consist of not less than 5 nor more than 9 directors (other than
directors elected by holders of our preferred stock), the exact number to be
fixed from time to time by resolution adopted by our directors. Further, subject
to the rights of the holders of any series of our preferred stock, if any, our
certificate of incorporation and bylaws authorize our board of directors to
elect additional directors under specified circumstances and fill any vacancies
that occur in our board of directors by reason of death, resignation, removal,
or otherwise. A director so elected by our board of directors to fill a vacancy
or a newly created directorship holds office until the next election of the
class for which such director has been chosen and until his successor is elected
and qualified. Subject to the rights of the holders of any series of our
preferred stock, if any, our certificate of incorporation and bylaws also
provide that directors may be removed only for cause and only by the affirmative
vote of holders of a majority of the combined voting power of the then
outstanding stock of Internet Capital Group. The effect of these provisions is
to preclude a shareholder from removing incumbent directors without cause and
simultaneously gaining control of our board of directors by filling the
vacancies created by such removal with its own nominees.
Indemnification
We have included in our certificate of incorporation and bylaws provisions
to (i) eliminate the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by the
Delaware General Corporation Law and (ii) indemnify our directors and officers
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law, including circumstances in which indemnification is otherwise
discretionary. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.
Certificate of Incorporation
The provisions of our certificate of incorporation that could have anti-
takeover effects as described above are subject to amendment, alternation,
repeal, or rescission either by (i) our board of directors without the assent or
vote of our shareholders or (ii) the affirmative vote of the holder of not less
than two-thirds (66 2/3%) of the outstanding shares of voting securities. This
requirement makes it more difficult for shareholders to make changes to the
provisions in our certificate of incorporation which could have anti-takeover
effects by allowing the holders of a minority of the voting securities to
prevent the holders of a majority of voting securities from amending these
provisions of our certificate of incorporation.
65
<PAGE>
Bylaws
Our certificate of incorporation provides that our bylaws are subject to
adoption, amendment, alteration, repeal, or rescission either by (i) our board
of directors without the assent or vote of our shareholders or (ii) the
affirmative vote of the holders of not less than two-thirds (66 2/3%) of the
outstanding shares of voting securities. This provision makes it more difficult
for shareholders to make changes in our bylaws by allowing the holders of a
minority of the voting securities to prevent the holders of a majority of voting
securities from amending our bylaws.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services. The Transfer Agent's address is 4 Station Square,
Pittsburgh, Pennsylvania, and its telephone number is (412)236-8157.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be shares
of our common stock outstanding (assuming conversion of all of our outstanding
convertible notes, no exercise of the underwriters' over-allotment option and no
exercise of outstanding options and warrants). Of these shares, the
shares sold in this offering will be freely transferable without restriction or
further registration under the Securities Act, except for any shares held by an
existing "affiliate" of Internet Capital Group, as that term is defined by the
Securities Act (an "Affiliate"), which shares will be subject to the resale
limitations of Rule 144 adopted under the Securities Act.
Upon completion of this offering, "restricted
shares" as defined in Rule 144 will be outstanding. None of these shares will be
eligible for sale in the public market as of the effective date of this
registration statement (the "Effective Date"). Beginning 180 days after the
Effective Date approximately additional shares will become
eligible for sale subject to compliance with Rule 144 upon the expiration of
agreements not to sell such shares entered into between the underwriters and
certain of our shareholders, including the officers and directors. Restrictions
pursuant to such agreements not to sell may be waived by Merrill Lynch, Pierce,
Fenner & Smith Incorporated. See "Underwriting."
In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person (or persons whose shares are aggregated) who owns shares
that were purchased from us (or any Affiliate) at least one year previously,
including a person who may be deemed our Affiliate, is entitled to sell within
any three-month period a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of our common stock (approximately
shares immediately after the offering) or (ii) the average weekly trading volume
of our common stock on the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission (the "Commission"). Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about us. Any person (or persons whose shares are
aggregated) who is not deemed to have been our Affiliate at any time during the
90 days preceding a sale, and who owns shares within the definition of
"restricted securities" under Rule 144 under the Securities Act that were
purchased from us (or any Affiliate) at least two years previously, would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.
We have agreed not to offer, sell or otherwise dispose of any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for our common stock or any rights to acquire our common stock for a period of
180 days after the date of this prospectus, without the prior written consent of
the representatives of the underwriters, subject to certain limited exceptions.
See "Underwriting."
The holders of shares of our common stock have agreed
not to demand registration of their common stock for 180 days after the date of
this prospectus without the prior written consent of the underwriters.
After such period, if such holders cause a large number of shares to be
registered and sold in the public market, such sales could have an adverse
effect on the market price for the common stock.
66
<PAGE>
UNDERWRITING
General
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
BancBoston Robertson Stephens, Inc., BT Alex. Brown Incorporated, NationsBanc
Montgomery Securities LLC and Wit Capital Corporation are acting as
representatives (the "Representatives") of each of the underwriters. Subject to
the terms and conditions set forth in the Purchase Agreement (the "Purchase
Agreement") among us and the underwriters, we have agreed to sell to each of the
underwriters, and each of the underwriters, severally and not jointly, has
agreed to purchase from us the number of shares of our common stock set forth
opposite its name below.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated........
BancBoston Robertson Stephens, Inc........................
BT Alex. Brown Incorporated...............................
NationsBanc Montgomery Securities LLC.....................
Wit Capital Corporation...................................
----------------
Total..............................................
================
</TABLE>
In the Purchase Agreement, the several underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of our
common stock being sold pursuant to the Purchase Agreement if any shares of our
common stock are purchased. Under certain circumstances, under the terms of the
Purchase Agreement, the commitments of the non-defaulting underwriters may be
increased or the Purchase Agreement may be terminated. We have agreed to
indemnify the underwriters against some liabilities, including some liabilities
under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
67
<PAGE>
Commissions and Discounts
The Representatives have advised us that they propose initially to offer
the shares of our common stock to the public at the initial public offering
price set forth on the cover page of this prospectus, and to certain dealers at
such price less a concession not in excess of $ per share of common
stock. The underwriters may allow, and such dealers may reallow, a discount not
in excess of $ per share of common stock on sales to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment options.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
------------ ------------ ------------
<S> <C> <C> <C>
Public offering price.................................................. $ $ $
Underwriting discount.................................................. $ $ $
Proceeds, before expenses, to Internet Capital Group................... $ $ $
</TABLE>
The expenses of the offering, exclusive of the underwriting discount, are
estimated at $ million and are payable by us.
Over-Allotment Option
We have granted to the underwriters an option exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of an additional
shares of common stock at the initial public offering price set forth on the
cover of this prospectus, less the underwriting discount. The underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of our common stock offered hereby. To the extent that the underwriters exercise
this option, each underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of our common stock proportionate to
such underwriter's initial amount reflected in the foregoing table.
Directed Shares
At our request, the underwriters have reserved approximately
shares of our common stock for sale at the initial public offering price to our
employees, directors and certain other persons with relationships to Internet
Capital Group. The number of shares of our common stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so orally confirmed for
purchase within one day of the pricing of the offering will be offered by the
underwriters to the general public on the same basis as the other shares offered
by this prospectus.
Directed Share Subscription Program
As part of this offering, we are offering shares of our common
stock in a directed share subscription program to certain shareholders of
Safeguard Scientifics, Inc., one of our principal and founding shareholders.
Only persons who owned at least shares of Safeguard Scientifics, Inc.
common stock as of , 1999 are eligible to participate in the program.
Such shareholders may subscribe for one share of our common stock for every ten
shares of Safeguard Scientifics, Inc. common stock held by them, and may not
transfer the opportunity to subscribe to another person except involuntarily by
operation of law. Sales under the program will close on the same day as other
sales under this offering. If any of the shares offered under the program are
not purchased by the shareholders of Safeguard Scientifics, Inc., then Safeguard
Scientifics, Inc. or one or more of its designees will purchase these shares.
The purchase price under the program, whether paid by Safeguard Scientifics,
Inc. or its shareholders, will be the same price per share as set forth on the
cover page of this prospectus.
No Sales of Similar Securities
We, our executive officers and directors, Safeguard Scientifics (Delaware),
Inc., Safeguard 98 Capital, L.P., Comcast ICG, Inc., CPQ Holdings, Inc.,
Internet Assets, Inc., RAF Ventures VII, L.P., Technology Leaders II L.P. and
Technology Leaders II Offshore C.V. have agreed, with certain exceptions, not to
directly or indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend or otherwise dispose of or
transfer any shares of our common stock or securities convertible into
or exchangeable or exercisable for or repayable with our common stock,
whether now owned or later acquired by the person executing the
agreement or with respect to which the person executing the agreement
later acquires the power of disposition, or file a registration
statement under the Securities Act relating to any shares of our common
stock for a period of 180 days after the date of this prospectus; or
. enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of our common stock whether
any such swap or transaction is to be settled by delivery of our common
stock or other securities, in cash or otherwise, without the prior
written consent of
68
<PAGE>
Merrill Lynch on behalf of the underwriters for a period of 180 days
after the date of this prospectus. See "Shares Eligible for Future
Sale."
Quotation on the Nasdaq National Market
Prior to this offering, there has been no public market for our common
stock. The initial public offering price was determined through negotiations
among us and the Representatives. Among the factors considered by us and the
Representatives in determining the initial public offering price of our common
stock, in addition to prevailing market conditions, are the trading multiples of
publicly traded companies that the Representatives believe to be comparable to
us, certain of our financial information, the history of, and the prospects for,
our company and the industry in which we compete, and an assessment of our
management, its past and present operations, the prospects for, and timing of,
our future revenue, the present state of our development, the percentage
interest of Internet Capital Group being sold as compared to the valuation for
the entire company and the above factors in relation to market values and
various valuation measures of other companies engaged in activities similar to
ours. There can be no assurance that an active trading market will develop for
our common stock or that our common stock will trade in the public market
subsequent to the offering at or above the initial public offering price.
We have applied for a listing of our common stock on the Nasdaq National
Market under the symbol "ICGE."
The underwriters have advised us that they do not expect sales to accounts
over which the underwriters exercise discretionary authority to exceed five
percent of the total number of shares of our common stock offered by them.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of our common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of our common stock.
If the underwriters create a short position in our common stock in
connection with the offering, that is, if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the Representatives may
reduce that short position by purchasing common stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the Representatives purchase
shares of our common stock in the open market to reduce the underwriters' short
position or to stabilize the price of our common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering.
In general purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the Representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
Electronic Format
Wit Capital is making a prospectus in electronic format available on its
Internet Web site. All dealers purchasing shares from Wit Capital in the
offering similarly have agreed to make a prospectus in electronic format
available on Web sites maintained by each of the dealers. The information on
these Web sites relating to the
69
<PAGE>
Internet Capital Group offering is filed as an exhibit to the registration
statement. Please see the exhibit for a more complete description of the
information relating to the offering contained on those Web sites.
Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in the offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
e-Manager(TM) or selected dealer in more than 70 public offerings. Except for
its participation in this offering and as disclosed below, Wit Capital has no
relationship with Internet Capital Group or any of its founders or significant
shareholders.
Robert Lessin, the Chairman, Chief Executive Officer and a significant
shareholder of Wit Capital, owned 154,861 shares of VerticalNet's Series C
Preferred Stock, which converted into 154,861 shares of VerticalNet's common
stock prior to consummation of VerticalNet's initial public offering. Except for
its participation as e-Manager(TM) in VerticalNet's initial public offering, or
as otherwise disclosed in the underwriting section of VerticalNet's initial
public offering prospectus, Wit Capital has no relationship with VerticalNet or
any of its founders or significant shareholders. Walter W. Buckley, President,
Chief Executive Officer and a director of Internet Capital Group, owns 50,000
shares of Wit Capital Corporation. Kenneth A. Fox, a Managing Director and
director of Internet Capital Group, owns 50,000 shares of Wit Capital
Corporation.
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for us
by Dechert Price & Rhoads, Philadelphia, Pennsylvania. An attorney associated
with Dechert Price & Rhoads beneficially owns (i) shares of our common
stock, (ii) an aggregate principal amount of $504,000 convertible notes that
will automatically convert into shares of our common stock at the initial public
price, (iii) warrants exercisable at the initial public offering price per share
to purchase an aggregate number of shares of our common stock equal to $100,800
divided by the initial public offering price. This attorney disclaims beneficial
ownership as to $475,000 aggregate principal amount of the convertible notes and
warrants exercisable at the initial public offering price per share to purchase
an aggregate number of shares of our common stock equal to $95,000 divided by
the initial public offering price.
Certain legal and regulatory matters in connection with the offering will
be passed upon for the underwriters by Davis Polk & Wardwell, New York, New
York. Members of and an attorney associated with Davis Polk & Wardwell
beneficially own (i) an aggregate principal amount of $150,000 of convertible
notes that will automatically convert into shares of our common stock at the
initial public offering price and (ii) warrants exercisable at the initial
public offering price per share to purchase an aggregate number of shares of our
common stock equal to $30,000 divided by the initial public offering price.
EXPERTS
The consolidated financial statements of Internet Capital Group, Inc. as of
December 31, 1997 and 1998 and for the period March 4, 1996 (inception) through
December 31, 1996, and for each of the years in the two-year period ended
December 31, 1997 and 1998 have been included herein in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein, and upon authority of said firm as experts in auditing and accounting.
The financial statements of ComputerJobs.com, Inc. as of December 31, 1997
and 1998, and for the period from January 16, 1996 (inception) through December
31, 1996 and for the years ended December 31, 1997 and 1998 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth on their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Syncra Software, Inc. as of December 31, 1998
and for the period from February 11, 1998 (inception) through December 31, 1998
included in this prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP given on the authority of said firm as experts in
auditing and accounting.
70
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission, Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to our common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits to the registration
statement. For further information with respect to Internet Capital Group and
our common stock offered hereby, reference is made to the Registration Statement
and the exhibits filed as a part of the Registration Statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete; reference is made in each instance
to the copy of such contract or any other document filed as an exhibit to the
registration statement. Each such statement is qualified in all respects by such
reference to such exhibit. The registration statement, including exhibits
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World
Trade Center, 13th Floor, New York, New York 10048 after payment of fees
prescribed by the Commission. The Commission also maintains a World Wide Web
site which provides online access to reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission at the address http://www.sec.gov.
71
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTERNET CAPITAL GROUP, INC.
Report of Independent Auditors................................................ F-2
Consolidated Balance Sheets................................................... F-3
Consolidated Statements of Operations......................................... F-4
Consolidated Statements of Shareholders' Equity............................... F-5
Consolidated Statements of Comprehensive Income (Loss)........................ F-5
Consolidated Statements of Cash Flows......................................... F-6
Notes to Consolidated Financial Statements.................................... F-7
COMPUTERJOBS.COM, INC.
Report of Independent Auditors................................................ F-23
Balance Sheets................................................................ F-24
Statements of Income.......................................................... F-25
Statements of Changes in Stockholders' Equity (Deficit)....................... F-26
Statements of Cash Flows...................................................... F-27
Notes to Financial Statements................................................. F-28
SYNCRA SOFTWARE, INC.
Report of Independent Accountants............................................. F-34
Balance Sheet................................................................. F-35
Statement of Operations....................................................... F-36
Statement of Changes in Redeemable Preferred Stock and Stockholders' Deficit.. F-37
Statement of Cash Flows....................................................... F-38
Notes to Financial Statements................................................. F-39
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Internet Capital Group, Inc.:
We have audited the accompanying consolidated balance sheets of Internet Capital
Group, Inc. and subsidiaries as of December 31, 1997 and 1998, and the related
consolidated statements of operations, shareholders' equity, comprehensive
income (loss) and cash flows for the period March 4, 1996 (inception) to
December 31, 1996 and for the years ended December 31, 1997 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of certain nonsubsidiary investee companies, which Internet Capital
Group, Inc. originally acquired an interest in during 1998. The Company's
ownership interests in and advances to these nonsubsidiary investee companies at
December 31, 1998 was $8,392,155, and its equity in net (income) loss of these
nonsubsidiary investee companies was $3,876,148 for the year ended December 31,
1998. The financial statements of these nonsubsidiary investee companies were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for these nonsubsidiary
investee companies, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Internet Capital Group, Inc. and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for the period March 4, 1996 (inception) to
December 31, 1996 and for the years ended December 31, 1997 and 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Philadelphia, Pennsylvania
May 7, 1999
F-2
<PAGE>
INTERNET CAPITAL GROUP, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Assets
- --------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 5,967,461 $26,840,904
Accounts receivable, less allowances for doubtful accounts
($30,000-1997; $61,037-1998)..................................... 721,381 1,842,137
Prepaid expenses and other current assets.......................... 148,313 1,119,062
----------------- -----------------
Total current assets............................................. 6,837,155 29,802,103
Fixed assets, net.................................................. 544,443 1,151,268
Ownership interests in and advances to Partner Companies........... 24,045,080 59,491,940
Available-for-sale securities...................................... -- 3,251,136
Intangible assets, net............................................. 34,195 2,476,135
Other.............................................................. 20,143 613,393
----------------- -----------------
TOTAL ASSETS........................................................ $31,481,016 $96,785,975
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt............................... $ 150,856 $ 288,016
Line of credit..................................................... 2,500,000 2,000,000
Accounts payable................................................... 696,619 1,348,293
Accrued expenses................................................... 388,525 1,823,407
Note payable to Partner Company.................................... -- 1,713,364
Deferred revenue................................................... 710,393 2,176,585
----------------- -----------------
Total current liabilities........................................ 4,446,393 9,349,665
Long-term debt..................................................... 399,948 351,924
Minority interest and other liabilities............................ -- 6,360,008
Commitments and contingencies (Note 14)
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value; no shares authorized............. -- --
Common stock, $.001 par value; authorized 130,000,000 shares;
46,783,625 (1997) and 66,043,625 (1998) issued and
outstanding...................................................... 46,784 66,044
Additional paid-in capital......................................... 36,144,814 74,935,262
Retained earnings (accumulated deficit)............................ (8,642,113) 5,256,815
Unamortized deferred compensation.................................. (914,810) (1,266,814)
Accumulated other comprehensive income............................. -- 1,733,071
----------------- -----------------
Total shareholders' equity....................................... 26,634,675 80,724,378
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................... $31,481,016 $96,785,975
================= =================
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
INTERNET CAPITAL GROUP, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
MARCH 4, 1996
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
REVENUE.................................................... $ 285,140 $ 791,822 $ 3,134,769
----------------- ----------------- -----------------
OPERATING EXPENSES
Cost of revenue.......................................... 427,470 1,767,017 4,642,528
Sales and marketing...................................... 268,417 2,300,365 7,894,662
General and administrative............................... 1,652,481 3,442,241 7,619,169
Minority interest........................................ (427,185) 106,411 (5,381,640)
Equity (income) loss..................................... 514,540 (106,298) 7,937,861
----------------- ----------------- -----------------
Total operating expenses................................ 2,435,723 7,509,736 22,712,580
----------------- ----------------- -----------------
OPERATING LOSS............................................. (2,150,583) (6,717,914) (19,577,811)
Other income, net (Note 13).............................. -- -- 32,552,151
Interest income, net..................................... 88,098 138,286 924,588
----------------- ----------------- -----------------
NET INCOME (LOSS).......................................... $(2,062,485) $(6,579,628) $ 13,898,928
================= ================= =================
PRO FORMA INFORMATION (UNAUDITED) (NOTE 2):
Pro forma net income
Net income as reported................................... $ 13,898,928
Pro forma income tax provision........................... (5,142,603)
-----------------
Pro forma net income..................................... $ 8,756,325
=================
Pro forma net income per share
Basic.................................................... $0.16
Diluted.................................................. $0.16
Pro forma shares used in computing net income per share
Basic.................................................... 56,102,289
Diluted.................................................. 56,149,289
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
INTERNET CAPITAL GROUP, INC.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings Unamortized
------------------------- Paid-In (Accumulated Deferred
Shares Amount Capital Deficit) Compensation
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF MARCH 4, 1996 -- $ -- $ -- $ -- $ --
Issuance of common stock, net....... 13,723,426 13,723 13,672,290 -- --
Issuance of common stock (Note 9)... 6,139,074 6,139 1,102,313 -- --
Issuance of restricted stock........ 6,027,017 6,027 1,013,639 -- (1,019,666)
Amortization of deferred
compensation....................... -- -- -- -- 126,876
Net loss............................ -- -- -- (2,062,485) --
------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1996 25,889,517 25,889 15,788,242 (2,062,485) (892,790)
Issuance of common stock............ 20,137,500 20,138 20,117,367 -- --
Issuance of restricted stock........ 1,773,053 1,773 416,562 -- (418,335)
Forfeitures of restricted stock..... (1,016,445) (1,016) (177,357) -- 178,373
Amortization of deferred
compensation....................... -- -- -- -- 217,942
Net loss............................ -- -- -- (6,579,628) --
------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1997 46,783,625 46,784 36,144,814 (8,642,113) (914,810)
Issuance of common stock, net....... 19,260,000 19,260 38,185,359 -- --
Issuance of stock options to
non-employees...................... -- -- 605,089 -- (605,089)
Net unrealized appreciation in
available-for-sale securities...... -- -- -- -- --
Amortization of deferred
compensation....................... -- -- -- -- 253,085
Net income.......................... -- -- -- 13,898,928 --
------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1998 66,043,625 $66,044 $74,935,262 $ 5,256,815 $(1,266,814)
====================================================================================
Accumulated
Other
Comprehensive
Income Total
---------------------------------
BALANCE AS OF MARCH 4, 1996 $ -- $ --
<S> <C> <C>
Issuance of common stock, net....... -- 13,686,013
Issuance of common stock (Note 9)... -- 1,108,452
Issuance of restricted stock........ -- --
Amortization of deferred
compensation....................... -- 126,876
Net loss............................ -- (2,062,485)
---------------------------------
BALANCE AS OF DECEMBER 31, 1996 -- 12,858,856
Issuance of common stock............ -- 20,137,505
Issuance of restricted stock........ -- --
Forfeitures of restricted stock..... -- --
Amortization of deferred
compensation....................... -- 217,942
Net loss............................ -- (6,579,628)
---------------------------------
BALANCE AS OF DECEMBER 31, 1997 -- 26,634,675
Issuance of common stock, net....... -- 38,204,619
Issuance of stock options to
non-employees...................... -- --
Net unrealized appreciation in
available-for-sale securities...... 1,733,071 1,733,071
Amortization of deferred
compensation....................... -- 253,085
Net income.......................... -- 13,898,928
---------------------------------
BALANCE AS OF DECEMBER 31, 1998 $1,733,071 $80,724,378
=================================
</TABLE>
Consolidated Statements of Comprehensive Income (Loss)
<TABLE>
<CAPTION>
MARCH 4, 1996
(INCEPTION) TO DECEMBER
31, YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1997 1998
------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME (LOSS)..................................................... $(2,062,485) $(6,579,628) $13,898,928
------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
Unrealized holding gains on available-for-sale
securities......................................................... -- -- 1,733,071
Reclassification adjustments......................................... -- -- --
------------------------------------------------------------
Net unrealized appreciation in available-for-sale
securities......................................................... -- -- 1,733,071
------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS)........................................... $(2,062,485) $(6,579,628) $15,631,999
============================================================
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
INTERNET CAPITAL GROUP, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
MARCH 4, 1996
(INCEPTION) TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------
1996 1997 1998
----------------- ------------------ --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $(2,062,485) $ (6,579,628) $ 13,898,928
Adjustments to reconcile to net cash used in operating
activities:
Other income............................................ -- -- (32,552,151)
Depreciation and amortization........................... 481,796 446,289 1,135,269
Equity (income) loss.................................... 514,540 (106,298) 7,937,861
Minority interest....................................... (427,185) 106,411 (5,381,640)
Changes in assets and liabilities, net of effect of
acquisitions:
Accounts receivable, net................................ (2,176,869) 1,574,374 (1,183,360)
Prepaid expenses and other assets....................... (69,558) (142,384) (1,346,515)
Accounts payable........................................ 43,727 565,672 620,127
Deferred revenue........................................ 147,100 493,960 1,249,624
Accrued expenses........................................ 145,977 204,645 1,415,265
----------------- ------------------ --------------
Net cash used in operating activities.............. (3,402,957) (3,436,959) (14,206,592)
INVESTING ACTIVITIES
Capital expenditures...................................... (100,480) (272,488) (545,432)
Proceeds from sales of available-for-sale securities...... -- -- 36,431,927
Acquisitions of ownership interests in and
advances to Partner Companies........................... (6,994,129) (16,315,874) (47,624,193)
Other acquisitions (Note 4)............................... -- -- (1,858,389)
----------------- ------------------ --------------
Net cash used in investing activities.............. (7,094,609) (16,588,362) (13,596,087)
FINANCING ACTIVITIES
Issuance of common stock, net............................. 13,686,013 20,137,505 38,204,619
Long-term debt and capital lease repayments............... (30,191) (57,979) (321,857)
Line of credit borrowings................................. 1,208,000 2,500,000 2,000,000
Line of credit repayments................................. (1,106,000) (2,000) (2,500,000)
Treasury stock purchase by subsidiary..................... (60,000) -- --
Issuance of stock by subsidiary........................... 15,000 200,000 11,293,360
----------------- ------------------ --------------
Net cash provided by financing activities.......... 13,712,822 22,777,526 48,676,122
----------------- ------------------ --------------
Net increase in cash and cash equivalents.................. 3,215,256 2,752,205 20,873,443
Cash and cash equivalents at beginning of period........... -- 3,215,256 5,967,461
----------------- ------------------ --------------
Cash and cash equivalents at end of period................. $ 3,215,256 $ 5,967,461 $ 26,840,904
================= ================== ==============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE COMPANY
Internet Capital Group, Inc. (the "Company") was formed on March 4, 1996.
The Company is an Internet holding company primarily engaged in managing and
operating a network of business-to-business, or B2B, e-commerce companies. The
Company defines e-commerce as conducting or facilitating business transactions
over the Internet. As of December 31, 1998, the Company owned interests in more
than 20 companies engaged in e-commerce, which the Company calls its "Partner
Companies". The Company's goal is to become the premier B2B e-commerce company.
The Company's operating strategy is to integrate its Partner Companies into a
collaborative network that leverages the collective knowledge and resources of
the Company.
BASIS OF PRESENTATION
On February 2, 1999, the Company converted from a Limited Liability
Corporation ("LLC") to a C Corporation. All shareholder transactions have been
presented as if the conversion occurred on March 4, 1996 (inception).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiary, Internet Capital Group Operations, Inc. (the
"Operations Company") and its majority owned subsidiary, VerticalNet, Inc.
("VerticalNet"). The various interests that the Company acquires in its Partner
Companies are accounted for under three broad methods: consolidation, equity
method and cost method. The applicable accounting method is generally determined
based on the Company's voting interest in a Partner Company.
Consolidation. Partner Companies in which the Company directly or
indirectly owns more than 50% of the outstanding voting securities are generally
accounted for under the consolidation method of accounting. Under this method, a
Partner Company's results of operations are reflected within the Company's
Consolidated Statements of Operations. All significant intercompany accounts and
transactions have been eliminated. Participation of other Partner Company
shareholders in the earnings or losses of a consolidated Partner Company is
reflected in the caption "Minority interest" in the Company's Consolidated
Statements of Operations. Minority interest adjusts the Company's consolidated
results of operations to reflect only the Company's share of the earnings or
losses of the consolidated Partner Company.
Equity Method. Partner Companies whose results are not consolidated, but
over whom the Company exercises significant influence, are accounted for
under the equity method of accounting. Whether or not the Company exercises
significant influence with respect to a Partner Company depends on an evaluation
of several factors including, among others, representation on the Partner
Company's Board of Directors and ownership level, which is generally a 20% to
50% interest in the voting securities of the Partner Company, including voting
rights associated with the Company's holdings in common, preferred and other
convertible instruments in the Partner Company. Under the equity method of
accounting, a Partner Company's results of operations are not reflected within
the Company's Consolidated Statements of Operations; however, the Company's
share of the earnings or losses of the Partner Company is reflected in the
caption "Equity (income) loss" in the Consolidated Statements of Operations.
The amount by which the Company's carrying value exceeds its share of the
underlying net assets of Partner Companies accounted for under the consolidation
or equity method of accounting is amortized on a straight-line basis over three
years which adjusts the Company's share of the Partner Company's earnings or
losses.
Cost Method. Partner Companies not accounted for under the consolidation or
the equity method of accounting are accounted for under the cost method of
accounting. Under this method, the Company's share of the earnings or losses of
such companies is not included in the Consolidated Statements of Operations.
F-7
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
The Company continually evaluates the carrying value of its ownership
interests in each of its Partner Companies for possible impairment based on
achievement of business plan objectives and milestones, the value of each
ownership interest in the Partner Company relative to carrying value, the
financial condition and prospects of the Partner Company, and other relevant
factors.
AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are reported at fair value, based on quoted
market prices, with the net unrealized gain or loss reported as a component of
accumulated other comprehensive income in shareholders' equity.
Unrealized gains or losses related to available-for-sale securities will be
recorded net of deferred taxes subsequent to February 2, 1999, the date the
Company converted from an LLC to a C Corporation.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents. Cash
and cash equivalents at December 31, 1998 are invested principally in money
market accounts.
FINANCIAL INSTRUMENTS
Cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses are carried at cost which approximates fair value due to the
short-term maturity of these instruments. Long-term debt is carried at cost
which approximates fair value as the debt bears interest at rates approximating
current market rates.
INTANGIBLES
Goodwill, the excess of cost over net assets of businesses acquired, is
amortized on a straight-line basis over three years. Goodwill at December 31,
1998 of $2.5 million, net of accumulated amortization of $.3 million, was
attributable to acquisitions by VerticalNet.
FIXED ASSETS
Fixed assets are carried at cost less accumulated depreciation, which is
based on the estimated useful lives of the assets (approximately three to seven
years) computed using the straight-line method.
Equipment acquired under long-term capital lease arrangements is recorded
at amounts equal to the net present value of the future minimum lease payments
using the interest rate implicit in the lease. Amortization is provided by use
of the straight-line method over the estimated useful lives of the related
assets.
REVENUE RECOGNITION
All of the Company's revenue from March 4, 1996 (inception) through
December 31, 1998 was attributable to VerticalNet.
VerticalNet's revenue is derived principally from advertising contracts
which include the initial construction of storefronts. The advertising contracts
generally do not extend beyond one year. Advertising revenue is recognized
ratably over the period of the advertising contract.
F-8
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
VerticalNet also generates revenue through providing educational courses
and selling books. Revenue from educational courses is recognized in the period
in which the course is completed and revenue from the sale of books is
recognized in the period in which the books are shipped.
Barter transactions are recorded at the lower of estimated fair value of
goods or services received or the estimated fair value of the advertisements
given. Barter revenue is recognized when the VerticalNet advertising impressions
(VNAI) are delivered to the customer and advertising expense is recorded when
the customer advertising impressions (CAI) are received from the customer. If
the CAI are received from the customer prior to VerticalNet delivering the VNAI,
a liability is recorded, and if VerticalNet delivers the VNAI to the customer
prior to receiving the CAI, a prepaid expense is recorded. For the period March
4, 1996 (inception) through December 31, 1997, VerticalNet barter transactions
were immaterial. For the year ended December 31, 1998, VerticalNet recognized
approximately $.6 million and $.5 million of advertising revenues and expenses,
respectively, from barter transactions. Included in prepaid expenses and other
current assets at December 31, 1998 is approximately $.2 million relating to
barter transactions.
CONCENTRATION OF CREDIT RISK
VerticalNet performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral on accounts receivable.
VerticalNet maintains allowances for credit losses and such losses have been
within management's expectations. No single customer accounted for greater than
10% of total revenue during the period from March 4, 1996 (inception) to
December 31, 1996 and the years ended December 31, 1997 and 1998.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards Board No.
121, the Company records an impairment loss on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.
DEFERRED OFFERING COSTS
As of December 31, 1998, specific incremental costs directly attributable
to a planned initial public offering (IPO) of VerticalNet shares have been
deferred. These deferred costs, totaling $.5 million, are included in non-
current other assets on the Consolidated Balance Sheet. These costs were charged
against VerticalNet's additional paid-in-capital in connection with the
consummation of VerticalNet's IPO in February 1999.
STOCK BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) for stock options and other stock-based
awards while disclosing pro forma net income and net income per share as if the
fair value method had been applied in accordance with Statement of Financial
Accounting Standards Board No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation".
COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" (SFAS 130), which requires companies to
report and display comprehensive income and its components in financial
statements. Comprehensive income is the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. Excluding net income, the Company's source of
comprehensive income is from net unrealized appreciation on its available-for-
sale securities. Reclassification adjustments result from the recognition in net
income of gains or losses that were included in comprehensive income in prior
periods.
F-9
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
SEGMENT INFORMATION
At December 31, 1998, the Company adopted Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131) which requires companies to present financial and
descriptive segment information (Note 10).
INCOME TAXES
Income taxes are accounted for under the asset and liability method whereby
deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which the temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
From the Company's inception in March 1996 to February 1999, the Company
was not subject to federal and state income taxes. The Company has no net
operating loss carry forwards at December 31, 1998 (Note 2).
NET INCOME PER SHARE
Net income per share (EPS) is computed using the weighted average number of
common shares outstanding during each year. Dilutive EPS includes common stock
equivalents (unless anti-dilutive) which would arise from the exercise of stock
options and conversion of other convertible securities and is adjusted, if
applicable, for the effect on net income (loss) of such transactions.
Pursuant to SEC Staff Accounting Bulletin No. 98, common stock and
convertible preferred stock issued for nominal consideration, prior to the
anticipated effective date of an IPO, are required to be included in the
calculation of basic and diluted net income per share as if they were
outstanding for all periods presented. To date, the Company has not had any
issuances or grants for nominal consideration.
GAIN OR LOSS ON ISSUANCES OF STOCK BY PARTNER COMPANIES
Pursuant to SEC Staff Accounting Bulletin No. 84, at the time a public
Partner Company accounted for under the consolidation or equity method of
accounting sells its stock at a price different from the Partner Company's book
value per share, the Company's share of the Partner Company's net equity
changes. If at that time, the Partner Company is an operating entity and not
engaged principally in research and development, the Company records the change
in its share of the Partner Company's net equity as a gain or loss in its
Consolidated Statements of Operations (Note 15).
RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flows.
2. PRO FORMA INFORMATION (UNAUDITED)
On February 2, 1999, the Company converted from an LLC to a C corporation.
The Company became subject to corporate federal and state income taxes
concurrent with the conversion to a C corporation. The accompanying Consolidated
Statement of Operations for 1998 includes pro forma information with respect to
income taxes, net income and net income per share assuming the Company had been
taxed as a C Corporation since January 1, 1998. The unaudited pro forma
information provided does not necessarily reflect the income taxes, net income
and net income per share that would have occurred had the Company been taxed as
a C corporation since January 1, 1998.
F-10
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
PRO FORMA INCOME TAXES
The Company's 1998 pro forma effective tax rate of 37% differed from the
federal statutory rate of 35% principally due to non-deductible permanent
differences.
Based upon the cumulative temporary differences (primarily relating to the
difference between the book and tax carrying value of its Partner Companies),
the Company would have recognized a pro forma net deferred federal and state tax
asset of $8.2 million at December 31, 1998. In the opinion of management, it is
more likely than not that such asset would be realized and accordingly, a
valuation allowance was not considered necessary in calculating this pro forma
amount.
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share was calculated as follows:
<TABLE>
<CAPTION>
PRO FORMA YEAR
ENDED DECEMBER
31, 1998
-----------------
Basic:
<S> <C>
Pro forma net income............................................... $ 8,756,325
Pro forma shares used in computing basic net income per share...... 56,102,289
-----------------
Basic pro forma net income per share............................... $ 0.16
=================
Diluted:
Pro forma net income............................................... $ 8,756,325
Pro forma shares used in computing basic net income per share...... 56,102,289
Effect of dilutive options......................................... 47,000
-----------------
Pro forma shares used in computing diluted net income per share.... 56,149,289
-----------------
Diluted pro forma net income per share............................. $ 0.16
=================
</TABLE>
3. OWNERSHIP INTERESTS IN AND ADVANCES TO PARTNER COMPANIES
The following summarizes the Company's ownership interests in and advances
to Partner Companies accounted for under the equity method or cost method of
accounting. The ownership interests are classified according to applicable
accounting methods at December 31, 1997 and 1998. Cost basis represents the
Company's original acquisition cost less any impairment charges in such
companies.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------------------------- -------------------------------------
CARRYING VALUE COST BASIS CARRYING VALUE COST BASIS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Equity Method.................................. $ 1,200,210 $ 1,608,452 $22,242,349 $30,588,452
Cost Method.................................... 22,844,870 22,844,870 37,249,591 37,249,591
----------------- -----------------
$24,045,080 $59,491,940
================= =================
</TABLE>
F-11
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
The following summarized financial information for Partner Companies
accounted for under the equity method of accounting at December 31, 1997 and
1998 has been compiled from the financial statements of the respective Partner
Companies:
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Current assets.................................................................. $ 7,042,767 $34,239,732
Non-current assets.............................................................. 3,876,167 8,003,286
----------------- -----------------
Total assets................................................................. 10,918,934 42,243,018
----------------- -----------------
Current liabilities............................................................. 5,406,510 12,159,173
Non-current liabilities......................................................... 1,203,524 758,840
Shareholders' equity............................................................ 4,308,900 29,325,005
----------------- -----------------
Total liabilities and shareholders' equity................................... $10,918,934 $42,243,018
================= =================
</TABLE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 4, 1996
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue........................................................ $ 9,365,872 $18,911,691 $ 21,495,832
Net income (loss).............................................. $(1,369,774) $ 255,280 $(17,038,167)
</TABLE>
4. OTHER ACQUISITIONS
In 1998, VerticalNet acquired all of the outstanding capital stock of
Boulder Interactive Technology Services Company (BITC) for $1.9 million in cash
and all of the outstanding capital stock of Informatrix Worldwide, Inc.
(Informatrix) for 49,892 shares of VerticalNet's common stock valued at $.2
million. These acquisitions were accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired of approximately $2.8 million was recorded as goodwill and is
being amortized over three years. Accumulated amortization relating to this
goodwill totaled $.3 million at December 31, 1998.
The following unaudited pro forma financial information presents the
combined results of operations as if VerticalNet had owned BITC and Informatrix
since January 1, 1997 and October 15, 1997 (inception), respectively, after
giving effect to certain adjustments including goodwill and income taxes. The
unaudited pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company, VerticalNet,
BITC and Informatrix constituted a single entity during such periods.
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Revenue......................................................................... $ 1,118,030 $3,606,027
Pro forma net income (loss) (1)................................................. $(7,590,016) $8,023,846
Pro forma net income per share (1).............................................. $ 0.14
(1) Includes for 1998 the effect of the pro forma adjustments described in Note 2.
</TABLE>
F-12
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
5. FIXED ASSETS
Fixed assets consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Computer equipment and software................................................. $ 681,656 $1,564,297
Office equipment and furniture.................................................. 148,430 271,809
Trade show equipment............................................................ 34,079 40,587
Leasehold improvements.......................................................... 29,402 45,864
----------------- -----------------
893,567 1,922,557
Less: accumulated depreciation and amortization................................. (349,124) (771,289)
----------------- -----------------
$ 544,443 $1,151,268
================= =================
</TABLE>
6. DEBT
REVOLVING CREDIT FACILITIES
In March 1998, the Company entered into an unsecured $3 million revolving
credit facility. Borrowings under this facility accrued interest at a premium to
prime ranging from .75% to 1.5%. The Company borrowed up to $2 million under
this facility during 1998. No amounts were outstanding at December 31, 1998 and
the facility expired in March 1999.
In April 1999, the Company entered into a $50 million revolving bank credit
facility. In connection with the facility, the Company issued 200,000 warrants
exercisable for seven years at $10 per share. The facility matures in April
2000, is subject to a .25% unused commitment fee, bears interest, at the
Company's option, at prime and/or LIBOR plus 2.5%, and is secured by
substantially all of the Company's assets (including the Company's holdings in
VerticalNet). Borrowing availability under the facility is based on the fair
market value of the Company's holdings of publicly traded Partner Companies
(currently only VerticalNet) and the value, as defined in the facility, of the
Company's private Partner Companies. Based on the provisions of the borrowing
base, borrowing availability at April 30, 1999 was $32.6 million, of which none
was outstanding. As of May 7, 1999, the Company had borrowed $13 million under
the facility.
VerticalNet had a line of credit with a bank in the amount of $2.5 million
at December 31, 1997. Borrowings under the facility were collateralized by a
security interest in all assets of VerticalNet and required VerticalNet to meet
specified financial ratios. As of December 31, 1997, VerticalNet was in
technical default, as it did not meet the specified financial ratios, but the
bank waived these violations. The facility accrued interest at prime plus 1.5%
(10% at December 31, 1997). The weighted average interest rate for borrowings
under this facility was 10% for the year ended December 31, 1997.
As of June 1998, VerticalNet modified the agreement, reducing its line of
credit with the bank to $.5 million. On November 25, 1998, the agreement was
additionally amended allowing the Company to execute a $2.0 million note with
the bank. The note accrues interest at prime plus 1.5% and matures at the
earlier of March 31, 1999 or the completion of VerticalNet's next financing. In
connection with the loan, VerticalNet issued warrants to purchase 20,513 shares
of VerticalNet's common stock at an exercise price of $16 per share with an
estimated fair value of $.1 million. As of December 31, 1998, the outstanding
balance for borrowings under this facility was $2 million and the weighted
average interest rate for the year ended December 31, 1998 was 10%. Upon the
completion of VerticalNet's IPO in February 1999, VerticalNet repaid $2 million
and the line of credit with the bank was reduced to $.5 million.
F-13
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
LONG-TERM DEBT
All of the Company's long-term debt is attributable to VerticalNet and
consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Term notes with related parties................................................. $ 100,000 $ --
Term bank notes................................................................. 32,852 --
Capital leases.................................................................. 417,952 639,940
----------------- -----------------
550,804 639,940
Less: current portion........................................................... (150,856) (288,016)
----------------- -----------------
Long-term debt.................................................................. $ 399,948 $ 351,924
================= =================
</TABLE>
VerticalNet had three unsecured term notes due to shareholders with an
interest rate of 7%. The notes were to mature on February 2001. One of the
holders of these notes is a Board member of the Company. These notes were repaid
in May 1998.
VerticalNet had a term loan with another bank with an interest rate at
prime plus 2.75% (11.25% at December 31, 1997) which was payable in 36 monthly
installments. This note was repaid in May 1998.
VerticalNet has several capital leases on its equipment with lease terms
ranging from three to five years. The interest rates implicit in the leases are
8% to 20%. At December 31, 1997 and 1998, the book value of assets held under
capital leases was approximately $.3 million and $.5 million, respectively, and
the aggregate remaining minimum lease payments at December 31, 1998 were
approximately $.7 million including interest of approximately $.1 million.
At December 31, 1998, long-term debt is scheduled to mature as follows:
<TABLE>
<S> <C>
1999.............................................. $288,016
2000.............................................. 230,338
2001.............................................. 95,718
2002.............................................. 19,810
2003.............................................. 6,058
-----------------
Total............................................. $639,940
=================
</TABLE>
Interest paid in the periods ended December 31, 1997 and 1998 was $.1
million and $.2 million, respectively.
7. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Accrued compensation and benefits............................................... $ 90,833 $ 454,230
Accrued marketing costs......................................................... -- 446,334
Other........................................................................... 297,692 922,843
----------------- -----------------
$388,525 $1,823,407
================= =================
</TABLE>
8. SHAREHOLDERS' EQUITY
The Company's authorized capital stock consists of 130,000,000 shares of
common stock, par value $.001 per share. The holders of common stock are
entitled to one vote per share and are entitled to dividends as declared.
F-14
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
Dividends may be restricted by the inability to liquidate ownership interests in
Partner Companies to fund cash dividends and may be subject to the preferential
rights of the holders of the Company's preferred stock, if any.
The Company may establish one or more classes or series of preferred stock.
The holders of the preferred stock may be entitled to preferences over common
stock or shareholders with respect to dividends, liquidation, dissolution, or
winding up of the Company, as established by the Company's Board of Directors.
No preferred stock is authorized at December 31, 1998.
Certain shareholders were granted registration rights which become
effective after completion of a public offering.
Shareholders' equity contributions are recorded when received. The Company
issued 15,990,000 shares of common stock for net proceeds of $32 million in
1999. These shares had been subscribed for at December 31, 1998.
RESTRICTED STOCK
During 1996 and 1997, 6,027,017 and 756,608 shares of restricted common
stock ("restricted stock") were granted, net of forfeitures, to employees,
consultants and advisors at no cost as performance incentives. The restricted
stock vests in equal annual installments over a five year period.
At December 31, 1997 and 1998, the 6,783,625 shares of restricted stock had
been granted at a weighted average fair value of $0.19 per share or an aggregate
of $1.3 million based on independent valuations of the shares. These independent
valuations took into account certain factors, primarily the restrictions on the
ability of restricted shareholders to receive distributions of dividends or
profits and the uncertainty of realization of any return from these shares. The
$1.3 million of deferred compensation is classified as a reduction of
shareholders' equity and is being amortized over the five-year vesting period.
Compensation expense related to the restricted stock totaling $.1 million, $.2
million and $.3 million was recorded in 1996, 1997 and 1998, respectively.
STOCK OPTION PLANS
Incentive or non-qualified stock options may be granted to Company
employees, directors and consultants under several stock option plans ("Plans").
Generally, the options vest over a four to five year period and expire eight to
ten years after the date of grant. At December 31, 1998, the Company reserved
10,470,000 shares of common stock for possible future issuance under the Plans.
VerticalNet and most Partner Companies also maintain their own stock option
plans.
The following table summarizes the activity of the Company's stock option
plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
----------------- -----------------
<S> <C> <C>
Outstanding at January 1, 1997 -- $ --
Options granted................................................................. 94,000 1.00
Options canceled/forfeited...................................................... -- --
-----------------
Outstanding at December 31, 1997................................................ 94,000 1.00
Options granted................................................................. 6,650,000 2.00
Options canceled/forfeited...................................................... (47,000) (1.00)
-----------------
Outstanding at December 31, 1998................................................ 6,697,000 $ 1.99
=================
</TABLE>
No options were issued by the Company in 1996. At December 31, 1997 there
were no options exercisable under the Plans. At December 31, 1998 there were
11,750 options exercisable at $1.00 per share under the Plans.
F-15
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
The following table summarizes information about stock options outstanding:
<TABLE>
<CAPTION> WEIGHTED AVERAGE
NUMBER OUTSTANDING AT REMAINING CONTRACTUAL
EXERCISE PRICE DECEMBER 31, 1998 LIFE (IN YEARS)
- ------------------------- --------------------------- ---------------------------
<S> <C> <C>
$1.00 47,000 7
$2.00 6,650,000 10
</TABLE>
Included in the 1998 option grants are 450,000 stock options to non-
employees. The fair value of these options of $.6 million was recorded as
deferred compensation in 1998 and is being amortized over the five year vesting
period. The fair value of these options was determined using the Black-Scholes
method assuming a volatility of 80%, a dividend yield of 0%, an average expected
option life of 5 years, and a risk-free interest rate of 5.2%.
The Company applies APB 25 and related interpretations in accounting for
its stock option plans. Had compensation cost been recognized pursuant to SFAS
123, the Company's net income (loss) would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Net income (loss)
As reported (pro forma in 1998).............................................. $(6,579,628) $8,756,325
SFAS 123 pro forma........................................................... $(6,648,952) $8,293,979
Net income per share:
Pro forma as reported........................................................ $ 0.16
SFAS 123 pro forma........................................................... $ 0.15
</TABLE>
The per share weighted-average fair value of options issued to employees
by the Company during 1997 and 1998 was approximately $0.22 and $0.45,
respectively.
The following assumptions were used to determine the fair value of stock
options granted to employees by the Company, its subsidiaries, and Partner
Companies accounted for under the equity method using the minimum value option-
price model:
<TABLE>
<S> <C>
Dividend yield.................................... 0%
Average expected option life...................... 5 years
Risk-free interest rate........................... 5.2%
</TABLE>
In 1999, the Company granted 2,934,500 options to employees and non-
employees at exercise prices ranging from $2.00 to $4.88.
9. RELATED PARTIES
A principal shareholder satisfied a portion of its initial 1996 funding
commitment by contributing its interests valued at $6.1 million in the
securities of a Partner Company. As this shareholder controlled the Company at
the time of the transfer, the shareholder's cost basis in the shares of the
Partner Company ($1.1 million), together with a $.5 million equity contribution
made by the Company, comprise the Company's cost basis in the Partner Company.
The Company entered into various cost sharing arrangements with the same
principal shareholder during 1996, 1997, and 1998, whereby the Company
reimbursed, under fair market terms, this shareholder for certain operational
expenses. The amounts incurred for such items were $.1 million, $.1 million and
$.2 million in 1996, 1997, and 1998, respectively.
The Company loaned an officer $.1 million during 1998, evidenced by a term
note with an interest rate of prime plus 1% (8.75% at December 31, 1998) to
purchase a portion of the Company's interest in a Partner Company at the
F-16
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
Company's cost. This note was repaid in January 1999 and is included in other
current assets in the December 31, 1998 Consolidated Balance Sheets.
In September 1998 the Company entered into a $.2 million one-year
consulting contract with a Partner Company.
The Company shares certain acquisition rights with certain of its principal
shareholders whereby these shareholders have the ability to purchase a portion
of the Company's interest in certain Partner Companies. During 1998 and 1999,
one shareholder exercised this right and acquired a portion of the Company's
interest in three Partner Companies at the Company's cost basis of approximately
$3.4 million. The agreement under which these rights were granted will terminate
automatically upon an initial public offering.
Certain executives of the Company and its Partner Companies have the option
to purchase a portion of the Company's ownership interest in various Partner
Companies at the Company's cost.
10. OPERATING SEGMENTS
In 1998, the Company adopted SFAS 131, which requires the reporting of
operating segments using the "management approach" versus the "industry
approach" previously required. The Company's reportable segments consist of
Partner Company Operations and General ICG Operations. Partner Company
Operations includes the effect of consolidating VerticalNet and recording the
Company's share of earnings and losses of Partner Companies accounted for under
the equity method. VerticalNet operations include creating and operating
industry-specific trade communities on the Internet. Partner Companies accounted
for under the equity method of accounting operate in various Internet-related
businesses. General ICG Operations represents the expenses of providing
strategic and operational support to the Internet related Partner Companies, as
well as the related administrative costs related to such expenses. General ICG
Operations also includes the effect of transactions and other events incidental
to the Company's general operations and the Company's ownership interests in
Partner Companies. The Company's and Partner Companies' operations were
principally in the United States of America during 1996, 1997 and 1998.
F-17
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
The following summarizes information related to the Company's segments. All
significant intersegment activity has been eliminated. Assets are owned or
allocated assets used by each operating segment.
<TABLE>
<CAPTION>
MARCH 4, 1996
(INCEPTION)
THROUGH
DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
PARTNER COMPANY OPERATIONS
<S> <C> <C> <C>
Revenue................................................... $ 285,140 $ 791,822 $ 3,134,769
----------------- ----------------- -----------------
Operating expenses
Cost of revenue......................................... 427,470 1,767,017 4,642,528
Sales and marketing..................................... 268,417 2,300,365 7,894,662
General and administrative.............................. 291,660 1,388,123 4,106,583
----------------- ----------------- -----------------
Operating loss -- Partner Company Operations before
minority interest and equity income (loss).............. (702,407) (4,663,683) (13,509,004)
Minority interest......................................... 427,185 (106,411) 5,381,640
Equity income (loss)...................................... (514,540) 106,298 (7,937,861)
----------------- ----------------- -----------------
Operating loss -- Partner Company Operations.............. (789,762) (4,663,796) (16,065,225)
Other income, net......................................... -- -- --
Interest expense, net..................................... (6,440) (115,106) (85,271)
----------------- ----------------- -----------------
Net loss -- Partner Company Operations.................... $ (796,202) $(4,778,902) $(16,150,496)
================= ================= =================
GENERAL ICG OPERATIONS
General and administrative................................ $ 1,360,821 $ 2,054,118 $ 3,512,586
----------------- ----------------- -----------------
Operating loss -- General ICG Operations.................. (1,360,821) (2,054,118) (3,512,586)
Other income, net......................................... -- -- 32,552,151
Interest income, net...................................... 94,538 253,392 1,009,859
----------------- ----------------- -----------------
Net income (loss) -- General ICG Operations............... $(1,266,283) $(1,800,726) $ 30,049,424
================= ================= =================
December 31,
--------------------------------------
1997 1998
----------------- -----------------
Total Assets
Partner Company Operations.............................. $ 2,104,087 $ 12,342,975
General ICG Operations.................................. 29,376,929 84,443,000
----------------- -----------------
$31,481,016 $ 96,785,975
================= =================
</TABLE>
11. PARENT COMPANY FINANCIAL INFORMATION
Parent Company financial information is provided to present the results of
operations and financial position of the Company assuming VerticalNet was
accounted for under the equity method of accounting instead of consolidation.
F-18
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
The following summarizes the Company's Parent Company Balance Sheets which
differ from the Consolidated Balance Sheets due to not consolidating VerticalNet
with the Company but instead including the losses recorded in excess of the
Company's carrying value in VerticalNet in the caption "Non-current
liabilities".
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1997 1998
----------------- -----------------
Assets
<S> <C> <C>
Current assets............................................................... $ 5,245,064 $21,596,575
Ownership interests in and advances to Partner Companies..................... 24,045,080 59,491,940
Other........................................................................ 86,785 3,354,485
----------------- -----------------
Total assets.................................................................... 29,376,929 84,443,000
Liabilities and shareholders' equity
Current liabilities.......................................................... 318,729 2,082,463
Non-current liabilities...................................................... 2,423,525 1,636,159
Shareholders' equity......................................................... 26,634,675 80,724,378
----------------- -----------------
Total liabilities and shareholders' equity...................................... $29,376,929 $84,443,000
================= =================
</TABLE>
The following summarizes the Company's Parent Company Statements of
Operations which differ from the Consolidated Statements of Operations due to
not consolidating VerticalNet with the Company but instead including the
Company's share of VerticalNet's losses in the caption "Equity (income) loss".
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 4, 1996
(INCEPTION) TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
Revenue $ -- $ -- $ --
----------------- ----------------- -----------------
<S> <C> <C> <C>
Operating expenses
General and administrative.................................... 1,360,821 2,054,118 3,512,586
Equity (income) loss.......................................... 796,202 4,778,902 16,150,496
----------------- ----------------- -----------------
Total operating expenses...................................... 2,157,023 6,833,020 19,663,082
----------------- ----------------- -----------------
Operating loss................................................. (2,157,023) (6,833,020) (19,663,082)
Other income, net.............................................. -- -- 32,552,151
Interest income, net........................................... 94,538 253,392 1,009,859
----------------- ----------------- -----------------
Net income (loss).............................................. $(2,062,485) $(6,579,628) $ 13,898,928
================= ================= =================
</TABLE>
12. DEFINED CONTRIBUTION PLAN
In 1997, the Company established a defined contribution plan that covers
all of its employees. Participants may contribute 1% to 15% of pre-tax
compensation, as defined. The Company may make discretionary contributions to
the plan but has never done so.
F-19
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
13. OTHER INCOME
Other income consists of the following for the year ended December 31,
1998:
<TABLE>
<CAPTION>
<S> <C>
Sale of Matchlogic to Excite.................................. $12,822,162
Sale of Excite holdings....................................... 16,813,844
Sale of WiseWire to Lycos..................................... 3,324,238
Sale of Lycos holdings........................................ 1,471,907
Partner Company impairment charge............................. (1,880,000)
-----------------
$32,552,151
=================
</TABLE>
Gains on sales of Partner Companies and available-for-sale securities are
determined using average cost.
In February 1998, the Company exchanged all of its holdings in Matchlogic
for 763,820 shares of Excite resulting in a gain at the date of exchange of
$12.8 million. Throughout the remainder of 1998, the Company sold 716,082 shares
of Excite which resulted in $30.2 million of proceeds and a gain of $16.8
million.
In April 1998, the Company exchanged all of its holdings in WiseWire
for 196,130 shares of Lycos, Inc. resulting in a gain at the date of exchange of
$3.3 million. Throughout the remainder of 1998, the Company sold 173,756 shares
of Lycos which resulted in $6.2 million of proceeds and a gain of $1.5 million.
In December 1998, the Company recorded an impairment charge of $1.9 million
for the decrease in value of a Partner Company.
14. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the amount of the ultimate liability with respect to these actions
will not materially affect the financial position, results of operations or cash
flows of the Company and its subsidiaries.
In connection with its ownership interests in certain Partner Companies,
the Company guaranteed $3.2 million of bank loan and other commitments and has
committed capital of $2 million to an existing Partner Company to be funded in
1999.
The Company and VerticalNet lease their facilities under operating lease
agreements expiring through 2004. Future minimum lease payments as of December
31, 1998 under the leases are as follows:
<TABLE>
<S> <C>
1999.............................................. $385,316
2000.............................................. 402,565
2001.............................................. 266,970
2002.............................................. 239,984
2003.............................................. 246,274
Thereafter........................................ 103,385
</TABLE>
Rent expense under the noncancelable operating leases was approximately $.1
million and $.3 million for the years ended December 31, 1997 and 1998,
respectively.
On June 30, 1998, VerticalNet entered into a three year Sponsorship
Agreement with Excite, Inc. (Excite). The Sponsorship Agreement provides for
VerticalNet and Excite to sponsor and promote thirty co-branded Web pages and
for each company to sell advertising on the Web pages. Excite has guaranteed a
minimum number of advertising impressions for each of the three years. The
agreement is cancelable by either party, as
F-20
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
defined, and requires VerticalNet to pay Excite $0.9 million, $2.0 million and
$3.0 million, respectively, in year one, two and three under the agreement. Such
payments will be charged to expense as the advertising impressions are provided
by Excite. In addition, each company will provide the other with $.2 million in
barter advertising during the term of the Sponsorship Agreement. As of December
31, 1998, each company has satisfied the barter provisions under the Sponsorship
Agreement.
On January 19, 1999, VerticalNet entered into a one-year agreement with
Compaq Computer Corporation (Compaq) and its Internet Web site known as
AltaVista. The agreement provides for VerticalNet and AltaVista to sponsor and
promote thirty-one co-branded Web pages. The agreement requires VerticalNet to
pay Compaq $1.0 million over the term of the agreement based on the number of
advertising impressions delivered. Such amount will be charged to expense as the
advertising impressions are provided by AltaVista. In addition, each company
will provide the other with $.3 million in barter advertising during the term of
the agreement.
VerticalNet has entered into non-cancelable obligations with several
content service providers and Internet search engines. Under these agreements,
exclusive of the Excite and AltaVista agreements discussed above, VerticalNet's
obligations are as follows:
<TABLE>
<S> <C>
1999.............................................. $1,488,734
2000.............................................. 65,500
</TABLE>
VerticalNet has entered into employment agreements with several employees.
The agreements are cancelable, but require severance upon termination. As of
December 31, 1998, VerticalNet would be required to pay approximately $1 million
in severance in the event that these employment agreements are canceled.
15. SUBSEQUENT EVENTS
ISSUANCE OF COMMON STOCK
The Company issued 15,990,000 shares of common stock for net proceeds of
$32 million from January through March, 1999 (Note 8).
In April, 1999 the Company's Board of Directors authorized the acceptance
of full recourse promissory notes from its employees and a director as
consideration for exercising all or a portion of their vested and unvested stock
options. The Company has the right, but not the obligation, to repurchase
unvested shares under certain circumstances. The exercise of unvested options by
the employees and director and the acceptance of promissory notes by the Company
are in accordance with the terms of the Company's equity compensation plans and
related option agreements. The Company's Board of Directors also approved
loaning employees the funds, under the terms of full recourse promissory notes,
to pay the income taxes that become due in connection with the option exercises.
VERTICALNET INITIAL PUBLIC OFFERING
In February 1999, VerticalNet completed its initial public offering (IPO)
of 4,025,000 shares of its common stock at $16.00 per share. Net proceeds to
VerticalNet were approximately $58.3 million. As a result of the VerticalNet
IPO, the Company expects to record a gain in 1999 of approximately $28 million
relating to the increase in the Company's share of VerticalNet's net equity.
TAX DISTRIBUTION
In March 1999 the Company made a distribution of $10.7 million to
former LLC members in accordance with the LLC agreements to satisfy the members'
tax liabilities.
OWNERSHIP INTERESTS IN AND ADVANCES TO PARTNER COMPANIES
Through May 7, 1999, the Company expended approximately $60 million to
acquire interests in or make advances to new and existing Partner Companies.
REVOLVING BANK CREDIT FACILITY
In April 1999, the Company entered into a $50 million revolving bank credit
facility (Note 6).
CONVERTIBLE SUBORDINATED NOTES
On May 5, 1999, the Company's Board of Directors authorized the issuance of
up to $90 million of convertible subordinated notes. The notes bear interest at
an annual rate of 4.99% during the first year and at the prime rate for the
remaining two years. Prior to May 2000, the notes will automatically convert
into shares of the
F-21
<PAGE>
INTERNET CAPITAL GROUP, INC.
Notes to Consolidated Financial Statements
Company's common stock at the initial public offering price upon consummation of
an initial public offering or at the per share value of a private round of
equity financing of at least $50 million. If the notes are converted, all
accrued interest is waived. The Company's Board of Directors also approved the
issuance of warrants to the holders of these convertible notes to purchase
shares of the Company's common stock. The warrant holders will be entitled to
purchase the number of shares of the Company's common stock determined by
dividing 20% of the principal amount of the notes converted by the price per
share at which the notes are converted. The warrants expire in May 2002.
INITIAL PUBLIC OFFERING
On May 7, 1999 the Company's Board of Directors authorized the filing of a
registration statement on Form S-1 in connection with the Company's initial
public offering.
F-22
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders of
ComputerJobs.com, Inc.
We have audited the accompanying balance sheets of ComputerJobs.com, Inc.
(formerly ComputerJobs Store, Inc.) as of December 31, 1997 and 1998, and the
related statements of income, changes in stockholders' equity (deficit), and
cash flows for the period from January 16, 1996 (inception) through December 31,
1996 and for the years ended December 31, 1997 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ComputerJobs.com, Inc. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from January 16, 1996 (inception) through December 31, 1996 and
for the years ended December 31, 1997 and 1998 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Atlanta, Georgia
March 11, 1999, except Note 1 as to which the date
is April 1, 1999
F-23
<PAGE>
COMPUTERJOBS.COM, INC.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................. $315,213 $ 9,385,180
Trade accounts receivable, net of allowance for doubtful
accounts of $4,000 and $20,000 at December 31, 1997 and
1998, respectively........................................ 136,528 315,081
Unbilled trade accounts receivable......................... 17,000 62,990
Prepaid expenses........................................... -- 1,197
Loan receivable from stockholder........................... 1,086 --
----------------- -----------------
Total current assets........................................ 469,827 9,764,448
Property and equipment:
Furniture and fixtures..................................... 15,291 35,728
Computer and office equipment.............................. 73,721 189,288
Accumulated depreciation................................... (21,159) (64,249)
----------------- -----------------
Net property and equipment.................................. 67,853 160,767
Other assets................................................ 2,000 99,721
----------------- -----------------
Total assets................................................ $539,680 $10,024,936
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses...................... $ 47,323 $ 136,209
Deferred income taxes payable.............................. -- 89,261
Note payable to stockholders............................... -- 1,000,000
Distribution payable to stockholders....................... -- 346,817
Current portion of notes payable........................... 6,279 --
Deferred revenue........................................... 16,271 27,996
----------------- -----------------
Total current liabilities................................... 69,873 1,600,283
Notes payable, less current portion......................... 6,354 --
Series A Preferred Stock, no par value -- ($2 per share
redemption value; minimum liquidation value of $10,000,000
plus accrued and unpaid dividends plus a portion of
remaining assets, as defined), convertible to Class 2
common stock, 5,000,000 shares authorized, issued and
outstanding................................................ -- 9,986,126
Stockholders' equity:
Class 1 common stock, no par value-- 5,500,000 shares
authorized, 5,500,000 shares issued and outstanding....... 10,510 10,510
Class 2 common stock, no par value-- 14,000,000 shares
authorized, no shares issued or outstanding............... -- --
Retained earnings (deficit)................................ 452,943 (1,571,983)
----------------- -----------------
Total stockholders' equity (deficit)........................ 463,453 (1,561,473)
----------------- -----------------
Total liabilities and stockholders' equity (deficit)........ $539,680 $10,024,936
================= =================
</TABLE>
See accompanying notes.
F-24
<PAGE>
COMPUTERJOBS.COM, INC.
Statements of Income
<TABLE>
<CAPTION>
Period from
January 16,
1996 through YEAR ENDED DECEMBER 31,
December 31, --------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue............................................ $ 377,163 $1,504,742 $4,431,060
Expenses:
Operations........................................ 38,477 65,178 469,519
Sales and marketing............................... 38,509 198,586 1,893,589
General and administrative........................ 189,126 776,572 1,121,918
Depreciation...................................... 3,617 17,542 45,383
----------------- ----------------- -----------------
269,729 1,057,878 3,530,409
Operating income................................... 107,434 446,864 900,651
Other income (deductions):
Interest expense.................................. (982) (1,646) (12,537)
Interest income................................... 401 8,258 53,610
----------------- ----------------- -----------------
(581) 6,612 41,073
----------------- ----------------- -----------------
Income before income taxes......................... 106,853 453,476 941,724
Income tax expense................................. -- -- 89,261
----------------- ----------------- -----------------
Net income......................................... $ 106,853 $ 453,476 $ 852,463
================= ================= =================
Supplemental unaudited pro forma information:
Income before taxes, as above..................... $ 106,853 $ 453,476 $ 941,724
Pro forma provision for income taxes.............. (40,604) (172,320) (357,853)
----------------- ----------------- -----------------
Pro forma net income.............................. $ 66,249 $ 281,156 $ 583,871
================= ================= =================
Basic pro forma earnings per common share......... $0.01 $0.05 $0.09
Average outstanding common shares................. 5,500,000 5,500,000 5,500,000
</TABLE>
See accompanying notes.
F-25
<PAGE>
COMPUTERJOBS.COM, INC.
Statements of Changes in Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
RETAINED TOTAL
CLASS 1 COMMON CLASS 2 COMMON EARNINGS SHAREHOLDERS'
STOCK STOCK (DEFICIT) EQUITY (DEFICIT)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 16, 1996 (INCEPTION).
$10,510 -- $ -- $ 10,510
Net income............................ -- -- 106,853 106,853
Distribution to stockholders.......... -- -- (33,879) (33,879)
----------------- ----------------- ----------------- -----------------
BALANCE AT DECEMBER 31, 1996............ 10,510 -- 72,974 83,484
Net income............................. -- -- 453,476 453,476
Distribution to stockholders........... -- -- (73,507) (73,507)
----------------- ----------------- ----------------- -----------------
BALANCE AT DECEMBER 31, 1997............ 10,510 -- 452,943 463,453
Net income............................. -- -- 852,463 852,463
Distribution to stockholders........... -- -- (2,796,817) (2,796,817)
Accretion and dividends on Series A
Preferred Stock....................... -- -- (80,572) (80,572)
----------------- ----------------- ----------------- -----------------
BALANCE AT DECEMBER, 31 1998............ $10,510 -- $(1,571,983) $(1,561,473)
================= ================= ================= =================
</TABLE>
See accompanying notes.
F-26
<PAGE>
COMPUTERJOBS.COM, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from
January 16,
1996 through YEAR ENDED DECEMBER 31,
December 31, --------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Operating activities
Net income................................................. $106,853 $ 453,476 $ 852,463
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................. 3,617 17,542 45,383
Provision for deferred taxes............................. -- -- 89,261
Changes in operating assets and liabilities:
Trade accounts receivable............................... (30,880) (105,648) (178,553)
Unbilled trade accounts receivable...................... -- (17,000) (45,990)
Loan receivable from stockholder........................ -- (1,086) 1,086
Prepaid expenses and other assets....................... -- (2,000) (98,918)
Accounts payable and accrued expenses................... 12,394 34,930 88,886
Deferred revenue........................................ 21,903 (5,632) 11,725
----------------- ----------------- -----------------
Net cash provided by operating activities.................. 113,887 374,582 765,343
INVESTING ACTIVITIES
Purchase of property and equipment......................... (23,980) (65,033) (138,297)
----------------- ----------------- -----------------
Net cash used in investing activities...................... (23,980) (65,033) (138,297)
FINANCING ACTIVITIES
Sale of Series A Preferred Stock, less expenses............ -- -- 9,905,554
Distributions to stockholders.............................. (33,879) (73,507) (1,450,000)
Proceeds from notes payable................................ 21,100 -- --
Repayment of notes payable................................. (2,817) (5,650) (12,633)
Sales of common stock...................................... 10,510 -- --
----------------- ----------------- -----------------
Net cash provided (used) by financing activities........... (5,086) (79,157) 8,442,921
----------------- ----------------- -----------------
Net increase in cash and cash equivalents.................. 84,821 230,392 9,069,967
Cash and cash equivalents, beginning of period............. -- 84,821 315,213
----------------- ----------------- -----------------
Cash and cash equivalents, end of year..................... $ 84,821 $ 315,213 $ 9,385,180
================= ================= =================
</TABLE>
See accompanying notes.
F-27
<PAGE>
COMPUTERJOBS.COM, INC.
Notes to Financial Statements
December 31, 1998
1. DESCRIPTION OF THE BUSINESS
The Company is an Internet-based interactive technology company that
provides an employment Web site for information technology (IT) professionals.
The Company's web site enables recruiters and employers to post job
opportunities and search for employment opportunities based on an array of
search criteria. The Company also offers banner advertising and job reposting
services for companies wanting access to IT professionals. The Company operates
primarily on a regional basis and at December 31, 1998, served five regions in
the United States: Atlanta, the Carolinas, Chicago, Florida, and Texas.
On April 1, 1999 the Company changed its name from ComputerJobs Store, Inc.
to ComputerJobs.com, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers short-term investments with original maturity dates
of 90 days or less at the date of purchase to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash equivalents and accounts receivable.
Cash equivalents are held primarily with one financial institution. The Company
performs periodic evaluations of the relative credit standing of this financial
institution. Accounts receivable are unsecured and the Company is at risk to the
extent such amounts become uncollectible.
ACCOUNTS RECEIVABLE
The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Receivables are
generally due within 30 days. Credit losses have been within management's
expectations.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company provides for
depreciation computed on a straight-line basis over the estimated useful lives
of the related assets which range from 3 to 5 years.
If facts and circumstances indicate that the property and equipment or
other assets may be impaired, an evaluation of continuing value would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with these assets would be compared to their carrying amount to
determine if a write down to fair market value or discounted cash flow value is
required.
REVENUE RECOGNITION
The Company recognizes advertising and service revenue as earned over the
service period. Advance payments received by the Company are deferred and
credited to operations on the straight-line basis over the life of the
agreement.
ADVERTISING COSTS
Advertising costs are expensed in the period in which they are incurred.
The Company incurred $11,583, $178,870 and $1,528,590 in advertising costs for
the period from January 16, 1996 (inception) through December 31, 1996 and for
the years ended December 31, 1997 and 1998, respectively.
F-28
<PAGE>
COMPUTERJOBS.COM, INC.
Notes to Financial Statements
December 31, 1998
INCOME TAXES
The Company elected to be taxed under the provision of Subchapter S of the
Internal Revenue Code for the period from January 16, 1996 (inception) through
November 25, 1998. Under these provisions, the income of the Company was
reported by the stock or shareholders on their individual income tax returns. As
such, the accompanying financial statements do not include a provision for
income taxes for the period from January 16, 1996 (inception) to November 25,
1998.
In connection with the Company's amended and restated articles of
incorporation, the Company terminated its tax status as a Subchapter S
corporation. Effective November 25, 1998, the Company is taxed as a subchapter C
corporation. The deferred tax effects of the change in tax status of
approximately $54,000 are included in income at the date the change in tax
status occurred. Supplemental unaudited pro forma information related to net
income and earnings per share is presented as if the Company had been taxed as a
subchapter C corporation for all periods presented.
Income taxes for the period November 25, 1998 through December 31, 1998
have been provided using the liability method in accordance with FASB Statement
109, Accounting for Income Taxes. Under the liability method, the Company
recognizes deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Using the enacted tax rates in effect for the year in which the
differences are expected to reverse, deferred tax liabilities and assets are
determined based on the differences between the book basis for financial
reporting and the tax basis of an asset or liability.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH FLOW INFORMATION
During 1998, the Company recorded a distribution payable to the
stockholders of $346,817, a note payable to stockholders for $1,000,000 and
accrued dividends of $79,000 on the Series A Preferred Stock which are non-cash
financing activities.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current presentation.
3. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1998
----------------- ------------------
<S> <C> <C>
Note payable; interest at prime rate plus 2.0% (10.5% at
December 31, 1997).................................................. $ 5,052 $ --
Note payable; interest at prime rate plus 2.0% (10.25% at
December 31, 1997).................................................. 7,581 --
----------------- ------------------
12,633 --
Less amounts due within one year.................................... 6,279 --
----------------- ------------------
$ 6,354 $ --
================= ==================
</TABLE>
F-29
<PAGE>
COMPUTERJOBS.COM, INC.
Notes to Financial Statements
December 31, 1998
The notes payables were secured by the property and equipment of the
Company and guaranteed by stockholders of the Company.
Interest paid for the period from January 16, 1996 (inception) through
December 31, 1996 and during the years ended December 31, 1997 and 1998 totaled
$982, $1,646 and $1,030, respectively.
At December 31, 1996 and 1997, the Company had an unused line of credit of
$50,000, for general working capital purposes. The line of credit expired on
April 5, 1998 and was not renewed.
4. INCOME TAXES
Income tax expense (benefit) consists of the following for the period from
November 25, 1998 through December 31, 1998:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
----------------- ----------------- -----------------
<S> <C> <C> <C>
Federal............................................ $(7,267) $86,665 $79,398
State.............................................. (481) 10,344 9,863
----------------- ----------------- -----------------
$(7,748) $97,009 $89,261
================= ================= =================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's deferred
tax assets and liabilities as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Deferred income tax assets (liabilities):
<S> <C>
Property and equipment.............................. $ 17,420
Net operating loss carryforwards.................... 7,748
Accrual to cash adjustment.......................... (114,429)
-----------------
Net deferred income taxes............................ $ (89,261)
=================
</TABLE>
The Company uses the cash basis for its calculation of income tax expense
in accordance with internal revenue code 448(b)(3). For income tax purposes,
income is generally reported in the period that cash is actually received and
expenses are generally reported in the period the payment is actually made.
Pro forma income tax expense differed from the amounts computed by applying
the statutory federal rate of 34% as a result of the following:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 16,
1996 THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------
1996 1997 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Computed using a 34% tax rate...................... $36,330 $154,182 $320,186
State income taxes, net of federal tax............. 4,274 18,138 37,667
----------------- ----------------- -----------------
$40,604 $172,320 $357,853
================= ================= =================
</TABLE>
5. STOCKHOLDERS' EQUITY
On November 25, 1998, the Company amended and restated its articles of
incorporation. Pursuant to this amendment and restatement, the Company converted
its original 1,000 shares of issued common stock into 5,500,000 shares of Class
1 common stock. The common stock authorized, outstanding and issued, as of
December
F-30
<PAGE>
COMPUTERJOBS.COM, INC.
Notes to Financial Statements
December 31, 1998
31, 1996 and 1997, has been adjusted to reflect this recapitalization. The
Company also authorized 14,000,000 shares of Class 2 common stock and 5,000,000
shares of Series A Preferred Stock. The Company has reserved 2,000,000 shares of
Class 2 common stock for issuance in connection with its stock option plan.
Each share of Class 1 common stock is convertible to one share of Class 2
common stock at the option of the holder. Class 1 common stock automatically
converts to Class 2 common stock upon a qualifying initial public offering (IPO)
of the Company.
The rights and privileges of Class 1 and Class 2 stockholders are equal
except that Class 1 stockholders are entitled to receive certain preferences
over Class 2 stockholders in the event of the Company's liquidation, dissolution
or sale or merger.
PREFERRED STOCK
In November 1998, the Company sold 5,000,000 shares of Series A Preferred
Stock for an aggregate sales price of $10,000,000. The Series A Preferred Stock
is cumulative and accrues dividends at 8%. Each share of preferred stock is
currently convertible into one share of Class 2 common stock at the option of
the holder. Each holder of Series A Preferred Stock is entitled to certain
protections against sales of common stock at less than the original Series A
purchase price, which may result in the right of such holder to convert each
share of Series A into more than one share of Class 2 common stock. The Series A
preferred stock automatically converts into Class 2 common stock upon a
qualifying IPO of the Company. The Company has reserved 5,000,000 shares of
Class 2 common stock for the conversion of Series A Preferred Stock.
The voting rights of the Series A Preferred Stock are equal to the voting
rights of the Class 2 common stock. Dividends are payable in cash or stock on
the sale, liquidation, or merger of the Company or redemption of such preferred
stock. To the extent the holders have not converted the Series A Preferred Stock
into Class 2 common stock, the holders of least 75% of the preferred stock may
cause the Company to redeem all such preferred stock at any time after November
25, 2003 at the greater of the purchase price plus accrued dividends or the
appraised value, as defined.
In the event of the Company's liquidation, dissolution or sale or merger,
the holders of Series A Preferred Stock are entitled to $10,000,000 plus all
accrued dividends on the Series A Preferred Stock before any amounts may be
distributed to the holders of Class 1 or Class 2 common stock.
No dividends may be paid to the holders of Class 1 and Class 2 common stock
until all outstanding dividends are paid on the Series A Preferred Stock. In the
event that the holders of the Series A Preferred Stock elect to convert their
shares into Class 2 common stock, the Company is not required to distribute the
accrued dividends on the Series A Preferred Stock.
At December 31, 1998, the Series A Preferred Stock was increased by $79,000
representing dividends not currently declared or paid. The cost of issuance of
the Series A Preferred Stock of $94,446 is being accreted over a five year
period. Such accretion amounted to $1,572 in the year ended December 31, 1998.
WARRANTS
In connection with the sale of Series A Preferred Stock, the Company issued
warrants for the purchase of 1,250,000 shares of Class 2 common stock at $5.00
per share. The Company has reserved 1,250,000 shares of Class 2 common stock for
the exercise of these warrants. The warrants expire on the earlier of 1) three
years after an IPO by the Company, 2) the closing date of the sale or merger of
the Company, or 3) December 31, 2003.
F-31
<PAGE>
COMPUTERJOBS.COM, INC.
Notes to Financial Statements
December 31, 1998
6. EARNINGS PER SHARE
The following table sets forth the computation of the unaudited pro forma
earnings per common share:
<TABLE>
<CAPTION>
1996 1997 1998
------------------ ------------------ ------------------
NUMERATOR:
<S> <C> <C> <C>
Pro forma net income.............................. $ 66,249 $ 281,156 $ 583,871
Accretion and dividends on Series A Preferred
Stock............................................ -- -- (80,572)
------------------ ------------------ ------------------
Numerator for basic pro forma earnings per common
share - income available to common stockholders..
$ 66,249 $ 281,156 $ 503,299
================== ================== ==================
DENOMINATOR:
Denominator for basic pro forma earning per
common share - weighted average shares........... 5,500,000 5,500,000 5,500,000
================== ================== ==================
Basic pro forma earnings per common share.......... $ 0.01 $ 0.05 $ 0.09
================== ================== ==================
</TABLE>
Series A Preferred Stock, which is convertible into Class 2 common stock
and was outstanding during 1998 (issued on November 25, 1998), and common shares
issuable upon the exercise of warrants were not included in the computation of
pro forma earnings per share because their effect would be anti-dilutive.
7. EMPLOYEE BENEFITS
On January 1, 1998, the Company established a 401(k) plan that covers
substantially all employees. The Company contributed $26,965 to the 401(k) plan
in 1998.
In 1997, the Company sponsored a simplified employee pension plan under
section 408(k) of the Internal Revenue Code. The plan provides discretionary
contributions in each calendar year to the individual retirement accounts of all
eligible employees. Full time employees with more than a year of service are
eligible to participate. Total contributions by the Company totaled $42,119 for
the year ended December 31, 1997. The 408(k) Plan was terminated upon the
establishment of the 401(k) Plan.
8. LEASE COMMITMENTS
During December 1998, the Company entered into a five year operating lease
for office space. This lease agreement provides for rent escalation clauses to
cover increases in certain of the lessors' operating costs. Rental expense
totaled $11,630, $30,646 and $92,217 for the period from January 16, 1996
through December 31, 1996 and for the years ended December 31, 1997 and 1998,
respectively. Future minimum rental payments (excluding any estimate of
operating costs) under noncancelable operating leases with terms of one year or
more at December 31, 1998 are $360,679 in 1999, $327,043 in 2000, $320,254 in
2001, $320,254 in 2002 and $320,254 in 2003.
9. RELATED PARTY TRANSACTIONS
On November 2, 1998, the Company declared a $2,000,000 dividend payable to
the stockholders. During 1998, $1,000,000 of the dividends were paid. The
Company issued notes to the stockholders for the remaining $1,000,000. These
notes accrue interest at the federal funds interest rate and are payable in
February 1999.
F-32
<PAGE>
COMPUTERJOBS.COM, INC.
Notes to Financial Statements
December 31, 1998
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and notes payable
approximates their fair value.
11. YEAR 2000 ISSUE (UNAUDITED)
Year 2000 issues may arise if computer programs have been written using two
digits rather than four digits to define the applicable year. In such cases,
programs that have time sensitive logic may recognize a date using "00" as the
year 1900 rather than the year 2000, which could result in miscalculations or
system failures.
The Company has determined that it will not need to modify or replace
significant portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and beyond. The Company
anticipates that any remaining costs to ensure year 2000 compliance will not be
significant.
Although no formal assessment of the information and operational systems of
its major clients and vendors has been made, the Company is not aware of any
significant problems as a result of the year 2000. However, if the customers and
clients encounter operational problems related to year 2000 and are unable to
resolve such problems in a timely manner, it could result in a material
financial risk to the Company.
F-33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Syncra Software, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in redeemable preferred stock and stockholders'
deficit and of cash flows present fairly, in all material respects, the
financial position of Syncra Software, Inc. (a development stage enterprise) at
December 31, 1998 and the results of its operations and its cash flows for the
period from inception (February 11, 1998) through December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 29, 1999
F-34
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Balance Sheet
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31,
DECEMBER 31, 1998
Assets 1998 (NOTES 2 AND 16)
- ------ ---------------- -----------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents.......................................... $ 1,700,370 $ 11,700,370
Prepaid expenses................................................... 185,506 185,506
Other current assets............................................... 22,704 22,704
----------------- -----------------
Total current assets............................................... 1,908,580 11,908,580
Fixed assets, net................................................... 351,752 351,752
Deposits............................................................ 136,998 136,998
----------------- -----------------
$ 2,397,330 $ 12,397,330
================= =================
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
- -----------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable................................................... $ 233,281 $ 233,281
Accrued expenses................................................... 316,918 300,271
Notes payable to stockholders...................................... 3,926,370 --
----------------- -----------------
Total current liabilities.......................................... 4,476,569 533,552
----------------- -----------------
REDEEMABLE PREFERRED STOCK:
Series A redeemable convertible preferred stock, $0.001 par value;
authorized: 2,941,031 shares; issued and outstanding: 2,586,207
shares plus accrued dividends of $334,652 (liquidation value of
$6,334,651)....................................................... 6,334,651 6,334,651
Series B redeemable convertible preferred stock, $0.001 par value;
authorized: 3,737,602 shares; issued and outstanding: 3,537,602
shares (liquidation value of $14,150,408)......................... -- 14,150,408
Preferred stock warrants........................................... 120,000 120,000
Redeemable non-voting, non-convertible preferred stock, $0.001 par
value; authorized: 150,000 shares; issued and outstanding 130,000
shares plus accrued dividends of $94,135 (liquidation value of
$1,389,468)....................................................... 1,389,468 1,389,468
----------------- -----------------
Total redeemable preferred stock................................... 7,844,119 21,994,527
----------------- -----------------
STOCKHOLDERS' DEFICIT:
Common stock, $0.001 par value; 10,000,000 shares authorized;
396,000 shares issued and outstanding at December 31, 1998........ 396 396
Deficit accumulated during the development stage................... (9,923,754) (10,131,145)
----------------- -----------------
Total stockholders' deficit........................................ (9,923,358) (10,130,749)
----------------- -----------------
Commitments and contingencies (Note 14).............................
----------------- -----------------
$ 2,397,330 $ 12,397,330
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-35
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Operations
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(FEBRUARY 11,
1998) THROUGH
DECEMBER 31, 1998
-------------------
COSTS AND EXPENSES:
<S> <C>
Research and development.................................... $ 1,670,803
Selling and marketing....................................... 2,617,460
General and administrative.................................. 1,588,689
Impairment charge for intangible goods...................... 1,312,500
Settlement charge........................................... 1,795,333
-------------------
Loss from operations......................................... (8,984,785)
Interest expense, net........................................ 90,430
-------------------
Net loss..................................................... $(9,075,215)
===================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-36
<PAGE>
SYNCRA SOFTWARE, INC.
(a development stage enterprise)
Statement of Changes in Redeemable Preferred Stock and Stockholders' Deficit
For the period from inception (February 11, 1998) through December 31, 1998
<TABLE>
<CAPTION>
SERIES A
REDEEMABLE REDEEMABLE NON-VOTING
SERIES A REDEEMABLE PREFERRED NON-CONVERTIBLE
PREFERRED STOCK STOCK WARRANTS PREFERRED STOCK
---------------------------------------------------------------------------
CARRYING CARRYING CARRYING
SHARES VALUE VALUE SHARES VALUE
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock
to founders.............
Issuance of Series A
redeemable convertible
preferred stock,
issuance costs of
$170,752................ 2,586,207 $5,999,999
Issuance of redeemable
non-voting,
non-convertible
preferred stock......... 150,000 $1,500,000
Repurchase and
retirement of common
stock...................
Redemption of redeemable
non-voting,
non-convertible
preferred stock......... (20,000) (204,667)
Series A redeemable
convertible preferred
stock warrants.......... $120,000
Accrual of cumulative
dividends on redeemable
preferred stock......... 334,652 94,135
Net loss.................
---------------------------------------------------------------------------
Balance at December 31,
1998.................... 2,586,207 $6,334,651 $120,000 130,000 $1,389,468
===========================================================================
DEFICIT
COMMON STOCK DURING
-------------------------- DEVELOPMENT
SHARES PAR VALUE STAGE TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock
to founders............. 1,396,000 $ 1,396 $ 1,396
Issuance of Series A
redeemable convertible
preferred stock,
issuance costs of
$170,752................ $ (170,752) (170,752)
Issuance of redeemable
non-voting,
non-convertible
preferred stock.........
Repurchase and
retirement of common (1,000,000) (1,000) (249,000) (250,000)
stock...................
Redemption of redeemable
non-voting,
non-convertible
preferred stock.........
Series A redeemable
convertible preferred
stock warrants..........
Accrual of cumulative
dividends on redeemable
preferred stock......... (428,787) (428,787)
Net loss................. (9,075,215) (9,075,215)
------------------------------------------------------------
Balance at December 31,
1998.................... 396,000 $ 396 $(9,923,754) $(9,923,358)
============================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-37
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Cash Flows
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(FEBRUARY 11,
1998) THROUGH
DECEMBER 31, 1998
-------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss..................................................... $(9,075,215)
Adjustments to reconcile net loss to net cash used for
operating activities:.......................................
Depreciation................................................ 58,537
Amortization and impairment of intangible assets............ 1,500,000
Amortization of discounts on notes payable.................. 46,370
Changes in assets and liabilities:
Prepaid expenses.......................................... (185,506)
Other current assets...................................... (22,704)
Accounts payable.......................................... 233,281
Accrued expenses.......................................... 316,918
-------------------
Net cash used for operating activities.................... (7,128,319)
-------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets.................................... (410,289)
Increase in deposits......................................... (136,998)
-------------------
Net cash used for investing activities.................... (547,287)
-------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholders...... 4,000,000
Proceeds from Series A redeemable convertible preferred
stock, net of issuance costs................................ 5,829,247
Proceeds from issuance of common stock....................... 1,396
Redemption of non-voting, non convertible redeemable
preferred stock and related dividends....................... (204,667)
Repurchase of common stock................................... (250,000)
-------------------
Net cash provided by financing activities................... 9,375,976
-------------------
Net increase in cash and cash equivalents.................... 1,700,370
Cash and cash equivalents, beginning of period............... --
-------------------
Cash and cash equivalents, end of period..................... $ 1,700,370
===================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Software acquired in exchange for 150,000 shares of
non-voting, non-convertible redeemable preferred............ $ 1,500,000
===================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-38
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
1. NATURE OF THE BUSINESS
Syncra Software, Inc. ("Syncra" or "the Company") was incorporated in
Delaware on February 11, 1998. Syncra was formed to design, develop, produce and
market supply chain collaboration software and solutions. Since its inception,
Syncra has devoted substantially all of its efforts to business planning,
research and development, recruiting management and technical staff, acquiring
operating assets, raising capital, marketing and business development.
Accordingly, Syncra is considered to be in the development stage as defined in
Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting and
Reporting by Development Stage Enterprise".
Syncra is subject to risks and uncertainties common to growing technology-
based companies, including rapid technological changes, growth and commercial
acceptances of the Internet, dependence on principal products and third party
technology, new product development and performance, new product introductions
and other activities of competitors, dependence on key personnel, development of
a distribution channel, international expansion, lengthy sales cycles and
limited operating history.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Syncra considers all highly liquid instruments with an original maturity of
three months or less at the time of purchase to be cash equivalents. Included in
cash and cash equivalents at December 31, 1998 is approximately $1.6 million in
money market accounts.
FINANCIAL INSTRUMENTS
The carrying amount of Syncra's financial instruments, principally cash,
notes payable, and redeemable preferred stock, approximates their fair values at
December 31, 1998.
FIXED ASSETS
Fixed assets are recorded at cost and depreciated using the straight-line
method over their estimated useful lives. Repairs and maintenance costs are
expensed as incurred.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Costs incurred in the research and development of Syncra's products are
expensed as incurred, except for certain research and development costs. Costs
associated with the development of computer software are expensed prior to the
establishment of technological feasibility, as defined by SFAS No. 86,
"Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise
Marketed." Costs incurred subsequent to the establishment of technological
feasibility and prior to the general release of the products are capitalized.
During the period ended December 31, 1998, costs eligible for capitalization
were immaterial.
ACCOUNTING FOR IMPAIRMENT OF LONG LIVED ASSETS
In accordance with SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"), the
Company records impairment of losses on long lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.
STOCK-BASED COMPENSATION
Syncra accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of Syncra's Common Stock at the date of grant. Syncra has adopted
the provisions of SFAS No. 123, " Accounting for Stock-Based Compensation",
F-39
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
through disclosure only (Note 11). All stock-based awards to non-employees are
accounted for at their fair value in accordance with SFAS No. 123.
PRO FORMA BALANCE SHEET
The pro forma balance sheet as of December 31, 1998, reflects the issuance
of 3,537,602 shares of convertible Series B Preferred Stock (the "Series B
Preferred Stock") (Note 16) in 1999. Upon issuance of the convertible Series B
Preferred Stock, the Company effected the conversion of the notes payable to
stockholders plus accrued interest of $4,150,408 and received cash proceeds of
$10.0 million from existing and new investors.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
3. PREPAID EXPENSES
Prepaid expenses consist of the following at December 31, 1998:
<TABLE>
<S> <C>
Trade shows and other marketing prepayments............. $135,774
Others....................................................... 49,732
-------------------
$185,506
===================
</TABLE>
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIFE 1998
(YEARS)
----------------- -----------------
<S> <C> <C>
Computer equipment............................................... 3 $246,631
Office equipment................................................. 5 71,783
Furniture and fixtures........................................... 7 91,875
-----------------
410,289
Less: accumulated depreciation...................................... 58,537
-----------------
$351,752
=================
</TABLE>
5. IMPAIRMENT OF INTANGIBLE ASSETS
In accordance with SFAS No. 121, Syncra reviews for impairment of long-
lived assets when events or changes in circumstances indicate that an asset's
carrying value may not be recoverable. In connection with the organization of
Syncra in February 1998, Syncra purchased the rights to certain software from
Benchmarking Partners, Inc. ("Benchmarking") in exchange for the issuance of
150,000 shares of Syncra's non-voting, non-convertible Redeemable Preferred
Stock (Note 8) with an aggregate value of $1.5 million. Syncra expected to use
the acquired software as a core technology in its product development. In May
1998, management reassessed the status of Syncra's product development and the
additional features and functionality planned to be included in Syncra's
products. As a result of this re-evaluation, management concluded that the core
technology acquired from Benchmarking would not be able to support Syncra's
planned products. Accordingly, management decided to
F-40
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
restart Syncra's product development activities without the use of the acquired
software. An impairment charge of $1,312,500 was recognized in the 1998
statement of operations.
6. NOTES PAYABLE TO STOCKHOLDERS
During 1998, the Company received aggregate cash proceeds totaling
$4,000,000 pursuant to the issuance of convertible promissory notes (the
"Notes") payable to certain of its stockholders. No repayments of principal or
interest (which accrues at a rate of 9% per annum) were made during the year.
The Note holders were also issued warrants to purchase preferred stock (`the
Preferred Stock Warrants"). The aggregate value of the warrants issued to all
Note holders was estimated to be $120,000, which was accounted for as discount
on the Notes and Preferred Stock Warrants. The discount is being amortized over
the term of the Notes. The Preferred Stock Warrants have a term of ten years.
Each Note holder is entitled to a number of the securities to be issued in the
Company's next financing equal to 20% of the face value of the Note held by such
holder divided by the price per share of such securities. As a result of the
Series B financing in 1999 (Note 16), the warrant holders are now entitled to
purchase 200,000 shares of Series B Preferred Stock at $4.00 per share.
7. REDEEMABLE CONVERTIBLE SERIES A PREFERRED STOCK
At December 31, 1998, the Company has authorized preferred stock of
5,000,000 shares, $.001 par value per share, of which 2,941,031 shares were
designated as redeemable convertible Series A Preferred Stock ("Series A
Preferred Stock") and 150,000 shares of which were designated as Redeemable
Preferred Stock (the "Redeemable Preferred Stock").
The Series A Preferred Stock has the following characteristics:
VOTING
Holders of Series A Preferred Stock are entitled to that number of votes
equal to the number of shares of common stock into which the shares of Series A
Preferred Stock are then convertible.
DIVIDENDS
Holders of Series A Preferred Stock are entitled to receive out of funds
legally available, cumulative dividends at the rate of 8% per share per annum on
the Base Amount of each share when, as, and if declared by the Board of
Directors. The Base Amount of each share is equal to the price paid for each
share of Series A Preferred Stock ($2.32) plus unpaid dividends which accrue
commencing on the date of original issuance of the Series A Preferred Stock. In
the event that the full amount of dividends is not paid in any twelve-month
period, the Base Amount will be increased by the amount of the unpaid dividend.
LIQUIDATION
In the event of any liquidation, dissolution or winding-up of the affairs
of the Company, the holders of Series A Preferred Stock are entitled to receive,
prior to and in preference to holders of both Redeemable Preferred Stock and
common stock, an amount equal to $2.32 per share plus all unpaid cumulative
dividends. After full payment of (i) the foregoing amounts and (ii) amounts to
be paid to the holders of Redeemable Preferred Stock pursuant to the terms
thereof (see Note 8), holders of Series A Preferred Stock were, as of December
31, 1998, entitled to share ratably in the remaining proceeds of the Company, if
any, on an as-converted basis.
CONVERSION
Each share of Series A Preferred Stock may be converted at any time, at the
option of the stockholder, into one share of common stock, subject to certain
anti-dilution adjustments, as defined in the terms of the Series A Preferred
Stock.
F-41
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
The Series A Preferred Stock will automatically convert into shares of
common stock upon (i) a public offering which results in net proceeds to Syncra
of at least $10,000,000, at a price per share of the Common Stock of at least
$9.28 or (ii) upon approval of the two-thirds of the outstanding Series A
preferred stockholders to convert all outstanding shares of Series A Preferred
Stock to Common Stock.
REDEMPTION
Any time after the fifth anniversary of the original issuance of the Series
A Preferred Stock, at the option of the holder thereof, Syncra shall redeem all,
but not less than all of such holder's shares of Series A Preferred Stock, at a
redemption price equal to the original purchase price of $2.32 per share plus
all unpaid dividends thereon which have accrued through and including the
redemption date.
ACCRETION
The issuance cost incurred by the Company was accreted in full in 1998 as
an adjustment to the carrying value of redeemable convertible Series A Preferred
Stock.
8. NON-VOTING, NON-CONVERTIBLE REDEEMABLE PREFERRED STOCK
As described in Note 5, Syncra's Redeemable Preferred Stock was issued in a
non-cash exchange with Benchmarking for certain software. Subsequent to the
issuance of the Redeemable Preferred Stock to Benchmarking, Syncra repurchased
20,000 shares of its Redeemable Preferred Stock from Benchmarking at a price per
share of $10.00 plus accrued dividends of $4,667. In a separate transaction,
Benchmarking transferred the remaining 130,000 shares of the Redeemable
Preferred Stock to Internet Capital Group, Inc. ("ICG"), an existing stockholder
of Syncra in exchange for a $1.3 million note, bearing interest at 8% per annum.
At December 31, 1998, ICG continued to hold the 130,000 shares of Redeemable
Preferred Stock. ICG is also a stockholder of Benchmarking.
The Redeemable Preferred Stock has the following characteristics:
VOTING
Except as required by law, holders of Redeemable Preferred Stock are not
entitled to vote on any matters submitted to a vote of the stockholders of
Syncra, including the election of directors.
DIVIDENDS
Holders of Redeemable Preferred Stock are entitled to receive out of funds
legally available, cumulative dividends at the rate of 8% per share per annum on
the Base Amount of each share when, as and if declared by the Board of
Directors. The Base Amount of each share is equal to purchase price paid for
such share of Redeemable Preferred Stock ($10.00) plus unpaid dividends which
accrue commencing on the date of original issuance of the Redeemable Preferred
Stock. In the event that the full amount of dividends is not paid in any twelve-
month period, the Base Amount will be increased by the amount of the unpaid
dividend.
LIQUIDATION
In the event of any liquidation, dissolution or winding-up of the affairs
of Syncra, the holders of Redeemable Preferred Stock are entitled to receive,
prior to and in preference to any holders of Common Stock, but after all
distribution or payments required to be made to the holders of Series A
Preferred Stock, an amount equal to $10.00 per share plus accrued but unpaid
dividends. After payment in full of the amounts owed to holders of the
Redeemable Preferred Stock, such holders are not entitled to share in the
distribution of the remaining assets of Syncra.
F-42
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
REDEMPTION
At any time after the fifth anniversary of the original issuance of the
Redeemable Preferred Stock, each holder may require Syncra to redeem all or any
portion of such holder's shares at a redemption price equal to the original
issuance price per share ($10.00) plus all unpaid dividends thereon which have
accrued through and including the redemption date.
At any time, and from time to time, Syncra may elect to redeem all, or any
portion of the outstanding shares of its Redeemable Preferred Stock, at a
redemption price equal to the original issuance price per share ($10.00) plus
all unpaid dividends thereon which have accrued through and including the
redemption date.
Redeemable Preferred Stock is also redeemable by Syncra upon the earlier of
(i) a public offering of Syncra's common stock with a per share price of at
least $7.86; or (ii) the consummation of a sale of all or substantially all of
Syncra's assets or capital stock, either through a direct sale, merger,
reorganization or other form of business combination in which control of Syncra
is transferred and as a result holders of Series A Preferred Stock receive at
least $7.86 per share.
9. COMMON STOCK
Each share of Common Stock entitles the holder to one vote on all matters
submitted to a vote of Syncra's stockholders. Common stockholders are entitled
to receive dividends, if any, as may be declared by the Board of Directors,
subject to the preferential dividend rights of the holders of the Series A
Preferred Stock and the Redeemable Preferred Stock.
RESTRICTED STOCK AGREEMENTS
Syncra has entered into agreements with certain of its stockholders
providing for restrictions on transfers of the shares subject to such agreement.
Each agreement provides Syncra with a right to repurchase the shares held by
such individual, in the event that the Company terminates the employment of the
individual. The number of shares which may be repurchased by the Company and the
price at which such shares may be repurchased differs per individual and is
contingent on whether such individual's termination is for `cause' (as defined
in the agreement) or other than for `cause'. At December 31, 1998, none of the
restricted shares were subject to repurchase due to the restrictions contained
in these agreements.
At December 31, 1998, all of the outstanding capital stock (including the
Common Stock, Series A Preferred Stock and Redeemable Preferred Stock) of the
Company is subject to certain restrictions as to sale or transfer of such
shares. The Company and its non-founder stockholders also maintain a right of
first refusal, under certain circumstances, on shares offered by a stockholder
for sale to third parties, at the price per share to be paid by such third
party.
RESERVED SHARES
At December 31, 1998, 2,833,857 shares were reserved for issuance upon
conversion of the Series A Preferred Stock and exercise of outstanding options.
10. REPURCHASE OF COMMON STOCK AND REDEMPTION OF PREFERRED STOCK
On June 5, 1998, the Company repurchased 1,000,000 shares of Common Stock
and redeemed 20,000 shares of its Redeemable Preferred Stock from Benchmarking,
one of the original founders in exchange for $2,250,000. The transaction was
financed through the sale of additional Series A Preferred Stock to certain of
the existing holders of Series A Preferred Stock. Of the 150,000 shares of
Redeemable Preferred Stock originally issued to Benchmarking, the remaining
130,000 shares were transferred by Benchmarking to ICG (see Note 8).
In addition to the shares acquired, the withdrawal of Benchmarking as a
stockholder eliminated a potential conflict of interest for Syncra and its other
stockholders with Benchmarking and its customers. The
F-43
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
transaction also settled potential claims by Benchmarking against Syncra with
respect to the transfer of technical talent from Benchmarking to Syncra and
other potential claims by Benchmarking against the potential future value of
Syncra.
The difference between the total amount paid to Benchmarking and the
aggregate of the redemption value of the Redeemable Preferred Stock plus accrued
dividends of $204,667 and the fair value of the Common Stock of $250,000 was
treated as settlement charge in the statement of operations.
11. STOCK OPTION PLAN
In 1998, the Company adopted the 1998 Stock Option Plan (the "1998 Plan")
which provides for the grant of incentive stock options and non-qualified stock
options, stock awards and stock purchase rights for the purchase of up to
1,000,000 shares of the Company's Common Stock by officers, employees,
consultants, and directors of the Company. The Board of Directors is responsible
for administration of the 1998 Plan. The Board determines the term of each
option, the option exercise price, the number of shares for which each option is
granted, the rate at which each option is exercisable and the vesting period
(generally ratably over four to five years). Incentive stock options may be
granted to any officer or employee at an exercise price of not less than the
fair value per common share on the date of the grant (not less than 110% of the
fair value in the case of holders of more than 10% of the Company's voting
stock) and with a term not to exceed ten years from the date of the grant (five
years for incentive stock options granted to holders of more than 10% of the
Company's voting stock). Non-qualified stock options may be granted to any
officer, employee, consultant, or director at an exercise price per share of not
less than the book value per share.
No compensation expense has been recognized for employee stock-based
compensation in 1998 because the fair value of the options did not exceed the
exercise price. Further, options vest over several years and additional option
grants are expected to be made in future years. Had compensation expense been
determined based on the fair value of the of the options granted to employees at
the grant date consistent with the provision of SFAS 123, the Company's net loss
would have been the same.
For purposes of pro forma disclosure of net loss, the fair value of each
option grant was estimated on the date of grant using the Black-Scholes option-
pricing model with the following assumptions for grants in 1998; zero dividend
yield; zero volatility; risk-free interest rate of 4.55%, and expected life of
five years.
During the period, Syncra granted options aggregating 803,300 shares with a
weighted average exercise price of $0.87 per share. Of the total options
granted, 99,374 shares were exercisable at December 31, 1998 but none of these
vested options were exercised during the period. Options totaling 196,700 were
available for future grant at December 31, 1998. The weighted-average remaining
contractual life of the options is 9.5 years. Further, since the exercise price
of the options is more than the fair market value of the common stock, the
weighted average fair value per share of the options granted during the year
using the Black-Scholes option-pricing model is zero at December 31, 1998.
F-44
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
12. INCOME TAXES
Deferred tax assets consist of the following at December 31, 1998:
<TABLE>
<S> <C>
Net operating loss carryforward..................... $2,386,619
Fixed and intangible assets......................... 482,690
Research and development credit carryforwards....... 90,891
Accrued vacation.................................... 35,687
-------------------
Net deferred tax assets...................................... 2,995,887
Deferred tax asset valuation allowance....................... 2,995,887
-------------------
$ --
===================
</TABLE>
The Company has provided a valuation allowance for the full amount of its
net deferred tax assets since realization of any future benefit from deductible
temporary differences and net operating loss and tax credit carryforwards cannot
be sufficiently assured at December 31, 1998.
At December 31, 1998, the Company has federal and state net operating loss
carryforwards of approximately $5.9 million available to reduce future taxable
income, which will expire in 2019. The Company also has federal and state
research and development tax credit carryforwards of approximately $72,490 and
$27,881, respectively, available to reduce future tax liabilities.
Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may limit the amount of net operating loss
carryforwards and research and development credit carryforwards which could be
utilized annually to offset future taxable income and taxes payable.
13. 401(K) SAVINGS PLAN
The Company has established a retirement savings plan under Section 401(k)
of the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers
substantially all employees of the Company who meet minimum age and service
requirements, and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Company contributions to the 401(k) Plan may be
made at the discretion of the Board of Directors. The Company has not made any
contributions to the 401(k) Plan through December 31, 1998.
14. COMMITMENTS AND CONTINGENCIES
The Company leases its office space and certain office equipment under
noncancelable operating leases. Total rent expense under these operating leases
was approximately $134,000 for the period ended December 31, 1998.
Future minimum lease commitments at December 31, 1998 are as follows:
YEAR ENDING DECEMBER 31, Operating leases
-------------------
1999........................................................ $ 272,328
2000........................................................ 254,728
2001........................................................ 254,728
2002........................................................ 254,728
Thereafter.................................................. 127,364
-------------------
$1,163,876
===================
F-45
<PAGE>
SYNCRA SOFTWARE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
15. RELATED PARTY TRANSACTIONS
In the normal course of business, Syncra had transactions with Benchmarking
during the period from inception until May 1998 for certain operating expenses
such as organizational costs, payroll, marketing, legal and other expenses. The
total expenses reimbursed by Syncra to Benchmarking amounted to $496,344.
Furthermore, Syncra also paid Benchmarking a management fee totaling $80,000
during the same period.
In addition to the above transactions, Syncra also reimbursed ICG $500,000
related to professional services provided by Benchmarking to Syncra that
originally were funded by ICG.
16. SUBSEQUENT EVENTS
In March and April 1999, 3,737,602 shares of convertible Series B Preferred
Stock were authorized. Syncra issued 3,537,602 shares of Series B Preferred
Stock in exchange for net cash proceeds of $10.0 million plus the conversion of
all principal and accrued interest due on the Notes (Note 6) ("the Series B
Financing"). The terms of the Series B Preferred Stock are substantially similar
to Series A Preferred Stock, except that the Base Amount of the Series B
Preferred Stock and its purchase price are $4.00 per share.
Further, certain terms of both the Series A Preferred Stock (including
conversion rights associated therewith and participating rights upon
liquidation) and the Redeemable Preferred Stock (including redemption rights
associated therewith) were amended in connection with the Series B Financing.
F-46
<PAGE>
================================================================================
Through and including , 1999 (the 25th day after the date
of this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to the unsold allotments
or subscriptions.
Shares
[Internet Capital Group logo appears here]
Common Stock
------------
P R O S P E C T U S
------------
Merrill Lynch & Co.
BancBoston Robertson Stephens
BT Alex. Brown
NationsBanc Montgomery Securities LLC
Wit Capital Corporation
, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The expenses to be paid by Internet Capital Group in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:
<TABLE>
<CAPTION>
Amount (1)
--------------------
<S> <C>
Securities and Exchange Commission Registration Fee..................... $ 73,531
NASD Filing Fee......................................................... 26,950
Nasdaq National Market Listing Fee...................................... 95,000
Accounting Fees and Expenses............................................ 250,000
Blue Sky Fees and Expenses.............................................. 1,000
Legal Fees and Expenses................................................. 450,000
Transfer Agent and Registrar Fees and Expenses.......................... 10,000
Printing and Engraving Expenses......................................... 200,000
Director and Officer Liability Insurance (2)............................ 150,000
Miscellaneous Fees and Expenses......................................... 18,519
--------------------
Total................................................................. $1,275,000
====================
</TABLE>
- ----------------------
(1) All amounts are estimates except the SEC filing fee, the NASD filing fee and
the Nasdaq National Market listing fee.
(2) Represents premiums paid by Internet Capital Group on policies that insure
Internet Capital Group's directors and officers against certain liabilities
they may incur in connection with the registration, offering and sale of the
securities described herein.
Item 14. Indemnification of Directors and Officers
Under Section 145 of the General Corporate Law of the State of Delaware,
Internet Capital Group has broad powers to indemnify its directors and officers
against liabilities they may incur in such capacities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). Internet
Capital Group's bylaws (Exhibit 3.2 hereto) also provide for mandatory
indemnification of its directors and executive officers, and permissive
indemnification of its employees and agents, to the fullest extent permissible
under Delaware law.
Internet Capital Group's certificate of incorporation (Exhibit 3.1 hereto)
provides that the liability of its directors for monetary damages shall be
eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, this includes elimination of liability for monetary damages for
breach of the directors' fiduciary duty of care to Internet Capital Group and
its shareholders. These provisions do not eliminate the directors' duty of care
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to Internet Capital Group, for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations of
law, for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
Prior to the effective date of the Registration Statement, Internet Capital
Group will have entered into agreements with its directors and certain of its
executive officers that require Internet Capital Group to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of Internet Capital Group or any of its affiliated enterprises, provided
such person acted in good faith and in a manner
II-1
<PAGE>
such person reasonably believed to be in or not opposed to the best interests of
Internet Capital Group and, with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
Internet Capital Group intends to obtain in conjunction with the
effectiveness of the Registration Statement a policy of directors' and officers'
liability insurance that insures the Company's directors and officers against
the cost of defense, settlement or payment of a judgment under certain
circumstances.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of Internet Capital
Group and its officers and directors for certain liabilities arising under the
Securities Act or otherwise.
Item 15. Recent Sales of Unregistered Securities
Since its inception in March 1996, Internet Capital Group (or its
predecessor, Internet Capital Group, L.L.C.) has issued and sold unregistered
securities in the transactions described below.
Shares of Common Stock
(1) On May 9, 1996, Internet Capital Group, L.L.C. issued 13,000,000 units
of Membership Interests to Safeguard Scientifics (Delaware), Inc. for
an aggregate purchase price of $13,000,000 consisting of $6,860,926 in
cash and the assignment of 182,500 shares of Common Stock, 127,000
shares of Series C Preferred Stock, 855,400 shares of Series D
Preferred Stock and 134,375 shares of Series F Preferred Stock of Sky
Alland Marketing, Inc. and related rights and obligations in respect
thereof.
(2) In July, 1996, Internet Capital Group, L.L.C. issued an aggregate of
27,000,000 units of Membership Interests to employees, directors,
consultants and other purchasers in a subscription offering for an
aggregate purchase price of $27,000,000.
(3) On September 30, 1996, Internet Capital Group, L.L.C. issued an
aggregate of 4,968,935 units of Membership Profit Interests to
employees, directors and consultants pursuant to the Membership Profit
Interest Plan in consideration for services rendered to Internet
Capital Group, L.L.C.
(4) In December, 1996, Internet Capital Group, L.L.C. issued an aggregate
of 20,000 units if Membership Profit Interests to employees and
consultants pursuant to the Membership Profit Interest Plan in
consideration for services rendered to Internet Capital Group, L.L.C.
(5) In February, 1997, Internet Capital Group, L.L.C. issued an aggregate
of 210,070 units of Membership Profit Interests to employees and
consultants pursuant to the Membership Profit Interest Plan in
consideration for services rendered to Internet Capital Group, L.L.C.
(6) On April 11, 1997, Internet Capital Group, L.L.C. issued 46,783 units
of Membership Interests to Lou Ryan pursuant to the Membership Profit
Interest Plan in consideration for services rendered to Internet
Capital Group, L.L.C.
(7) In September, 1997, Internet Capital Group, L.L.C. issued an aggregate
of 1,209,519 units of Membership Profit Interests to employees and
consultants to the Membership Profit Interest Plan in consideration
for services rendered to Internet Capital Group, L.L.C.
(8) In November, 1997, Internet Capital Group, L.L.C. issued an aggregate
of 115,175 units of Membership Profit Interests to employees and
consultants pursuant to the Membership Profit Interest Plan in
consideration for services rendered to Internet Capital Group, L.L.C.
II-2
<PAGE>
(9) In December, 1997, Internet Capital Group, L.L.C. issued 185,000 units
of Membership Profit Interests to employees and consultants pursuant
to the Membership Profit Interest Plan in consideration for services
rendered to Internet Capital Group, L.L.C.
(10) In March, 1998, Internet Capital Group, L.L.C. issued 250,000 units of
Membership Interests to Mr. Austin Hearst in a subscription offering
for an aggregate purchase price of $500,000.
(11) In April, 1998, Internet Capital Group, L.L.C. issued an aggregate of
125,000 units of Membership Interests to Mr. Britton Murdock, Mr.
Robert E. Keith and Mrs. Margot W. Keith in a subscription offering
for an aggregate purchase price of $250,000.
(12) In May, 1998, Internet Capital Group, L.L.C. issued an aggregate of
1,912,500 units of Membership Interests to employees, consultants and
other purchasers in a subscription offering for an aggregate purchase
price of $3,825,000.
(13) In June, 1998, Internet Capital Group, L.L.C. issued an aggregate of
11,143,750 units of Membership Interests to employees, consultants and
other purchasers in a subscription offering for an aggregate purchase
price of $22,287,500.
(14) In July, 1998, Internet Capital Group, L.L.C. issued an aggregate of
551,250 units of Membership Interests to employees, consultants and
other purchasers in a subscription offering for an aggregate purchase
price of $1,102,500.
(15) In August, 1998, Internet Capital Group, L.L.C. issued an aggregate of
225,000 units of Membership Interests to employees, consultants and
other purchasers in a subscription offering for an aggregate purchase
price of $450,000.
(16) In September, 1998, Internet Capital Group, L.L.C. issued an aggregate
of 1,092,500 units of Membership Interests to employees, consultants
and other purchasers in a subscription offering for an aggregate
purchase price of $2,185,000.
(17) In October, 1998, Internet Capital Group, L.L.C. issued an aggregate
of 3,883,750 units of Membership Interests to employees, consultants
and other purchasers in a subscription offering for an aggregate
purchase price of $7,767,500.
(18) In November, 1998, Internet Capital Group, L.L.C. issued an aggregate
of 76,250 units of Membership Interests to Mr. Roger S. Penske, Jr.,
Mr. Ron Trichon and Mr. T. Richard Butera in a subscription offering
for an aggregate purchase price of $152,500.
(19) In January, 1999, internet Capital Group, L.L.C. issued an aggregate
of 158,750 units of Membership Interests to Mr. Samuel A. Plum, Mrs.
Susan R. Buckley and Dr. Thomas P. Gerrity, a director of Internet
Capital Group, in a subscription offering for an aggregate purchase
price of $317,500.
(20) On February 2, 1999, each unit of the foregoing Membership Interests
and Membership Profit Interests was converted into one share of Common
Stock of Internet Capital Group as a result of the merger of Internet
Capital Group, L.L.C. into Internet Capital Group.
(21) In February, 1999, Internet Capital Group issued an aggregate of
14,706,250 shares of Common Stock to employees, directors, consultants
and other purchasers in a subscription offering for an aggregate
purchase price of $29,412,500.
(22) In March, 1999, Internet Capital Group issued an aggregate of
1,125,000 shares of Common Stock to consultants and other purchasers
in a subscription offering for an aggregate purchase price of
$2,250,000.
Warrants to Purchase Common Stock
On May 10, 1999, in connection with Internet Capital Group's issuance of
the convertible notes, Internet Capital Group granted warrants, exercisable at
the public offering price, to the holders of the convertible notes to purchase a
number shares of common stock of Internet Capital Group equal to $ 18 million
divided by the initial public offering price.
On April 30, 1999, in connection with the Secured Revolving Credit Facility
dated April 30, 1999, between Internet Capital Group, Inc. and certain lenders
and guarantors, Internet Capital Group granted to the lenders warrants to
purchase an aggregate of 200,000 shares of common stock of Internet Capital
Group for a purchase price of $10 per share.
Notes Convertible to Common Stock
On May 10, 1999, Internet Capital Group issued convertible notes in an
aggregate principal amount of $90 million. Upon consummation of this
offering, the convertible notes automatically convert into shares of common
stock of Internet Capital Group at the initial public offering price.
Options to Purchase Common Stock
Internet Capital Group from time to time has granted stock options to
employees, directors, advisory board members and certain employees of our
Partner Companies. The following table sets forth certain information regarding
such grants:
<TABLE>
<CAPTION>
Range of
No. of Shares Exercise Prices
----------------- -----------------
<S> <C> <C>
1996............................................... -- N/A
1997...............................................
1998...............................................
</TABLE>
The sale and issuance of securities in the transactions described above
were exempt from registration under the Securities Act in reliance on Section
4(2) of the Securities Act or Regulation D promulgated thereunder as
transactions by an issuer not involving a public offering, where the purchasers
were sophisticated investors who represented their intention to acquire
securities for investment only and not with a view to distribution and received
or had access to adequate information about the Registrant.
Appropriate restrictive legends were affixed to the stock certificates
issued in the above transactions. Similar legends were imposed in connection
with any subsequent sales of any such securities. No underwriters were employed
in any of the above transactions.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Document
- ------- --------
1.1* Form of Underwriting Agreement
2.1 Agreement of Merger, dated February 2, 1999, between Internet
Capital Group, L.L.C., and Internet Capital Group, Inc.
3.1* Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
4.1 Specimen Certificate for Internet Capital Group's Common Stock
5.1* Opinion of Dechert Price & Rhoads as to the legality of the shares
of Common Stock being registered
10.1 Internet Capital Group, L.L.C. 1998 Equity Compensation Plan
10.1.1 Internet Capital Group, Inc. 1999 Equity Compensation Plan
10.1.2 Internet Capital Group, Inc. 1999 Equity Compensation Plan as
Amended and Restated May 1, 1999
10.2 Internet Capital Group, L.L.C. Option Plan for Non-Employee Managers
10.2.1 Internet Capital Group, Inc. Directors' Option Plan
10.3 Internet Capital Group, L.L.C. Membership Profit Interest Plan
10.4* Internet Capital Group, Inc. Long-Term Incentive Plan
10.5 Amended and Restated Limited Liability Company Agreement of Internet
Capital Group, L.L.C. dated September 30, 1998
10.5.1 Amended and Restated Limited Liability Company Agreement of Internet
Capital Group, L.L.C. dated January 4, 1999
10.6 Securities Holders Agreement dated February 2, 1999 among Internet
Capital Group, Inc. and certain securities holders named therein
10.7 Amended and Restated 1996 Equity Compensation Plan of VerticalNet,
Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1
to the Registration Statement on Form S-1 filed by VerticalNet, Inc.
on January 22, 1999 (Registration No. 333-68053) ("VerticalNet
Amendment No. 1"))
10.8 Employment Letter with Mark L. Walsh (incorporated by reference to
Exhibit 10.2 to Amendment No. 2 to the Registration Statement on
Form S-1 filed by VerticalNet, Inc. on February 8, 1999
(Registration No. 333-68053) ("VerticalNet Amendment No. 2"))
10.9 Employment Letter with Bary E. Wynkoop (incorporated by reference to
Exhibit 10.3 to VerticalNet Amendment No. 2)
10.10 Share Purchase Agreement dated September 1, 1998, between Boulder
Interactive Technology Services Co. and VerticalNet, Inc.
(incorporated by reference to Exhibit 10.4 to VerticalNet Amendment
No. 1)
10.11 Agreement and Plan of Merger dated September 30, 1998, among
VerticalNet, Inc., Informatrix Acquisition Corp., Informatrix
Worldwide, Inc. and the Stockholders of Informatrix Worldwide, Inc.
(incorporated by reference to Exhibit 10.5 to VerticalNet Amendment
No. 2)
10.12 Sponsorship Agreement dated June 30, 1998, between Excite!, Inc. and
VerticalNet, Inc. (incorporated by reference to Exhibit 10.6 to
VerticalNet Amendment No. 1)
10.13 Internet Services Agreement dated as of January 19, 1999 by and
between Compaq Computer Corporation and VerticalNet, Inc.
(incorporated by reference to Exhibit 10.7 to Amendment No. 3 to the
Registration Statement on Form S-1 filed by VerticalNet, Inc. on
February 10, 1999 (Registration No. 333-68053))
10.14 Asset Purchase Agreement dated January 13, 1999 by and among
VerticalNet, Inc., Coastal Video Communications Corp., Paul V.
Michels and Phillip P. Price (incorporated by reference to Exhibit
10.8 to VerticalNet Amendment No. 1)
10.15 Common Stock Purchase Warrant to purchase 40,000 or 60,000 shares of
VerticalNet, Inc. Common Stock dated November 25, 1998 issued to
Progress Capital, Inc. (incorporated by reference to Exhibit 10.9 to
VerticalNet Amendment No. 1)
II-4
<PAGE>
10.16 Form of VerticalNet, Inc. Common Stock Purchase Warrant dated
November 25, 1998 issued in connection with the Convertible Note
(incorporated by reference to Exhibit 10.10 to VerticalNet Amendment
No. 1)
10.17 Form of VerticalNet, Inc. Convertible Note dated November 25, 1998
(incorporated by reference to Exhibit 10.11 to VerticalNet Amendment
No. 1)
10.18 Series A Preferred Stock Purchase Agreement dated as of September
12, 1996 between Internet Capital Group, L.L.C. and Water Online,
Inc. (incorporated by reference to Exhibit 10.12 to VerticalNet
Amendment No. 2)
10.19 Series D Investor Rights Agreement dated as of May 8, 1998 by and
among VerticalNet, Inc. and the Investors (incorporated by reference
to Exhibit 10.13 to VerticalNet Amendment No. 2)
10.20 Registration Rights Agreement dated as of November 25, 1998 between
VerticalNet, Inc. and the Convertible Note Holders (incorporated by
reference to Exhibit 10.14 to VerticalNet Amendment No. 2)
10.21 Form of Internet Capital Group, Inc. Common Stock Purchase Warrant
dated May 10, 1999 issued in connection with the Convertible Note
10.22 Form of Internet Capital Group, Inc. Convertible Note dated May 10,
1999
10.23* Stock Purchase Agreement between Internet Capital Group and
Safeguard Scientifics, Inc.
10.24* Lease between Internet Capital Group and Safeguard Scientifics, Inc.
for premises located in Wayne, Pennsylvania.
10.25 Office Lease dated July 22, 1996 between State Street Bank and
Trust, Internet Capital Group, The Access Fund, Hamilton Lane
Advisors and Martin S. Gans for office space in San Francisco,
California.
10.26 Credit Agreement dated as of April 30, 1999 by and among Internet
Capital Group, Inc., Internet Capital Group Operations, Inc., the
Banks named therein and PNC Bank, N.A.
10.27 Breakaway Solutions, Inc. Option Agreement dated January 6, 1999 by
and between Gordon Brooks and Internet Capital Group, L.L.C.
10.28 Benchmarking Partners, Inc. Option Agreement dated January 1, 1997
by and between Christopher H. Greendale and Internet Capital Group,
L.L.C.
10.29 Syncra Software, Inc. Option Agreement dated August 1, 1998 by and
between Michael H. Forster and Internet Capital Group, L.L.C.
21.1 Subsidiaries of Internet Capital Group
23.1 Consent of KPMG LLP
23.2* Consent of Dechert Price & Rhoads, included in Exhibit 5.1
23.3 Consent of Ernst & Young LLP
23.4 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney, included on the signature page hereof
27.1 Financial Data Schedule
99.1 Form of Letter from Internet Capital Group, Inc. to Safeguard
Scientifics, Inc.'s shareholders describing the Directed Share
Subscription Program
99.2 Form of Letter from Merrill Lynch & Co. to Safeguard Scientifics,
Inc.'s shareholders to accompany the Internet Capital Group, Inc.
letter to Safeguard Scientifics, Inc. shareholders
99.3 Form of Letter from Internet Capital Group, Inc. to Brokers
describing the Directed Share Subscription Program
99.4 Form of Subscription Form for Directed Share Subscription Program
99.5* Information placed by Wit Capital on its Web site regarding Internet
Capital Group, Inc.
- ---------------------------
* To be filed by amendment.
(b) Financial Statement Schedules
None.
II-5
<PAGE>
Schedules other than those listed above have been omitted since they are
not required or are not applicable or the required information is shown in the
financial statements or related notes. Columns omitted from schedules filed have
been omitted since the information is not applicable.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide the underwriters at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania on the 11th day of May, 1999.
INTERNET CAPITAL GROUP, INC.
By: Walter W. Buckley, III
---------------------------
Walter W. Buckley, III
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Walter W. Buckley, III and David D.
Gathman, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and sign
any registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462 promulgated
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ --------------------------------------- ------------------------------
<S> <C> <C>
Walter W. Buckley, III President, Chief Executive Officer and May 11, 1999
- ------------------------------------------ Director
Walter W. Buckley, III (principal executive officer)
David D. Gathman Chief Financial Officer, Secretary and May 11, 1999
- ------------------------------------------ Treasurer
David D. Gathman (principal financial and accounting
officer)
Julian A. Brodsky Director May 11, 1999
- ------------------------------------------
Julian A. Brodsky
E. Michael Forgash Director May 11, 1999
- ------------------------------------------
E. Michael Forgash
Kenneth A. Fox Director May 11, 1999
- ------------------------------------------
Kenneth A. Fox
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Dr. Thomas P. Gerrity Director May 11, 1999
- ------------------------------------------
Dr. Thomas P. Gerrity
Scott Gould Director May 11, 1999
- ------------------------------------------
Scott Gould
Robert E. Keith, Jr. Director May 11, 1999
- ------------------------------------------
Robert E. Keith, Jr.
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document
- ------- --------
1.1* Form of Underwriting Agreement
2.1 Agreement of Merger, dated February 2, 1999, between Internet
Capital Group, L.L.C., and Internet Capital Group, Inc.
3.1* Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
4.1 Specimen Certificate for Internet Capital Group's Common Stock
5.1* Opinion of Dechert Price & Rhoads as to the legality of the shares
of Common Stock being registered
10.1 Internet Capital Group, L.L.C. 1998 Equity Compensation Plan
10.1.1 Internet Capital Group, Inc. 1999 Equity Compensation Plan
10.1.2 Internet Capital Group, Inc. 1999 Equity Compensation Plan as
Amended and Restated May 1, 1999
10.2 Internet Capital Group, L.L.C. Option Plan for Non-Employee Managers
10.2.1 Internet Capital Group, Inc. Directors' Option Plan
10.3 Internet Capital Group, L.L.C. Membership Profit Interest Plan
10.4* Internet Capital Group, Inc. Long-Term Incentive Plan
10.5 Amended and Restated Limited Liability Company Agreement of Internet
Capital Group, L.L.C. dated September 30, 1998
10.5.1 Amended and Restated Limited Liability Company Agreement of Internet
Capital Group, L.L.C. dated January 4, 1999
10.6 Securities Holders Agreement dated February 2, 1999 among Internet
Capital Group, Inc. and certain securities holders named therein
10.7 Amended and Restated 1996 Equity Compensation Plan of VerticalNet,
Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1
to the Registration Statement on Form S-1 filed by VerticalNet, Inc.
on January 22, 1999 (Registration No. 333-68053) ("VerticalNet
Amendment No. 1"))
10.8 Employment Letter with Mark L. Walsh (incorporated by reference to
Exhibit 10.2 to Amendment No. 2 to the Registration Statement on
Form S-1 filed by VerticalNet, Inc. on February 8, 1999
(Registration No. 333-68053) ("VerticalNet Amendment No. 2"))
10.9 Employment Letter with Bary E. Wynkoop (incorporated by reference to
Exhibit 10.3 to VerticalNet Amendment No. 2)
10.10 Share Purchase Agreement dated September 1, 1998, between Boulder
Interactive Technology Services Co. and VerticalNet, Inc.
(incorporated by reference to Exhibit 10.4 to VerticalNet Amendment
No. 1)
10.11 Agreement and Plan of Merger dated September 30, 1998, among
VerticalNet, Inc., Informatrix Acquisition Corp., Informatrix
Worldwide, Inc. and the Stockholders of Informatrix Worldwide, Inc.
(incorporated by reference to Exhibit 10.5 to VerticalNet Amendment
No. 2)
10.12 Sponsorship Agreement dated June 30, 1998, between Excite!, Inc. and
VerticalNet, Inc. (incorporated by reference to Exhibit 10.6 to
VerticalNet Amendment No. 1)
10.13 Internet Services Agreement dated as of January 19, 1999 by and
between Compaq Computer Corporation and VerticalNet, Inc.
(incorporated by reference to Exhibit 10.7 to Amendment No. 3 to the
Registration Statement on Form S-1 filed by VerticalNet, Inc. on
February 10, 1999 (Registration No. 333-68053))
10.14 Asset Purchase Agreement dated January 13, 1999 by and among
VerticalNet, Inc., Coastal Video Communications Corp., Paul V.
Michels and Phillip P. Price (incorporated by reference to Exhibit
10.8 to VerticalNet Amendment No. 1)
10.15 Common Stock Purchase Warrant to purchase 40,000 or 60,000 shares of
VerticalNet, Inc. Common Stock dated November 25, 1998 issued to
Progress Capital, Inc. (incorporated by reference to Exhibit 10.9 to
VerticalNet Amendment No. 1)
II-9
<PAGE>
10.16 Form of VerticalNet, Inc. Common Stock Purchase Warrant dated
November 25, 1998 issued in connection with the Convertible Note
(incorporated by reference to Exhibit 10.10 to VerticalNet Amendment
No. 1)
10.17 Form of VerticalNet, Inc. Convertible Note dated November 25, 1998
(incorporated by reference to Exhibit 10.11 to VerticalNet Amendment
No. 1)
10.18 Series A Preferred Stock Purchase Agreement dated as of September
12, 1996 between Internet Capital Group, L.L.C. and Water Online,
Inc. (incorporated by reference to Exhibit 10.12 to VerticalNet
Amendment No. 2)
10.19 Series D Investor Rights Agreement dated as of May 8, 1998 by and
among VerticalNet, Inc. and the Investors (incorporated by reference
to Exhibit 10.13 to VerticalNet Amendment No. 2)
10.20 Registration Rights Agreement dated as of November 25, 1998 between
VerticalNet, Inc. and the Convertible Note Holders (incorporated by
reference to Exhibit 10.14 to VerticalNet Amendment No. 2)
10.21 Form of Internet Capital Group, Inc. Common Stock Purchase Warrant
dated May , 1999 issued in connection with the Convertible Note
10.22 Form of Internet Capital Group, Inc. Convertible Note dated May 10,
1999
10.23* Stock Purchase Agreement between Internet Capital Group and
Safeguard Scientifics, Inc.
10.24* Lease between Internet Capital Group and Safeguard Scientifics, Inc.
for premises located in Wayne, Pennsylvania.
10.25 Office Lease dated July 22, 1996 between State Street Bank and
Trust, Internet Capital Group, The Access Fund, Hamilton Lane
Advisors and Martin S. Gans for office space in San Francisco,
California.
10.26 Credit Agreement dated as of April 30, 1999 by and among Internet
Capital Group, Inc., Internet Capital Group Operations, Inc., the
Banks named therein and PNC Bank, N.A.
10.27 Breakaway Solutions, Inc. Option Agreement dated January 6, 1999 by
and between Gordon Brooks and Internet Capital Group, L.L.C.
10.28 Benchmarking Partners, Inc. Option Agreement dated January 1, 1997
by and between Christopher H. Greendale and Internet Capital Group,
L.L.C.
10.29 Syncra Software, Inc. Option Agreement dated August 1, 1998 by and
between Michael H. Forster and Internet Capital Group, L.L.C.
21.1 Subsidiaries of Internet Capital Group
23.1 Consent of KPMG LLP
23.2* Consent of Dechert Price & Rhoads, included in Exhibit 5.1
23.3 Consent of Ernst & Young LLP
23.4 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney, included on the signature page hereof
27.1 Financial Data Schedule
99.1 Form of Letter from Internet Capital Group, Inc. to Safeguard
Scientifics, Inc.'s shareholders describing the Directed Share
Subscription Program
99.2 Form of Letter from Merrill Lynch & Co. to Safeguard Scientifics,
Inc.'s shareholders to accompany the Internet Capital Group, Inc.
letter to Safeguard Scientifics, Inc. shareholders
99.3 Form of Letter from Internet Capital Group, Inc. to Brokers
describing the Directed Share Subscription Program
99.4 Form of Subscription Form for Directed Share Subscription Program
99.5* Information placed by Wit Capital on its Web site regarding Internet
Capital Group, Inc.
- ----------------------
* To be filed by amendment.
II-10
<PAGE>
EXHIBIT 2.1
AGREEMENT OF MERGER
-------------------
This is an Agreement of Merger (this "Agreement"), dated February 2,
1999 by and between Internet Capital Group, L.L.C., a Delaware limited liability
company ("ICG-LLC") and Internet Capital Group, Inc., a Delaware corporation
(the "Surviving Corporation").
The parties hereby prescribe the terms and conditions of said merger
and the mode of carrying the same into effect as follows:
1. Capitalized Terms. Capitalized terms used herein without
-----------------
definition shall have the meanings ascribed to such terms in the Amended and
Restated Limited Liability Company Agreement of Internet Capital Group, L.L.C.,
dated as of January 4, 1999 (the "LLC Agreement").
2. Merger of ICG-LLC into Surviving Corporation. On the Effective
--------------------------------------------
Date, ICG-LLC will merge with and into the Surviving Corporation (the "Merger"),
and the existence of ICG-LLC will cease. The Surviving Corporation to the
Merger is and will continue its existence under Delaware law as a corporation.
The name of the Surviving Corporation shall be unchanged.
3. Certificate of Incorporation. On the Effective Date, the
----------------------------
Certificate of Incorporation of the Surviving Corporation (the "Certificate"),
as filed with the Delaware Secretary of State on February 2, 1999, will
thereafter continue to be its Certificate until changed as provided by law.
4. Members. On the Effective Date, the members of ICG-LLC shall
-------
become the stockholders of the Surviving Corporation in accordance with the
terms of the LLC Agreement.
5. Interest in ICG-LLC. The manner and basis of converting
-------------------
Membership Interests, Membership Profit Interest and Options shall be as
follows:
(a) Each share of Membership Interests in ICG-LLC issued and
outstanding immediately prior to the Effective Date shall be converted into and
shall thereafter evidence one-hundredth (1/100th) of a share of Common Stock of
the Surviving Corporation, par value $.001 per share (the "Surviving Corporation
Common Stock").
(b) Each share of Membership Profit Interest in ICG-LLC issued and
outstanding immediately prior to the Effective Date shall be converted into and
shall thereafter evidence one-hundredth (1/100th) of a share of Surviving
Corporation Common Stock. All such shares of Surviving Corporation Common Stock
shall be and remain subject to the terms,
<PAGE>
conditions and restrictions set forth in the Membership Profit Interest Plan
including, without limitation, applicable vesting schedules.
(c) Options to purchase shares of Membership Interests shall be
converted into options to purchase shares of Surviving Corporation Common Stock
so that each Option to purchase one (1) share of Membership Interest shall be
converted into options to purchase one-hundredth (1/100th) of a share of
Surviving Corporation Common Stock ("Surviving Options"). All Surviving Options
shall be and remain subject to the terms, conditions and restrictions set forth
in the plans granting such options including, without limitation, applicable
vesting schedules.
6. Asset and Liabilities. As a result of the Merger, by operation
---------------------
of law and without further act or deed, on the Effective Date, all of the
property, rights, interests and other assets of ICG-LLC will be transferred to
and vested in the Surviving Corporation and the Surviving Corporation will
assume all of the liabilities of ICG-LLC. The capital call approved by the
Managers of ICG-LLC on January 15, 1999 and due on February 24, 1999 (the
"Capital Call") shall remain effective, shall inure to the benefit of the
Surviving Corporation, and shall be payable to the Surviving Corporation in
accordance with the notice of such Capital Call issued by ICG-LLC on January 22,
1999 and otherwise in accordance with the LLC Agreement. Shares of Surviving
Corporation Common Stock issuable in accordance with Section 5 of this Agreement
shall be issuable only upon a Member's satisfaction with such Capital Call
applicable to such Member. Failure to contribute all or any portion of such
Capital Call applicable to such Member on or before February 24, 1999 shall
result in forfeiture of such Member's Membership Interests and the shares of
Surviving Corporation Common Stock into which such Membership Interest shall be
converted, all in accordance with Section 4.3 of the LLC Agreement and this
Agreement.
7. Registration Rights. On the Effective Date, the Surviving
-------------------
Corporation shall assume the obligation to register each Strategic Partner's
equity interest as provided in Exhibit C of the LLC Agreement.
8. Approval, Adoption and Filing. If the Agreement has not been
-----------------------------
terminated pursuant to paragraph 9 hereof, an appropriate Certificate of Merger
will be executed and shall become effective upon filing by the Surviving
Corporation with the Delaware Secretary of State (the "Effective Date"). This
Agreement was adopted in the following manner:
As to Internet Capital Group, L.L.C., by the required majority of the
Members entitled to vote.
As to ICG Capital Group, Inc., by unanimous written consent of the
shareholders.
9. Termination. This Agreement may be terminated and the Merger
-----------
abandoned by the Surviving Corporation or ICG-LLC at any time prior to the
Effective Date.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this duly approved
Agreement to be executed by their respective authorized representatives as of
the day and year first above written.
INTERNET CAPITAL GROUP, L.L.C.
By: /s/ E. Michael Forgash
______________________________
Name: E. Michael Forgash
Title: Manager
ICG CAPITAL GROUP, INC.
By: /s/ Donna M. Lightner
______________________________
Name: Donna M. Lightner
Title: Secretary
-3-
<PAGE>
EXHIBIT 4.1
See Legend on Reverse
CERTIFICATE NO. SHARES
- --------------- --------------
- --------------- --------------
Internet Capital Group, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
Par Value $.001 Per Share
THIS CERTIFIES THAT ___________________________________________ is the owner of
_________________________________________________________________ shares of the
COMMON STOCK of Internet Capital Group, Inc., fully paid and non-assessable,
transferable only on the books of the Corporation in person or by Attorney upon
surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ______________ day of ___________________ A.D. ______.
_____________________________ ________________________
ASSISTANT SECRETARY/SECRETARY VICE PRESIDENT/PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM-as tenants in common UNIF GIFT MIN ACT-.....Custodian.....under
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right Uniform Gifts to Minors Act..........
of survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, ______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint ___________________________________ Attorney to transfer
the said Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated __________________ 19__
In presence of _________________________
_____________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE RIGHTS
AND RESTRICTIONS SET FORTH IN THE COMPANY'S CERTIFICATE OF INCORPORATION, A COPY
OF WHICH CERTIFICATE OF INCORPORATION IS ON FILE WITH THE OFFICE OF THE
SECRETARY OF STATE, STATE OF DELAWARE, AND AT THE PRINCIPAL OFFICE OF THE
COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IS SUBJECT
TO THE TERMS OF SUCH CERTIFICATE OF INCORPORATION AND THE SECURITIES ARE
TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE TERMS AND
CONDITIONS OF A SECURITIES HOLDERS AGREEMENT BY AND AMONG THE COMPANY AND THE
HOLDERS SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF THE
SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE SECURITIES ARE
TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
<PAGE>
EXHIBIT 10.1
INTERNET CAPITAL GROUP, L.L.C.
1998 EQUITY COMPENSATION PLAN
-----------------------------
The purpose of the Internet Capital Group, L.L.C. 1998 Equity Compensation
Plan (the "Plan") is to provide (i) designated employees of Internet Capital
Group, L.L.C. (the "Company") and its subsidiaries, (ii) certain advisors who
perform services for the Company or its subsidiaries and (iii) non-employee
members of the Board of Managers of the Company (the "Board") with the
opportunity to receive grants of incentive stock options, nonqualified options,
unit appreciation rights, restricted units and performance units. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefiting the Company's members, and will
align the economic interests of the participants with those of the members.
1. Administration
--------------
(a) Committee. The Plan shall be administered and interpreted by a
---------
committee appointed by the Board (the "Committee"). Prior to the Company
becoming a "Reporting Company" as described in Section 23(b), the Board may
exercise any power or authority of the Committee under the Plan and, in such
case, references to the Committee hereunder, as they relate to Plan
administration, shall be deemed to include the Board as a whole. After the
Company becomes a Reporting Company, the Committee shall consist of two or more
persons appointed by the Board, all of whom may be "outside directors" as
defined under section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and related Treasury regulations and may be "non-employee
directors" as defined under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) Committee Authority. The Committee shall have the sole authority
-------------------
to (i) determine the individuals to whom grants shall be made under the Plan,
(ii) determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, and (iv)
deal with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
-----------------------
authority to administer and interpret the Plan, to make factual determinations,
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan, and
need not be uniform as to similarly situated individuals.
<PAGE>
2. Grants
------
Awards under the Plan may consist of grants of (1) on or after the Company
becomes a Reporting Company, incentive stock options as described in Section 5
("Incentive Stock Options"), (2) Nonqualified Options as described in Section 5
("Nonqualified Options") (Incentive Stock Options and Nonqualified Options are
collectively referred to as "Options"), (3) restricted units as described in
Section 6 ("Restricted Units"), (4) unit appreciation rights as described in
Section 7 ("UARs"), and (5) performance units as described in Section 8
("Performance Units") (hereinafter collectively referred to as "Grants"). All
Grants shall be subject to the terms and conditions set forth herein and to such
other terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the individual
in a grant instrument (the "Grant Instrument") or an amendment to the Grant
Instrument. The Committee shall approve the form and provisions of each Grant
Instrument. Grants under a particular Section of the Plan need not be uniform
as among the grantees.
3. Units Subject to the Plan
-------------------------
(a) Units Authorized. For purposes of the Plan, a Unit means (i)
----------------
prior to the Company becoming a Reporting Company, one Membership Interest of
the Company and (ii) on and after the Company becomes a Reporting Company, one
or more units of equity interest in the Company as determined pursuant to
Section 3(b). Subject to the adjustment specified below, the aggregate number of
Units of the Company that may be issued or transferred under the Plan is
10,000,000 Units. The maximum aggregate number of Units that shall be subject to
Grants made under the Plan to any individual during any calendar year shall be
2,500,000 Units. The Units may be authorized but unissued Units or reacquired
Units, including Units purchased by the Company on the open market for purposes
of the Plan. If and to the extent Options or UARs granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered without
having been exercised, or if any Restricted Units or Performance Units are
forfeited, the Units subject to such Grants shall again be available for
purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of
-----------
Units outstanding (i) by reason of a dividend, spinoff, recapitalization, split
or combination or exchange of Units, (ii) by reason of a merger, reorganization
or consolidation in which the Company is the surviving corporation, (iii) by
reason of a reclassification or change in par value, (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Units of the Company as
a class without the Company's receipt of consideration, or (v) by reason of the
Company being a Reporting Company, or if the value of outstanding Units is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of Units available
for Grants, the maximum number of Units that any individual participating in the
Plan may be granted in any year, the number of Units covered by outstanding
Grants, the kind of Units issued under the Plan, and the price per Unit or the
applicable market value of such Grants shall be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in the
kind or value of, issued Units to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants; provided,
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<PAGE>
however, that any fractional Units resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
-----------------------------
(a) Eligible Persons. All employees of the Company and its
----------------
subsidiaries ("Employees"), including Employees who are officers or members of
the Board, and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Advisors who perform
services to the Company or any of its subsidiaries ("Key Advisors") shall be
eligible to participate in the Plan if the Key Advisors render bona fide
services and such services are not in connection with the offer or sale of
securities in a capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees,
---------------------
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of Units subject to a particular Grant in such manner as the
Committee determines. Employees, Key Advisors and Non-Employee Directors who
receive Grants under this Plan shall hereinafter be referred to as "Grantees."
5. Granting of Options
-------------------
(a) Number of Units. The Committee shall determine the number of
---------------
Units that will be subject to each Grant of Options to Employees, Non-Employee
Directors and Key Advisors.
(b) Type of Option and Price.
------------------------
(i) On or after the Company becomes a Reporting Company, the
Committee may grant Incentive Stock Options that are intended to qualify as
"incentive stock options" within the meaning of section 422 of the Code or
Nonqualified Options that are not intended so to qualify or any combination of
Incentive Stock Options and Nonqualified Options, all in accordance with the
terms and conditions set forth herein. Incentive Stock Options may be granted
only to Employees. Nonqualified Options may be granted to Employees, Non-
Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Units subject
to an Option shall be determined by the Committee and may be equal to, greater
than, or less than the Fair Market Value (as defined below) of a Unit on the
date the Option is granted; provided, however, that (x) the Exercise Price of an
Incentive Stock Option shall be equal to, or greater than, the Fair Market Value
of a Unit on the date the Incentive Stock Option is granted and (y) an Incentive
Stock Option may not be granted to an Employee who, at the time of grant, owns
Units possessing more than 10 percent of the total combined voting power of all
Units and other classes of stock of the Company or any parent or subsidiary of
the Company, unless the Exercise Price per Unit is not less than 110% of the
Fair Market Value of a Unit on the date of grant.
-3-
<PAGE>
(iii) If the Units are publicly traded, then the Fair Market
Value per Unit shall be determined as follows: (x) if the principal trading
market for the Units is a national securities exchange or the Nasdaq National
Market, the last reported sale price thereof on the relevant date or (if there
were no trades on that date) the latest preceding date upon which a sale was
reported, or (y) if the Units are not principally traded on such exchange or
market, the mean between the last reported "bid" and "asked" prices of a Unit on
the relevant date, as reported on Nasdaq or, if not so reported, as reported by
the National Daily Quotation Bureau, Inc. or as reported in a customary
financial reporting service, as applicable and as the Committee determines. If
the Units are not publicly traded or, if publicly traded, are not subject to
reported transactions or "bid" or "asked" quotations as set forth above, the
Fair Market Value per Unit shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each
-----------
Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who,
at the time of grant, owns Units possessing more than 10 percent of the total
combined voting power of all Units and other classes of stock of the Company, or
any parent or subsidiary of the Company, may not have a term that exceeds five
years from the date of grant.
(d) Exercisability of Options.
-------------------------
(i) Options shall become exercisable in accordance with such
terms and conditions, consistent with the Plan, as may be determined by the
Committee and specified in the Grant Instrument or an amendment to the Grant
Instrument. The Committee may accelerate the exercisability of any or all
outstanding Options at any time for any reason.
(ii) Notwithstanding the foregoing, the Option may, but need
not, include a provision whereby the Grantee may elect at any time while an
Employee, Non-Employee Director or Key Advisor to exercise the Option as to any
part or all of the Units subject to the Option prior to the full vesting of the
Option. Any unvested Units so purchased shall be subject to a repurchase right
in favor of the Company, with the repurchase price to be equal to the lesser of
(x) the original purchase price or (y) the Fair Market Value of the Units, or to
any other restriction the Committee determines to be appropriate.
(e) Termination of Employment, Disability or Death.
----------------------------------------------
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by the Company as an Employee, Key Advisor or
member of the Board. In the event that a Grantee ceases to be employed by the
Company for any reason other than "disability," death or "termination for
cause," any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the
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<PAGE>
Grantee's Options that are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by the
Company on account of a "termination for cause" by the Company, any Option held
by the Grantee shall terminate as of the date the Grantee ceases to be employed
by the Company.
(iii) In the event the Grantee ceases to be employed by the
Company because the Grantee is "disabled," any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Any of the
Grantee's Options which are not otherwise exercisable as of the date on which
the Grantee ceases to be employed by the Company shall terminate as of such
date.
(iv) If the Grantee dies while employed by the Company or
within 90 days after the date on which the Grantee ceases to be employed on
account of a termination of employment specified in Section 5(e)(i) above (or
within such other period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(v) For purposes of Sections 5(e), 6, 7, 8 and 13:
(A) "Company," when used in the phrase "employed by the
Company," shall mean the Company and its parent and subsidiary
corporations.
(B) "Employed by the Company" shall mean employment or service
as an Employee, Key Advisor or member of the Board (so that, for purposes
of exercising Options and UARs and satisfying conditions with respect to
Restricted Units and Performance Units, a Grantee shall not be considered
to have terminated employment or service until the Grantee ceases to be an
Employee, Key Advisor and member of the Board), unless the Committee
determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean, except to the extent
specified otherwise by the Committee, a finding by the Committee that (1)
the Grantee has breached his or her employment, service, noncompetition,
nonsolicitation or other similar contract with the Company or its parent
and subsidiary corporations, (2) has been engaged in disloyalty to the
Company or its parent and subsidiary corporations, including, without
-5-
<PAGE>
limitation, fraud, embezzlement, theft, commission of a felony or
dishonesty in the course of his or her employment or service, (3) has
disclosed trade secrets or confidential information of the Company or its
parents and subsidiary corporations to persons not entitled to receive such
information or (4) has entered into competition with the Company or its
parent or Subsidiary Corporations. Notwithstanding the foregoing, if the
Grantee has an employment agreement with the Company defining "termination
for cause," then such definition shall supersede the foregoing definition.
(vi) In the event a Grantee's employment is terminated for cause,
in addition to the immediate termination of all Grants, the Grantee shall
automatically forfeit all Units underlying any exercised portion of an Option
for which the Company has not yet delivered the certificates, upon refund by the
Company of the Exercise Price paid by the Grantee for such Units.
(f) Exercise of Options. A Grantee may exercise an Option that has
-------------------
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) by
delivering Units owned by the Grantee for the period necessary to avoid a charge
to the Company's earnings for financial reporting purposes (including Units
acquired in connection with the exercise of an Option, subject to such
restrictions as the Committee deems appropriate) and having a Fair Market Value
on the date of exercise equal to the Exercise Price, or (z) by such other method
as the Committee may approve, including, after the Company becomes a Reporting
Company, payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board; provided, that, for purpose of
assisting an Optionee to exercise an Option, the Company may make loans to the
Optionee or guarantee loans made by third parties to the Optionee, on such terms
and conditions as the Committee may authorize. Units used to exercise an Option
shall have been held by the Grantee for the requisite period of time to avoid
adverse accounting consequences to the Company with respect to the Option. The
Grantee shall pay the Exercise Price and the amount of any withholding tax due
(pursuant to Section 10) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
---------------------------------
shall provide that, if the aggregate Fair Market Value of the Units on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other equity compensation plan of the Company or a parent or subsidiary, exceeds
$100,000, then the option, as to the excess, shall be treated as a Nonqualified
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code).
-6-
<PAGE>
6. Restricted Unit Grants
----------------------
The Committee may issue or transfer Units to an Employee, Non-Employee
Director or Key Advisor under a Grant of Restricted Units, upon such terms as
the Committee deems appropriate. The following provisions are applicable to
Restricted Units:
(a) General Requirements. Units issued or transferred pursuant to
--------------------
Restricted Unit Grants may be issued or transferred for consideration or for no
consideration, as determined by the Committee. The Committee may establish
conditions under which restrictions on Restricted Units shall lapse over a
period of time or according to such other criteria as the Committee deems
appropriate. The period of time during which the Restricted Units will remain
subject to restrictions will be designated in the Grant Instrument as the
"Restriction Period."
(b) Number of Units. The Committee shall determine the number of
---------------
Restricted Units to be issued or transferred and the restrictions applicable to
such Grant.
(c) Requirement of Employment. If the Grantee ceases to be employed
-------------------------
by the Company (as defined in Section 5(e)(v)(B)) during a period designated in
the Grant Instrument as the Restriction Period, or if other specified conditions
are not met, the Restricted Unit Grant shall terminate as to all Units covered
by the Grant as to which the restrictions have not lapsed, and those Units must
be immediately returned to the Company. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Certificate. During the
--------------------------------------------------
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the Restricted Units except as permitted under Section 11.
Each certificate for Restricted Units shall contain a legend giving appropriate
notice of the restrictions in the Grant. The Grantee shall be entitled to have
the legend removed from the certificate covering the Restricted Units subject to
restrictions when all restrictions on such Units have lapsed. The Committee may
determine that the Company will not issue certificates for Restricted Units
until all restrictions on such Units have lapsed, or that the Company will
retain possession of certificates for Restricted Units until all restrictions on
such Units have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
--------------------------------------
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote Restricted Units and to receive any dividends or other
distributions paid on such Units, subject to any restrictions deemed appropriate
by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
---------------------
Units shall lapse upon the expiration of the applicable Restriction Period and
the satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Unit Grants, that the restrictions shall
lapse without regard to any Restriction Period.
-7-
<PAGE>
7. Unit Appreciation Rights
------------------------
(a) General Requirements. The Committee may grant unit appreciation
--------------------
rights ("UARs") to an Employee, Non-Employee Director or Key Advisor separately
or in tandem with any Option (for all or a portion of the applicable Option).
Tandem UARs may be granted either at the time the Option is granted or at any
time thereafter while the Option remains outstanding; provided, however, that,
in the case of an Incentive Stock Option, UARs may be granted only at the time
of the Grant of the Incentive Stock Option. The Committee shall establish the
base amount of the UAR at the time the UAR is granted. Unless the Committee
determines otherwise, the base amount of each UAR shall be equal to the per Unit
Exercise Price of the related Option or, if there is no related Option, the Fair
Market Value of a Unit as of the date of Grant of the UAR.
(b) Tandem UARs. In the case of tandem UARs, the number of UARs
-----------
granted to a Grantee that shall be exercisable during a specified period shall
not exceed the number of Units that the Grantee may purchase upon the exercise
of the related Option during such period. Upon the exercise of an Option, the
UARs relating to the Units covered by such Option shall terminate. Upon the
exercise of UARs, the related Option shall terminate to the extent of an equal
number of Units.
(c) Exercisability. An UAR shall be exercisable during the period
--------------
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding UARs at
any time for any reason. UARs may only be exercised while the Grantee is
employed by the Company or during the applicable period after termination of
employment as described in Section 5(e). A tandem UAR shall be exercisable only
during the period when the Option to which it is related is also exercisable.
No UAR may be exercised for cash by an executive officer or director of the
Company or any of its subsidiaries who is subject to Section 16 of the Exchange
Act, except in accordance with Rule 16b-3 under the Exchange Act.
(d) Value of UARs. When a Grantee exercises UARs, the Grantee shall
-------------
receive in settlement of such UARs an amount equal to the value of the stock
appreciation for the number of UARs exercised, payable in cash, Units or a
combination thereof. The stock appreciation for a UAR is the amount by which
the Fair Market Value of the underlying Unit on the date of exercise of the UAR
exceeds the base amount of the UAR as described in Subsection (a).
(e) Form of Payment. The Committee shall determine whether the
---------------
appreciation in a UAR shall be paid in the form of cash, Units, or a combination
of the two, in such proportion as the Committee deems appropriate. For purposes
of calculating the number of Units to be received, Units shall be valued at
their Fair Market Value on the date of exercise of the UAR. If Units are to be
received upon exercise of a UAR, cash shall be delivered in lieu of any
fractional Unit.
-8-
<PAGE>
8. Performance Units
-----------------
(a) General Requirements. The Committee may grant performance units
--------------------
("Performance Units") to an Employee or Key Advisor. Each Performance Unit
shall represent the right of the Grantee to receive an amount based on the value
of the Performance Unit, if performance goals established by the Committee are
met. A Performance Unit shall be based on the Fair Market Value of a Unit or on
such other measurement base as the Committee deems appropriate. The Committee
shall determine the number of Performance Units to be granted and the
requirements applicable to such Units.
(b) Performance Period and Performance Goals. When Performance Units
----------------------------------------
are granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to the Units ("Performance Goals"), and such other conditions of the
Grant as the Committee deems appropriate. Performance Goals may relate to the
financial performance of the Company or its operating units, the performance of
Units, individual performance, or such other criteria as the Committee deems
appropriate.
(c) Payment with respect to Performance Units. At the end of each
-----------------------------------------
Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Units have been met and the
amount, if any, to be paid with respect to the Performance Units. Payments with
respect to Performance Units shall be made in cash, in Units, or in a
combination of the two, as determined by the Committee.
(d) Requirement of Employment. If the Grantee ceases to be employed
-------------------------
by the Company (as defined in Section 5(e)(v)(B)) during a Performance Period,
or if other conditions established by the Committee are not met, the Grantee's
Performance Units shall be forfeited. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
9. Qualified Performance-Based Compensation.
----------------------------------------
(a) Designation as Qualified Performance-Based Compensation. The
-------------------------------------------------------
Committee may determine that Performance Units or Restricted Units granted to an
Employee shall be considered "qualified performance-based compensation" under
section 162(m) of the Code. The provisions of this Section 9 shall apply to
Grants of Performance Units and Restricted Units that are to be considered
"qualified performance-based compensation" under section 162(m) of the Code.
(b) Performance Goals. When Performance Units or Restricted Units
-----------------
that are to be considered "qualified performance-based compensation" are
granted, the Committee shall establish in writing (i) the objective performance
goals that must be met in order for restrictions on the Restricted Units to
lapse or amounts to be paid under the Performance Units, (ii) the Performance
Period during which the performance goals must be met, (iii) the threshold,
target and maximum amounts that may be paid if the performance goals are met,
and (iv) any other
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<PAGE>
conditions, including without limitation provisions relating to death,
disability, other termination of employment or Reorganization, that the
Committee deems appropriate and consistent with the Plan and section 162(m) of
the Code. The performance goals may relate to the Employee's business unit or
the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall use objectively determinable
performance goals based on one or more of the following criteria: Unit price,
earnings per Unit, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales,
market share, or strategic business criteria consisting of one or more
objectives based on meeting specific revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
----------------------
performance goals in writing either before the beginning of the Performance
Period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the Performance Period or (ii) the date on which 25% of the
Performance Period has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code. The
performance goals shall satisfy the requirements for "qualified performance-
based compensation," including the requirement that the achievement of the goals
be substantially uncertain at the time they are established and that the goals
be established in such a way that a third party with knowledge of the relevant
facts could determine whether and to what extent the performance goals have been
met. The Committee shall not have discretion to increase the amount of
compensation that is payable upon achievement of the designated performance
goals.
(d) Maximum Payment. If Restricted Units, or Performance Units
---------------
measured with respect to the fair market value of the Company's Units, are
granted, not more than 2,500,000 Units may be granted to an Employee under the
Performance Units or Restricted Units for any Performance Period. If
Performance Units are measured with respect to other criteria, the maximum
amount that may be paid to an Employee with respect to a Performance Period is
$2,000,000.
(e) Announcement of Grants. The Committee shall certify and announce
----------------------
the results for each Performance Period to all Grantees immediately following
the announcement of the Company's financial results for the Performance Period.
If and to the extent that the Committee does not certify that the performance
goals have been met, the grants of Restricted Units or Performance Units for the
Performance Period shall be forfeited.
10. Withholding of Taxes
--------------------
(a) Required Withholding. All Grants under the Plan shall be subject
--------------------
to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid
in cash, or from other wages paid to the Grantee, any federal, state or local
taxes required by law to be withheld with respect to such Grants. In the case
of Options and other Grants paid in Units, the Company may require the Grantee
or other person receiving such Units to pay to the Company the amount of any
such taxes that the Company is required to withhold with respect to such Grants,
or the Company may
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<PAGE>
deduct from other wages paid by the Company the amount of any withholding taxes
due with respect to such Grants.
(b) Election to Withhold Units. If the Committee so permits, a
--------------------------
Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option, UAR, Restricted Units or Performance Units paid in
Company Units by having Units withheld up to an amount that does not exceed the
Grantee's maximum marginal tax rate for federal (including FICA), state and
local tax liabilities. The election must be in a form and manner prescribed by
the Committee and shall be subject to the prior approval of the Committee.
11. Transferability of Grants
-------------------------
(a) Except as provided in Section 11(b), only the Grantee may
exercise rights under a Grant during the Grantee's lifetime. A Grantee may not
transfer those rights except by will or by the laws of descent and distribution.
When a Grantee dies, the personal representative or other person entitled to
succeed to the rights of the Grantee ("Successor Grantee") may exercise such
rights. A Successor Grantee must furnish proof satisfactory to the Company of
his or her right to receive the Grant under the Grantee's will or under the
applicable laws of descent and distribution.
(b) Transfer of Nonqualified Options. The Committee may provide, in a
--------------------------------
Grant Instrument, that a Grantee may transfer Nonqualified Options to family
members or other persons or entities according to such terms as the Committee
may determine; provided that the Grantee receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.
12. Right of First Refusal
----------------------
Prior to a Public Offering, as defined in Section 23(c), if at any time an
individual desires to sell, encumber, or otherwise dispose of Units distributed
to him under this Plan, the individual shall first offer the Units to the
Company by giving the Company written notice disclosing: (a) the name of the
proposed transferee of the Units; (b) the certificate number and number of Units
proposed to be transferred or encumbered; (c) the proposed price; (d) all other
terms of the proposed transfer; and (e) a written copy of the proposed offer.
Within 30 days after receipt of such notice, the Company shall have the option
to purchase all or part of such Units at the same price and on the same terms as
contained in such notice.
In the event the Company (or a shareholder, as described below) does not
exercise the option to purchase Units, as provided above, the individual shall
have the right to sell, encumber or otherwise dispose of his Units on the terms
of the transfer set forth in the written notice to the Company, provided such
transfer is effected within 30 days after the expiration of the option period.
If the transfer is not effected within such period, the Company must again be
given an option to purchase, as provided above.
-11-
<PAGE>
The Board, in its sole discretion, may waive the Company's right of first
refusal pursuant to this Section 12 and the Company's repurchase right pursuant
to Section 13 below. If the Company's right of first refusal or repurchase
right is so waived, the Board may, in its sole discretion, pass through such
right to the remaining members of the Company in the same proportion that each
shareholder's Unit ownership bears to the Unit ownership of all the members of
the Company, as determined by the Board. To the extent that a shareholder has
been given such right and does not purchase his or her allotment, the other
members shall have the right to purchase such allotment on the same basis.
On and after a Public Offering, the Company shall have no further right to
purchase Units under this Section 12 and Section 13 below, and its limitations
shall be null and void.
Notwithstanding the foregoing, the Committee may require that a Grantee
execute a shareholder's agreement, with such terms as the Committee deems
appropriate, with respect to any Unit distributed pursuant to this Plan. Such
agreement may provide that the provisions of this Section 12 and Section 13
below shall not apply to such Units.
13. Purchase by the Company
-----------------------
Unless otherwise determined by the Board or Committee at or after grant, in
the event of the Optionee's termination of employment or performance of services
for the Company, the Company shall have the right to repurchase all Units issued
or to be issued to the Optionee under this Plan at Fair Market Value but not
less than the Optionee's cost. In the event that the Board or Committee
determines in good faith that the Optionee has materially breached any non-
compete or confidentiality agreement with the Company after termination of his
or her status as an Employee or Consultant, the price at which the Company shall
have the right to repurchase such Units shall be equal to the exercise price or
purchase price paid by the Optionee. Any repurchase shall be made in accordance
with accounting rules to avoid adverse accounting treatment.
The Company's right to repurchase shall be exercisable at any time within
one year after the date of Optionee's termination of employment or performance
of service by the delivery of written notice by the Company to such effect to
the Optionee, his executor, administrator or beneficiaries. Within 30 days
after receipt of such notice, the Optionee, his executor, administrator or
beneficiaries shall deliver a certificate or certificates for the shares being
sold, together with appropriate duly signed stock powers transferring such
shares to the Company, and the Company shall deliver to the Optionee, his
executor, administrator or beneficiaries the Company's check in the amount of
the purchase price for the shares being sold.
14. Reorganization of the Company.
------------------------------
(a) Reorganization. As used herein, a "Reorganization" shall be
---------------
deemed to have occurred if the members of the Company approve (or, if
shareholder approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another corporation
where the members of the Company, immediately prior to the
-12-
<PAGE>
merger or consolidation, will not beneficially own, immediately after the merger
or consolidation, Units entitling such members to more than 50% of all votes to
which all members of the surviving corporation would be entitled in the election
of directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.
(b) Assumption of Grants. Upon a Reorganization where the Company is
--------------------
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
and UARs that are not exercised shall be assumed by, or replaced with comparable
options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, in the event
------------------
of a Reorganization, the Committee may take one or both of the following
actions: the Committee may (i) require that Grantees surrender their outstanding
Options and UARs in exchange for a payment by the Company, in cash or Units as
determined by the Committee, in an amount equal to the amount by which the then
Fair Market Value of the Units subject to the Grantee's unexercised Options and
UARs exceeds the Exercise Price of the Options or the base amount of the UARs,
as applicable, or (ii) after accelerating all vesting and giving Grantees an
opportunity to exercise their outstanding Options and UARs, terminate any or all
unexercised Options and UARs at such time as the Committee deems appropriate.
Such surrender or termination shall take place as of the date of the
Reorganization or such other date as the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Reorganization, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Subsection (b) above) that would make the Reorganization
ineligible for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the Company
intends to use such treatment with respect to the Reorganization.
15. Change of Control of the Company.
---------------------------------
(a) As used herein, a "Change of Control" shall be deemed to have
occurred if:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than Safeguard Scientifics, Inc. or any of its
subsidiaries or affiliates becomes a "beneficial owner" (as defined in Rule 13d-
3 under the Exchange Act), directly or indirectly, of securities of the Company
representing a majority of the voting power of the then outstanding securities
of the Company except where the acquisition is approved by the Board; or
(ii) Any person has commenced a tender offer or exchange offer
for a majority of the voting power of the then outstanding Units of the Company.
(b) Notice and Acceleration. Upon a Change of Control, to the extent
------------------------
the
-13-
<PAGE>
Committee in its sole discretion determines, (i) the Company shall provide
each Grantee with outstanding Grants written notice of such Change of Control,
(ii) all outstanding Options and UARs shall automatically accelerate and become
fully exercisable, (iii) the restrictions and conditions on all outstanding
Restricted Units shall immediately lapse, and (iv) Grantees holding Performance
Units shall receive a payment in settlement of such Performance Units, in an
amount determined by the Committee, based on the Grantee's target payment for
the Performance Period and the portion of the Performance Period that precedes
the Change of Control.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
------------------
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and UARs in exchange for a payment
by the Company, in cash or Units as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the Units subject to
the Grantee's unexercised Options and UARs exceeds the Exercise Price of the
Options or the base amount of the UARs, as applicable, or (ii) after giving
Grantees an opportunity to exercise their outstanding Options and UARs,
terminate any or all unexercised Options and UARs at such time as the Committee
deems appropriate. Such surrender or termination shall take place as of the
date of the Change of Control or such other date as the Committee may specify.
(c) Committee. The Committee making the determinations under this
---------
Section 15 following a Change of Control must be comprised of the same members
as those on the Committee immediately before the Change of Control. If the
Committee members do not meet this requirement, the automatic provisions of
Subsection (b) of this Section shall apply in the case of such a Change of
Control, and the Committee shall not have discretion to vary them.
(d) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
16. Requirements for Issuance or Transfer of Units
----------------------------------------------
(a) Shareholder's Agreement. The Committee may require that a
-----------------------
Grantee execute a shareholder's agreement, with such terms as the Committee
deems appropriate, with respect to any Units distributed pursuant to this Plan.
(b) Limitations on Issuance or Transfer of Units. No Units shall be
--------------------------------------------
issued or transferred in connection with any Grant hereunder unless and until
all legal requirements applicable to the issuance or transfer of such Units have
been complied with to the satisfaction of the Committee. The Committee shall
have the right to condition any Grant made to any Grantee hereunder on such
Grantee's undertaking in writing to comply with such restrictions on his or her
-14-
<PAGE>
subsequent disposition of such Units as the Committee shall deem necessary or
advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such Units may be legended
to reflect any such restrictions. Certificates representing Units issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
17. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any time.
---------
(b) Termination of Plan. The Plan shall terminate on the day
-------------------
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the members.
(c) Termination and Amendment of Outstanding Grants. A termination or
-----------------------------------------------
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents. The termination of
the Plan shall not impair the power and authority of the Committee with respect
to an outstanding Grant. Whether or not the Plan has terminated, an outstanding
Grant may be terminated or amended in accordance with the Plan or may be amended
by agreement of the Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document.
------------------
No other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
18. Funding of the Plan
-------------------
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
19. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Employee, Non-Employee Director, Key
Advisor or other person to any claim or right to be granted a Grant under this
Plan. Neither this Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
20. No Fractional Units
-------------------
No fractional Units shall be issued or delivered pursuant to the Plan or
any Grant. The Committee shall determine whether cash, other awards or other
property shall be issued or paid in
-15-
<PAGE>
lieu of such fractional Units or whether
such fractional Units or any rights thereto shall be forfeited or otherwise
eliminated.
21. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
22. Effective Date of the Plan; Definition of Terms.
-----------------------------------------------
(a) Effective Date. The Plan shall be effective on October 2, 1998.
--------------
(b) Reporting Company. The provisions of the Plan that refer to the
-----------------
Company becoming a Reporting Company, or that refer to, or are applicable to
persons subject to, Section 16 of the Exchange Act or section 162(m) of the
Code, shall be effective, if at all, upon the initial registration of the Units
under Section 12(g) of the Exchange Act, and shall remain effective thereafter
for so long as such Units are so registered.
(c) Public Offering. All references in the Plan to a Public Offering
---------------
shall refer to the consummation of the first registered public offering of Units
of the Company in a firm commitment underwriting.
23. Miscellaneous
-------------
(a) Grants in Connection with Corporate Transactions and Otherwise.
--------------------------------------------------------------
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan; provided, that the total number of Units issuable upon
exercise of all outstanding options shall not exceed 30% of the then outstanding
Units of the Company unless approved by a two-thirds vote of the members.
Without limiting the foregoing, the Committee may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted unit grant made by such corporation. The terms and
conditions of the substitute grants may vary from the terms and conditions
required by the Plan and from those of the substituted stock incentives. The
Committee shall prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and UARs
-------------------
and the obligations of the Company to issue or transfer Units under Grants shall
be subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject to
Section 16 of the Exchange Act, it is the intent of the Company
-16-
<PAGE>
that the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Governing Law. The validity, construction, interpretation and
-------------
effect of the Plan and Grant Instruments issued under the Plan shall exclusively
be governed by and determined in accordance with the law of the State of
Delaware.
-17-
<PAGE>
EXHIBIT 10.1.1
INTERNET CAPITAL GROUP, INC.
1999 EQUITY COMPENSATION PLAN
-----------------------------
The purpose of the Internet Capital Group, Inc. 1999 Equity Compensation
Plan (the "Plan") is to provide (i) designated employees of Internet Capital
Group, Inc. (the "Company") and its subsidiaries, (ii) certain advisors who
perform services for the Company or its subsidiaries and (iii) non-employee
members of the Board of Directors of the Company (the "Board") with the
opportunity to receive grants of incentive stock options, nonqualified options,
share appreciation rights, restricted shares and performance shares. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefiting the Company's shareholders, and
will align the economic interests of the participants with those of the
shareholders.
1. Administration
--------------
(a) Committee. The Plan shall be administered and interpreted by a
---------
committee appointed by the Board (the "Committee"). Prior to the Company
becoming a "Reporting Company" as described in Section 23(b), the Board may
exercise any power or authority of the Committee under the Plan and, in such
case, references to the Committee hereunder, as they relate to Plan
administration, shall be deemed to include the Board as a whole. After the
Company becomes a Reporting Company, the Committee shall consist of two or more
persons appointed by the Board, all of whom may be "outside directors" as
defined under section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and related Treasury regulations and may be "non-employee
directors" as defined under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) Committee Authority. The Committee shall have the sole
-------------------
authority to (i) determine the individuals to whom grants shall be made under
the Plan, (ii) determine the type, size and terms of the grants to be made to
each such individual, (iii) determine the time when the grants will be made and
the duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, and (iv)
deal with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power
------------------------
and authority to administer and interpret the Plan, to make factual
determinations, and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interest in the Plan or in any awards granted hereunder.
All powers of the Committee shall be executed in its sole discretion, in the
best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan, and need not be uniform as to similarly situated
individuals.
<PAGE>
2. Grants
------
Awards under the Plan may consist of grants of (1) incentive stock
options as described in Section 5 ("Incentive Stock Options"), (2) nonqualified
options as described in Section 5 ("Nonqualified Options") (Incentive Stock
Options and Nonqualified Options are collectively referred to as "Options"), (3)
restricted shares as described in Section 6 ("Restricted Shares"), (4) stock
appreciation rights as described in Section 7 ("SARs"), and (5) performance
shares as described in Section 8 ("Performance Shares") (hereinafter
collectively referred to as "Grants"). All Grants shall be subject to the terms
and conditions set forth herein and to such other terms and conditions
consistent with this Plan as the Committee deems appropriate and as are
specified in writing by the Committee to the individual in a grant instrument
(the "Grant Instrument") or an amendment to the Grant Instrument. The Committee
shall approve the form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.
3. Shares Subject to the Plan
--------------------------
(a) Shares Authorized. For purposes of the Plan, a Share means one
-----------------
or more shares of common stock of the Company, par value $.001, as determined
pursuant to Section 3(b). Subject to the adjustment specified below, the
aggregate number of Shares of the Company that may be issued or transferred
under the Plan is 10,000,000 Shares. The maximum aggregate number of Shares that
shall be subject to Grants made under the Plan to any individual during any
calendar year shall be 2,500,000 Shares. The Shares may be authorized but
unissued Shares or reacquired Shares, including Shares purchased by the Company
on the open market for purposes of the Plan. If and to the extent Options or
SARs granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised, or if any Restricted
Shares or Performance Shares are forfeited, the Shares subject to such Grants
shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of
-----------
Shares outstanding (i) by reason of a dividend, spinoff, recapitalization, split
or combination or exchange of Shares, (ii) by reason of a merger, reorganization
or consolidation in which the Company is the surviving corporation, (iii) by
reason of a reclassification or change in par value, (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Shares of the Company
as a class without the Company's receipt of consideration, or (v) by reason of
the Company being a Reporting Company, or if the value of outstanding Shares is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of Shares available
for Grants, the maximum number of Shares that any individual participating in
the Plan may be granted in any year, the number of Shares covered by outstanding
Grants, the kind of Shares issued under the Plan, and the price per Share or the
applicable market value of such Grants shall be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in the
kind or value of, issued Shares to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional Shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
-2-
<PAGE>
4. Eligibility for Participation
-----------------------------
(a) Eligible Persons. All employees of the Company and its
----------------
subsidiaries ("Employees"), including Employees who are officers or members of
the Board, and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Advisors who perform
services to the Company or any of its subsidiaries ("Key Advisors") shall be
eligible to participate in the Plan if the Key Advisors render bona fide
services and such services are not in connection with the offer or sale of
securities in a capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the
---------------------
Employees, Non-Employee Directors and Key Advisors to receive Grants and shall
determine the number of Shares subject to a particular Grant in such manner as
the Committee determines. Employees, Key Advisors and Non-Employee Directors who
receive Grants under this Plan shall hereinafter be referred to as "Grantees."
5. Granting of Options
-------------------
(a) Number of Shares. The Committee shall determine the number of
----------------
Shares that will be subject to each Grant of Options to Employees, Non-Employee
Directors and Key Advisors.
(b) Type of Option and Price.
------------------------
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Options that are not intended so to qualify or
any combination of Incentive Stock Options and Nonqualified Options, all in
accordance with the terms and conditions set forth herein. Incentive Stock
Options may be granted only to Employees. Nonqualified Options may be granted to
Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Shares subject
to an Option shall be determined by the Committee and may be and may be equal
to, greater than, or less than the Fair Market Value (as defined below) of a
Share on the date the Option is granted; provided, however, that (x) the
Exercise Price of an Incentive Stock Option shall be equal to, or greater than,
the Fair Market Value of a Share on the date the Incentive Stock Option is
granted and (y) an Incentive Stock Option may not be granted to an Employee who,
at the time of grant, owns Shares possessing more than 10 percent of the total
combined voting power of all Shares and other classes of stock of the Company or
any parent or subsidiary of the Company, unless the Exercise Price per Share is
not less than 110% of the Fair Market Value of a Share on the date of grant.
-3-
<PAGE>
(iii) If the Shares are publicly traded, then the Fair Market
Value per Share shall be determined as follows: (x) if the principal trading
market for the Shares is a national securities exchange or the Nasdaq National
Market, the last reported sale price thereof on the relevant date or (if there
were no trades on that date) the latest preceding date upon which a sale was
reported, or (y) if the Shares are not principally traded on such exchange or
market, the mean between the last reported "bid" and "asked" prices of a Share
on the relevant date, as reported on Nasdaq or, if not so reported, as reported
by the National Daily Quotation Bureau, Inc. or as reported in a customary
financial reporting service, as applicable and as the Committee determines. If
the Shares are not publicly traded or, if publicly traded, are not subject to
reported transactions or "bid" or "asked" quotations as set forth above, the
Fair Market Value per Share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each
-----------
Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who, at
the time of grant, owns Shares possessing more than 10 percent of the total
combined voting power of all Shares and other classes of stock of the Company,
or any parent or subsidiary of the Company, may not have a term that exceeds
five years from the date of grant.
(d) Exercisability of Options.
-------------------------
(i) Options shall become exercisable in accordance with such
terms and conditions, consistent with the Plan, as may be determined by the
Committee and specified in the Grant Instrument or an amendment to the Grant
Instrument. The Committee may accelerate the exercisability of any or all
outstanding Options at any time for any reason.
(ii) Notwithstanding the foregoing, the Option may, but need
not, include a provision whereby the Grantee may elect at any time while an
Employee, Non-Employee Director or Key Advisor to exercise the Option as to any
part or all of the Shares subject to the Option prior to the full vesting of the
Option. Any unvested Shares so purchased shall be subject to a repurchase right
in favor of the Company, with the repurchase price to be equal to the lesser of
(x) the original purchase price or (y) the Fair Market Value of the Shares, or
to any other restriction the Committee determines to be appropriate.
(e) Termination of Employment, Disability or Death.
----------------------------------------------
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by the Company as an Employee, Key Advisor or
member of the Board. In the event that a Grantee ceases to be employed by the
Company for any reason other than "disability," death or "termination for
cause," any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
-4-
<PAGE>
(ii) In the event the Grantee ceases to be employed by the
Company on account of a "termination for cause" by the Company, any Option held
by the Grantee shall terminate as of the date the Grantee ceases to be employed
by the Company.
(iii) In the event the Grantee ceases to be employed by the
Company because the Grantee is "disabled," any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Any of the
Grantee's Options which are not otherwise exercisable as of the date on which
the Grantee ceases to be employed by the Company shall terminate as of such
date.
(iv) If the Grantee dies while employed by the Company or within
90 days after the date on which the Grantee ceases to be employed on account of
a termination of employment specified in Section 5(e)(i) above (or within such
other period of time as may be specified by the Committee), any Option that is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date on which the Grantee ceases to be employed by the Company
(or within such other period of time as may be specified by the Committee), but
in any event no later than the date of expiration of the Option term. Any of the
Grantee's Options that are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by the Company shall terminate as of such date.
(v) For purposes of Sections 5(e), 6, 7, 8 and 13:
(A) "Company," when used in the phrase "employed by the
Company," shall mean the Company and its parent and subsidiary
corporations.
(B) "Employed by the Company" shall mean employment or
service as an Employee, Key Advisor or member of the Board (so that, for
purposes of exercising Options and SARs and satisfying conditions with
respect to Restricted Shares and Performance Shares, a Grantee shall not be
considered to have terminated employment or service until the Grantee
ceases to be an Employee, Key Advisor and member of the Board), unless the
Committee determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean, except to the
extent specified otherwise by the Committee, a finding by the Committee
that (1) the Grantee has breached his or her employment, service,
noncompetition, nonsolicitation or other similar contract with the Company
or its parent and subsidiary corporations, (2) has been engaged in
disloyalty to the Company or its parent and subsidiary corporations,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or dishonesty in the course of his or her employment or service, (3)
has disclosed trade secrets or confidential
-5-
<PAGE>
information of the Company or its parents and subsidiary corporations to
persons not entitled to receive such information or (4) has entered into
competition with the Company or its parent or Subsidiary Corporations.
Notwithstanding the foregoing, if the Grantee has an employment agreement
with the Company defining "termination for cause," then such definition
shall supersede the foregoing definition.
(vi) In the event a Grantee's employment is terminated for
cause, in addition to the immediate termination of all Grants, the Grantee shall
automatically forfeit all Shares underlying any exercised portion of an Option
for which the Company has not yet delivered the certificates, upon refund by the
Company of the Exercise Price paid by the Grantee for such Shares.
(f) Exercise of Options. A Grantee may exercise an Option that has
-------------------
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) by
delivering Shares owned by the Grantee for the period necessary to avoid a
charge to the Company's earnings for financial reporting purposes (including
Shares acquired in connection with the exercise of an Option, subject to such
restrictions as the Committee deems appropriate) and having a Fair Market Value
on the date of exercise equal to the Exercise Price, or (z) by such other method
as the Committee may approve, including, after the Company becomes a Reporting
Company, payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board; provided, that, for purpose of
assisting an Optionee to exercise an Option, the Company may make loans to the
Optionee or guarantee loans made by third parties to the Optionee, on such terms
and conditions as the Committee may authorize. Shares used to exercise an Option
shall have been held by the Grantee for the requisite period of time to avoid
adverse accounting consequences to the Company with respect to the Option. The
Grantee shall pay the Exercise Price and the amount of any withholding tax due
(pursuant to Section 10) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
---------------------------------
shall provide that, if the aggregate Fair Market Value of the Shares on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other equity compensation plan of the Company or a parent or subsidiary, exceeds
$100,000, then the option, as to the excess, shall be treated as a Nonqualified
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code).
6. Restricted Share Grants
-----------------------
The Committee may issue or transfer Shares to an Employee, Non-
Employee Director or Key Advisor under a Grant of Restricted Shares, upon such
terms as the Committee deems appropriate. The following provisions are
applicable to Restricted Shares:
-6-
<PAGE>
(a) General Requirements. Shares issued or transferred pursuant to
--------------------
Restricted Share Grants may be issued or transferred for consideration or for no
consideration, as determined by the Committee. The Committee may establish
conditions under which restrictions on Restricted Shares shall lapse over a
period of time or according to such other criteria as the Committee deems
appropriate. The period of time during which the Restricted Shares will remain
subject to restrictions will be designated in the Grant Instrument as the
"Restriction Period."
(b) Number of Shares. The Committee shall determine the number of
----------------
Restricted Shares to be issued or transferred and the restrictions applicable to
such Grant.
(c) Requirement of Employment. If the Grantee ceases to be employed
-------------------------
by the Company (as defined in Section 5(e)(v)(B)) during a period designated in
the Grant Instrument as the Restriction Period, or if other specified conditions
are not met, the Restricted Share Grant shall terminate as to all Shares covered
by the Grant as to which the restrictions have not lapsed, and those Shares must
be immediately returned to the Company. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Certificate. During the
--------------------------------------------------
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the Restricted Shares except as permitted under Section 11.
Each certificate for Restricted Shares shall contain a legend giving appropriate
notice of the restrictions in the Grant. The Grantee shall be entitled to have
the legend removed from the certificate covering the Restricted Shares subject
to restrictions when all restrictions on such Shares have lapsed. The Committee
may determine that the Company will not issue certificates for Restricted Shares
until all restrictions on such Shares have lapsed, or that the Company will
retain possession of certificates for Restricted Shares until all restrictions
on such Shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
--------------------------------------
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote Restricted Shares and to receive any dividends or other
distributions paid on such Shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
---------------------
Shares shall lapse upon the expiration of the applicable Restriction Period and
the satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Share Grants, that the restrictions shall
lapse without regard to any Restriction Period.
7. Stock Appreciation Rights
-------------------------
(a) General Requirements. The Committee may grant stock
--------------------
appreciation rights ("SARs") to an Employee, Non-Employee Director or Key
Advisor separately or in tandem with any Option (for all or a portion of the
applicable Option). Tandem SARs may be granted either at the time the Option is
granted or at any time thereafter while the Option remains outstanding;
provided, however, that, in the case of an Incentive Stock Option, SARs may be
granted only at the time of the Grant of the Incentive Stock Option. The
Committee shall establish the base amount of the SAR at the time the SAR is
granted. Unless the Committee
-7-
<PAGE>
determines otherwise, the base amount of each SAR shall be equal to the per
Share Exercise Price of the related Option or, if there is no related Option,
the Fair Market Value of a Share as of the date of Grant of the SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs
-----------
granted to a Grantee that shall be exercisable during a specified period shall
not exceed the number of Shares that the Grantee may purchase upon the exercise
of the related Option during such period. Upon the exercise of an Option, the
SARs relating to the Shares covered by such Option shall terminate. Upon the
exercise of SARs, the related Option shall terminate to the extent of an equal
number of Shares.
(c) Exercisability. An SAR shall be exercisable during the period
--------------
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is
employed by the Company or during the applicable period after termination of
employment as described in Section 5(e). A tandem SAR shall be exercisable only
during the period when the Option to which it is related is also exercisable. No
SAR may be exercised for cash by an executive officer or director of the Company
or any of its subsidiaries who is subject to Section 16 of the Exchange Act,
except in accordance with Rule 16b-3 under the Exchange Act.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee
-------------
shall receive in settlement of such SARs an amount equal to the value of the
stock appreciation for the number of SARs exercised, payable in cash, Shares or
a combination thereof. The stock appreciation for a SAR is the amount by which
the Fair Market Value of the underlying Share on the date of exercise of the SAR
exceeds the base amount of the SAR as described in Subsection (a).
(e) Form of Payment. The Committee shall determine whether the
---------------
appreciation in a SAR shall be paid in the form of cash, Shares, or a
combination of the two, in such proportion as the Committee deems appropriate.
For purposes of calculating the number of Shares to be received, Shares shall be
valued at their Fair Market Value on the date of exercise of the SAR. If Shares
are to be received upon exercise of a SAR, cash shall be delivered in lieu of
any fractional Share.
8. Performance Shares
------------------
(a) General Requirements. The Committee may grant performance shares
--------------------
("Performance Shares") to an Employee or Key Advisor. Each Performance Share
shall represent the right of the Grantee to receive an amount based on the value
of the Performance Share, if performance goals established by the Committee are
met. A Performance Share shall be based on the Fair Market Value of a Share or
on such other measurement base as the Committee deems appropriate. The Committee
shall determine the number of Performance Shares to be granted and the
requirements applicable to such Shares.
(b) Performance Period and Performance Goals. When Performance
----------------------------------------
Shares are granted, the Committee shall establish the performance period during
which performance shall
-8-
<PAGE>
be measured (the "Performance Period"), performance goals applicable to the
Shares ("Performance Goals"), and such other conditions of the Grant as the
Committee deems appropriate. Performance Goals may relate to the financial
performance of the Company or its operating shares, the performance of Shares,
individual performance, or such other criteria as the Committee deems
appropriate.
(c) Payment with respect to Performance Shares. At the end of each
------------------------------------------
Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Shares have been met and the
amount, if any, to be paid with respect to the Performance Shares. Payments with
respect to Performance Shares shall be made in cash, in Shares, or in a
combination of the two, as determined by the Committee.
(d) Requirement of Employment. If the Grantee ceases to be employed
-------------------------
by the Company (as defined in Section 5(e)(v)(B)) during a Performance Period,
or if other conditions established by the Committee are not met, the Grantee's
Performance Shares shall be forfeited. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
9. Qualified Performance-Based Compensation
----------------------------------------
(a) Designation as Qualified Performance-Based Compensation. The
-------------------------------------------------------
Committee may determine that Performance Shares or Restricted Shares granted to
an Employee shall be considered "qualified performance-based compensation" under
section 162(m) of the Code. The provisions of this Section 9 shall apply to
Grants of Performance Shares and Restricted Shares that are to be considered
"qualified performance-based compensation" under section 162(m) of the Code.
(b) Performance Goals. When Performance Shares or Restricted Shares
-----------------
that are to be considered "qualified performance-based compensation" are
granted, the Committee shall establish in writing (i) the objective performance
goals that must be met in order for restrictions on the Restricted Shares to
lapse or amounts to be paid under the Performance Shares, (ii) the Performance
Period during which the performance goals must be met, (iii) the threshold,
target and maximum amounts that may be paid if the performance goals are met,
and (iv) any other conditions, including without limitation provisions relating
to death, disability, other termination of employment or Reorganization, that
the Committee deems appropriate and consistent with the Plan and section 162(m)
of the Code. The performance goals may relate to the Employee's business share
or the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall use objectively determinable
performance goals based on one or more of the following criteria: Share price,
earnings per Share, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, share volume, sales,
market share, or strategic business criteria consisting of one or more
objectives based on meeting specific revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
----------------------
performance goals in writing either before the beginning of the Performance
Period or during a period ending
-9-
<PAGE>
no later than the earlier of (i) 90 days after the beginning of the Performance
Period or (ii) the date on which 25% of the Performance Period has been
completed, or such other date as may be required or permitted under applicable
regulations under section 162(m) of the Code. The performance goals shall
satisfy the requirements for "qualified performance-based compensation,"
including the requirement that the achievement of the goals be substantially
uncertain at the time they are established and that the goals be established in
such a way that a third party with knowledge of the relevant facts could
determine whether and to what extent the performance goals have been met. The
Committee shall not have discretion to increase the amount of compensation that
is payable upon achievement of the designated performance goals.
(d) Maximum Payment. If Restricted Shares, or Performance Shares
---------------
measured with respect to the fair market value of the Company's Shares, are
granted, not more than 2,500,000 Shares may be granted to an Employee under the
Performance Shares or Restricted Shares for any Performance Period. If
Performance Shares are measured with respect to other criteria, the maximum
amount that may be paid to an Employee with respect to a Performance Period is
$2,000,000.
(e) Announcement of Grants. The Committee shall certify and
----------------------
announce the results for each Performance Period to all Grantees immediately
following the announcement of the Company's financial results for the
Performance Period. If and to the extent that the Committee does not certify
that the performance goals have been met, the grants of Restricted Shares or
Performance Shares for the Performance Period shall be forfeited.
10. Withholding of Taxes
--------------------
(a) Required Withholding. All Grants under the Plan shall be
--------------------
subject to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid in
cash, or from other wages paid to the Grantee, any federal, state or local taxes
required by law to be withheld with respect to such Grants. In the case of
Options and other Grants paid in Shares, the Company may require the Grantee or
other person receiving such Shares to pay to the Company the amount of any such
taxes that the Company is required to withhold with respect to such Grants, or
the Company may deduct from other wages paid by the Company the amount of any
withholding taxes due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a
---------------------------
Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option, SAR, Restricted Shares or Performance Shares paid in
Company Shares by having Shares withheld up to an amount that does not exceed
the Grantee's maximum marginal tax rate for federal (including FICA), state and
local tax liabilities. The election must be in a form and manner prescribed by
the Committee and shall be subject to the prior approval of the Committee.
11. Transferability of Grants
-------------------------
(a) Except as provided in Section 11(b), only the Grantee may
exercise rights a Grant during the Grantee's lifetime. A Grantee may not
transfer those rights except by
-10-
<PAGE>
will or by the laws of descent and distribution. When a Grantee dies, the
personal representative or other person entitled to succeed to the rights of the
Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee must
furnish proof satisfactory to the Company of his or her right to receive the
Grant under the Grantee's will or under the applicable laws of descent and
distribution.
(b) Transfer of Nonqualified Options. The Committee may provide, in
--------------------------------
a Grant Instrument, that a Grantee may transfer Nonqualified Options to family
members or other persons or entities according to such terms as the Committee
may determine; provided that the Grantee receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.
12. Right of First Refusal
----------------------
Prior to a Public Offering, as defined in Section 23(c), if at any
time an individual desires to sell, encumber, or otherwise dispose of Shares
distributed to him under this Plan, the individual shall first offer the Shares
to the Company by giving the Company written notice disclosing: (a) the name of
the proposed transferee of the Shares; (b) the certificate number and number of
Shares proposed to be transferred or encumbered; (c) the proposed price; (d) all
other terms of the proposed transfer; and (e) a written copy of the proposed
offer. Within 30 days after receipt of such notice, the Company shall have the
option to purchase all or part of such Shares at the same price and on the same
terms as contained in such notice.
In the event the Company (or a shareholder, as described below) does
not exercise the option to purchase Shares, as provided above, the individual
shall have the right to sell, encumber or otherwise dispose of his Shares on the
terms of the transfer set forth in the written notice to the Company, provided
such transfer is effected within 30 days after the expiration of the option
period. If the transfer is not effected within such period, the Company must
again be given an option to purchase, as provided above.
The Board, in its sole discretion, may waive the Company's right of
first refusal pursuant to this Section 12 and the Company's repurchase right
pursuant to Section 13 below. If the Company's right of first refusal or
repurchase right is so waived, the Board may, in its sole discretion, pass
through such right to the remaining members of the Company in the same
proportion that each shareholder's Share ownership bears to the Share ownership
of all the members of the Company, as determined by the Board. To the extent
that a shareholder has been given such right and does not purchase his or her
allotment, the other members shall have the right to purchase such allotment on
the same basis.
On and after a Public Offering, the Company shall have no further
right to purchase Shares under this Section 12 and Section 13 below, and its
limitations shall be null and void.
Notwithstanding the foregoing, the Committee may require that a
Grantee execute a shareholder's agreement, with such terms as the Committee
deems appropriate, with respect to
-11-
<PAGE>
any Share distributed pursuant to this Plan. Such agreement may provide that the
provisions of this Section 12 and Section 13 below shall not apply to such
Shares.
13. Purchase by the Company
-----------------------
Unless otherwise determined by the Board or Committee at or after
grant, in the event of the Optionee's termination of employment or performance
of services for the Company, the Company shall have the right to repurchase all
Shares issued or to be issued to the Optionee under this Plan at Fair Market
Value but not less than the Optionee's cost. In the event that the Board or
Committee determines in good faith that the Optionee has materially breached any
non-compete or confidentiality agreement with the Company after termination of
his or her status as an Employee or Consultant, the price at which the Company
shall have the right to repurchase such Shares shall be equal to the exercise
price or purchase price paid by the Optionee. Any repurchase shall be made in
accordance with accounting rules to avoid adverse accounting treatment.
The Company's right to repurchase shall be exercisable at any time
within one year after the date of Optionee's termination of employment or
performance of service by the delivery of written notice by the Company to such
effect to the Optionee, his executor, administrator or beneficiaries. Within 30
days after receipt of such notice, the Optionee, his executor, administrator or
beneficiaries shall deliver a certificate or certificates for the shares being
sold, together with appropriate duly signed stock powers transferring such
shares to the Company, and the Company shall deliver to the Optionee, his
executor, administrator or beneficiaries the Company's check in the amount of
the purchase price for the shares being sold.
14. Reorganization of the Company
-----------------------------
(a) Reorganization. As used herein, a "Reorganization" shall be
---------------
deemed to have occurred if the members of the Company approve (or, if
shareholder approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another corporation
where the members of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, Shares entitling such members to more than 50% of all votes to
which all members of the surviving corporation would be entitled in the election
of directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.
(b) Assumption of Grants. Upon a Reorganization where the Company
--------------------
is not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
and SARs that are not exercised shall be assumed by, or replaced with comparable
options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, in the
------------------
event of a Reorganization, the Committee may take one or both of the following
actions: the Committee may (i) require that Grantees surrender their outstanding
Options and SARs in exchange for a
-12-
<PAGE>
payment by the Company, in cash or Shares as determined by the Committee, in an
amount equal to the amount by which the then Fair Market Value of the Shares
subject to the Grantee's unexercised Options and SARs exceeds the Exercise Price
of the Options or the base amount of the SARs, as applicable, or (ii) after
accelerating all vesting and giving Grantees an opportunity to exercise their
outstanding Options and SARs, terminate any or all unexercised Options and SARs
at such time as the Committee deems appropriate. Such surrender or termination
shall take place as of the date of the Reorganization or such other date as the
Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Reorganization, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Subsection (b) above) that would make the Reorganization
ineligible for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the Company
intends to use such treatment with respect to the Reorganization.
15. Change of Control of the Company
--------------------------------
(a) As used herein, a "Change of Control" shall be deemed to have
occurred if:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than Safeguard Scientifics, Inc. or any of its
subsidiaries or affiliates becomes a "beneficial owner" (as defined in Rule 13d-
3 under the Exchange Act), directly or indirectly, of securities of the Company
representing a majority of the voting power of the then outstanding securities
of the Company except where the acquisition is approved by the Board; or
(ii) Any person has commenced a tender offer or exchange offer
for a majority of the voting power of the then outstanding Shares of the
Company.
(b) Notice and Acceleration. Upon a Change of Control, to the
-----------------------
extent the Committee in its sole discretion determines, (i) the Company shall
provide each Grantee with outstanding Grants written notice of such Change of
Control, (ii) all outstanding Options and SARs shall automatically accelerate
and become fully exercisable, (iii) the restrictions and conditions on all
outstanding Restricted Shares shall immediately lapse, and (iv) Grantees holding
Performance Shares shall receive a payment in settlement of such Performance
Shares, in an amount determined by the Committee, based on the Grantee's target
payment for the Performance Period and the portion of the Performance Period
that precedes the Change of Control.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
------------------
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and SARs in exchange for a payment
by the Company, in cash or Shares as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the Shares subject to
the Grantee's unexercised Options and SARs exceeds the Exercise Price of the
Options or the base amount of the SARs, as applicable, or (ii) after giving
Grantees an opportunity to exercise their outstanding Options and SARs,
terminate any or all unexercised
-13-
<PAGE>
Options and SARs at such time as the Committee deems appropriate. Such surrender
or termination shall take place as of the date of the Change of Control or such
other date as the Committee may specify.
(d) Committee. The Committee making the determinations under this
---------
Section 15 following a Change of Control must be comprised of the same members
as those on the Committee immediately before the Change of Control. If the
Committee members do not meet this requirement, the automatic provisions of
Subsection (b) of this Section shall apply in the case of such a Change of
Control, and the Committee shall not have discretion to vary them.
(e) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
16. Requirements for Issuance or Transfer of Shares
-----------------------------------------------
(a) Shareholder's Agreement. The Committee may require that a
-----------------------
Grantee execute a shareholder's agreement, with such terms as the Committee
deems appropriate, with respect to any Shares distributed pursuant to this Plan.
(b) Limitations on Issuance or Transfer of Shares. No Shares shall
---------------------------------------------
be issued or transferred in connection with any Grant hereunder unless and until
all legal requirements applicable to the issuance or transfer of such Shares
have been complied with to the satisfaction of the Committee. The Committee
shall have the right to condition any Grant made to any Grantee hereunder on
such Grantee's undertaking in writing to comply with such restrictions on his or
her subsequent disposition of such Shares as the Committee shall deem necessary
or advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such Shares may be
legended to reflect any such restrictions. Certificates representing Shares
issued or transferred under the Plan will be subject to such stop-transfer
orders and other restrictions as may be required by applicable laws, regulations
and interpretations, including any requirement that a legend be placed thereon.
17. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any
---------
time.
(b) Termination of Plan. The Plan shall terminate on the day
-------------------
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the members.
(c) Termination and Amendment of Outstanding Grants. A termination
-----------------------------------------------
or amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents. The termination of
the Plan shall not impair the power and
-14-
<PAGE>
authority of the Committee with respect to an outstanding Grant. Whether or not
the Plan has terminated, an outstanding Grant may be terminated or amended in
accordance with the Plan or may be amended by agreement of the Company and the
Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document.
------------------
No other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
18. Funding of the Plan
-------------------
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
19. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Employee, Non-Employee
Director, Key Advisor or other person to any claim or right to be granted a
Grant under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.
20. No Fractional Shares
--------------------
No fractional Shares shall be issued or delivered pursuant to the Plan
or any Grant. The Committee shall determine whether cash, other awards or other
property shall be issued or paid in lieu of such fractional Shares or whether
such fractional Shares or any rights thereto shall be forfeited or otherwise
eliminated.
21. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
22. Effective Date of the Plan; Definition of Terms
-----------------------------------------------
(a) Effective Date. The Plan shall be effective on February 2, 1999.
--------------
(b) Reporting Company. The provisions of the Plan that refer to
-----------------
the Company becoming a Reporting Company, or that refer to, or are applicable to
persons subject to, Section 16 of the Exchange Act or section 162(m) of the
Code, shall be effective, if at all, upon the initial registration of the Shares
under Section 12(g) of the Exchange Act, and shall remain effective thereafter
for so long as such Shares are so registered.
-15-
<PAGE>
(c) Public Offering. All references in the Plan to a Public
---------------
Offering shall refer to the consummation of the first registered public offering
of Shares of the Company in a firm commitment underwriting.
23. Miscellaneous
-------------
(a) Grants in Connection with Corporate Transactions and Otherwise.
--------------------------------------------------------------
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan; provided, that the total number of Shares issuable upon
exercise of all outstanding options shall not exceed 30% of the then outstanding
Shares of the Company unless approved by a two-thirds vote of the members.
Without limiting the foregoing, the Committee may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted share grant made by such corporation. The terms and
conditions of the substitute grants may vary from the terms and conditions
required by the Plan and from those of the substituted stock incentives. The
Committee shall prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and SARs
-------------------
and the obligations of the Company to issue or transfer Shares under Grants
shall be subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject to Section
16 of the Exchange Act, it is the intent of the Company that the Plan and all
transactions under the Plan comply with all applicable provisions of Rule 16b-3
or its successors under the Exchange Act. The Committee may revoke any Grant if
it is contrary to law or modify a Grant to bring it into compliance with any
valid and mandatory government regulation. The Committee may also adopt rules
regarding the withholding of taxes on payments to Grantees. The Committee may,
in its sole discretion, agree to limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
-------------
effect of the Plan and Grant Instruments issued under the Plan shall exclusively
be governed by and determined in accordance with the law of the State of
Delaware.
-16-
<PAGE>
================================================================================
EXHIBIT 10.1.2
INTERNET CAPITAL GROUP, INC.
1999 EQUITY COMPENSATION PLAN
(as amended and restated, effective May 1, 1999)
================================================================================
The purpose of the Internet Capital Group, Inc. 1999 Equity Compensation
Plan (as amended and restated, effective May 1, 1999) (the "Plan") is to provide
(i) designated employees of Internet Capital Group, Inc. (the "Company") and its
subsidiaries, (ii) certain advisors who perform services for the Company or its
subsidiaries and (iii) non-employee members of the Board of Directors of the
Company (the "Board") with the opportunity to receive grants of incentive stock
options, nonqualified options, share appreciation rights, restricted shares,
performance shares, dividend equivalent rights and cash awards. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefiting the Company's shareholders, and
will align the economic interests of the participants with those of the
shareholders.
1. Administration
--------------
(a) Committee. The Plan shall be administered and interpreted by a
---------
committee appointed by the Board (the "Committee"). Prior to the Company's
becoming a "Reporting Company" as described in Section 25(b), the Board may
exercise any power or authority of the Committee under the Plan and, in such
case, references to the Committee hereunder, as they relate to Plan
administration, shall be deemed to include the Board as a whole. After the
Company becomes a Reporting Company, the Committee shall consist of two or more
persons appointed by the Board, all of whom shall be "outside directors" as
defined under section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and related Treasury regulations and shall be "non-employee
directors" as defined under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(b) Committee Authority. The Committee shall have the sole authority to
-------------------
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, and (iv)
make all determinations with respect to any other matters arising under the
Plan.
(c) Committee Determinations. The Committee shall have full power and
------------------------
authority to administer and interpret the Plan, to make factual determinations,
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan.
Determinations made by the Committee under the Plan need not be uniform as to
similarly situated individuals.
<PAGE>
2. Grants
------
Awards under the Plan may consist of grants of (i) incentive stock
options as described in Section 5 ("Incentive Stock Options"), (ii) nonqualified
options as described in Section 5 ("Nonqualified Options") (Incentive Stock
Options and Nonqualified Options are collectively referred to as "Options"),
(iii) stock appreciation rights as described in Section 7 ("SARs"), (iv)
restricted shares as described in Section 8 ("Restricted Shares"), (v)
performance shares as described in Section 9 ("Performance Shares"), (vi)
dividend equivalent rights as described in Section 10 ("Dividend Equivalent
Rights") and (vii) cash awards as described in Section 11 ("Cash Awards")
(hereinafter collectively referred to as "Grants"). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions consistent with the Plan as the Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument (the "Grant Instrument") or an amendment to the Grant Instrument. The
Committee shall approve the form and provisions of each Grant Instrument. Grants
under a particular Section of the Plan need not be uniform as among the grant
recipients (the "Grantees").
3. Shares Subject to the Plan
--------------------------
(a) Shares Authorized. For purposes of the Plan, a Share means one share
-----------------
of common stock of the Company, par value $.001. Subject to adjustments as
provided in Section 3(b) below, the aggregate number of Shares of the Company
that may be issued or transferred under the Plan is 10,470,000 Shares. The
maximum aggregate number of Shares that shall be subject to Grants made under
the Plan to any individual during any calendar year shall be 3,000,000 Shares.
The Shares may be authorized but unissued Shares or reacquired Shares, including
Shares purchased by the Company on the open market for purposes of the Plan. If
and to the extent Options or SARs granted under the Plan terminate, expire, or
are canceled, forfeited, exchanged or surrendered without having been exercised,
or if any Restricted Shares or Performance Shares or Dividend Equivalent Rights
are forfeited, the Shares subject to such Grants shall again be available for
purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of Shares
-----------
outstanding (i) by reason of a dividend, spin-off, recapitalization, split or
combination or exchange of Shares, (ii) by reason of a merger, reorganization or
consolidation in which the Company is the surviving corporation, (iii) by reason
of a reclassification or change in par value, (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Shares of the Company
as a class without the Company's receipt of consideration, or (v) by reason of
the Company's being a Reporting Company, or if the value of outstanding Shares
is substantially reduced as a result of a spin-off or the Company's payment of
an extraordinary dividend or distribution, the maximum number of Shares
available for Grants, the maximum number of Shares that any individual
participating in the Plan may be granted in any year, the number of Shares
covered by outstanding Grants, the kind of Shares issued under the Plan, and the
price per Share or the applicable market value of such Grants may be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued Shares to preclude, to
the extent practicable, the enlargement or dilution of rights and benefits under
such Grants; provided, however, that any fractional Shares resulting from such
adjustment shall be eliminated. Any
-2-
<PAGE>
adjustments determined by the Committee shall be final, binding and conclusive.
Any Shares, other securities or other property distributed to a Grantee, or
which a Grantee is entitled to receive, in respect of Restricted Shares, which
are then subject to restrictions imposed by Section 8, by reason of any the
events described in clauses (i), (ii), (iii), (iv) or (v) above shall be subject
to the restrictions and requirements imposed on such Restricted Shares,
including depositing the certificates therefor with the Company and bearing a
legend as provided in Section 8(d), unless determined otherwise by the
Committee.
4. Eligibility for Participation
-----------------------------
(a) Eligible Persons. All employees of the Company, its parents
----------------
and its subsidiaries ("Employees"), including Employees who are officers or
members of the Board, and members of the Board who are not Employees ("Non-
Employee Directors") shall be eligible to participate in the Plan. Advisors who
perform services to the Company or any of its parents or its subsidiaries ("Key
Advisors") shall be eligible to participate in the Plan if the Key Advisors
render bona fide services and such services are not in connection with the offer
or sale of securities in a capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the
---------------------
Employees, Non-Employee Directors and Key Advisors to receive Grants and shall
determine the number of Shares subject to a particular Grant in such manner as
the Committee determines.
5. Options
-------
(a) Number of Shares. Subject to Section 6, the Committee shall
----------------
determine the number of Shares that will be subject to each Grant of Options to
Employees, Non-Employee Directors and Key Advisors. Subject to adjustment as
provided in Section 3(b), the maximum aggregate number of Shares that may be
subject to Incentive Stock Options shall be 3,000,000.
(b) Type of Option and Price.
------------------------
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code or Nonqualified Options that are not intended so to qualify or
any combination of Incentive Stock Options and Nonqualified Options, all in
accordance with the terms and conditions set forth herein. Incentive Stock
Options may be granted only to Employees. Nonqualified Options may be granted to
Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Shares
subject to an Option shall be determined by the Committee and may be equal to,
greater than, or less than the Fair Market Value (as defined below) of a Share
on the date the Option is granted; provided, however, that (x) the Exercise
Price of an Incentive Stock Option shall be equal to, or greater than, the Fair
Market Value of a Share on the date the Incentive Stock Option is granted and
(y) an Incentive Stock Option may not be granted to an Employee who, at the time
of grant, owns Shares possessing more than 10 percent of the total combined
voting power of all Shares and other classes of stock of the Company or any
parent or subsidiary of the Company, unless the
-3-
<PAGE>
Exercise Price per Share is not less than 110% of the Fair Market Value of a
Share on the date of grant.
(iii) If the Shares are publicly traded, then the Fair Market
Value per Share shall be determined as follows: (x) if the principal trading
market for the Shares is a national securities exchange or the Nasdaq National
Market, the last reported sale price thereof on the preceding date or, if there
were no trades on that date, the latest preceding date upon which a sale was
reported, or (y) if the Shares are not principally traded on such exchange or
market, the mean between the last reported "bid" and "asked" prices of a Share
on the preceding date, as reported on Nasdaq or, if not so reported, as reported
by the National Daily Quotation Bureau, Inc. or as reported in a customary
financial reporting service, as applicable and as the Committee determines. If
the Shares are not publicly traded or, if publicly traded, are not subject to
reported transactions or "bid" or "asked" quotations as set forth above, the
Fair Market Value per Share shall be as determined in good faith by the
Committee; provided that, if the Shares are publicly traded, the Committee may
make such discretionary determinations where the shares have not been traded for
10 trading days.
(c) Option Term. The Committee shall determine the term of each
-----------
Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who, at
the time of grant, owns Shares possessing more than 10 percent of the total
combined voting power of all Shares and other classes of stock of the Company,
or any parent or subsidiary of the Company, may not have a term that exceeds
five years from the date of grant.
(d) Vesting and Exercisability of Options.
-------------------------------------
(i) Vesting. Options shall vest in accordance with such terms
and conditions as may be determined by the Committee and specified in the Grant
Instrument or an amendment to the Grant Instrument. The Committee may accelerate
the vesting of any or all outstanding Options at any time for any reason.
(ii) Exercisability. Notwithstanding the foregoing, the Option
--------------
may, but need not, include a provision whereby the Grantee may elect at any time
while an Employee, Non-Employee Director or Key Advisor to exercise the Option
as to any part or all of the Shares subject to the Option prior to the full
vesting of the Option. Any unvested Shares so purchased shall be subject to a
repurchase right in favor of the Company, with the repurchase price to be equal
to the lesser of (x) the original purchase price or (y) the Fair Market Value of
the Shares on the date of such repurchase, or to any other restriction the
Committee determines to be appropriate.
(e) Termination of Employment, Disability or Death.
----------------------------------------------
(i) Except as provided below and subject to the provisions
of the Grant Instrument, an Option may only be exercised while the Grantee is an
Employee, Key Advisor or member of the Board. In the event that a Grantee has a
Termination of Service (as defined below) for any reason other than Disability
(as defined below), death or Cause (as defined
-4-
<PAGE>
below), any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days after the date of such termination (or within
such other period of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option term. Any of the
Grantee's Options that are not otherwise exercisable as of the date on which the
Grantee has such a Termination of Service shall terminate as of such date.
(ii) In the event the Grantee has a Termination of Service on
account of a termination for Cause by the Company, unless otherwise determined
by the Committee (x) any Option held by the Grantee shall terminate as of the
date of such Termination of Service and (y) the Grantee shall automatically
forfeit all Shares underlying any exercised portion of an Option for which the
Company has not yet delivered the certificates, upon refund by the Company of
the Exercise Price paid by the Grantee for such Shares.
(iii) In the event the Grantee has a Termination of Service on
account of Disability, any Option which is otherwise exercisable by the Grantee
shall terminate unless exercised within one year after the date of such
Termination of Service (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Unless provided otherwise in the applicable Grant Instrument, any
of the Grantee's Options which are not otherwise exercisable as of the date of
such Termination of Service shall terminate as of such date.
(iv) If the Grantee dies while an Employee, Key Advisor or
member of the Board or within 90 days after the date on which the Grantee has a
Termination of Service specified in Section 5(e)(i) above (or within such other
period of time as may be specified by the Committee), any Option that is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date of such death or Termination of Service (or within such
other period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Unless provided otherwise
in the applicable Grant Instrument, any of the Grantee's Options that are not
otherwise exercisable as of the date shall terminate as of such date.
(v) For purposes of the Plan:
(A) "Cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that (1) the Grantee
has breached his or her employment, service, noncompetition,
nonsolicitation or other similar contract with the Company or its parent
and subsidiary corporations, (2) has been engaged in disloyalty to the
Company or its parent and subsidiary corporations, including, without
limitation, fraud, embezzlement, theft, commission of a felony or
dishonesty in the course of his or her employment or service, (3) has
disclosed trade secrets or confidential information of the Company or its
parents and subsidiary corporations to persons not entitled to receive such
information or (4) has entered into competition with the Company or its
parent or Subsidiary Corporations. Notwithstanding the foregoing, if the
Grantee has an employment agreement with the Company defining "Cause," then
such definition shall supersede the foregoing definition.
-5-
<PAGE>
(B) "Disability" shall mean a Grantee's becoming disabled
within the meaning of Section 22(e)(3) of the Code.
(C) "Termination of Service" shall mean a Grantee's
termination of employment or service as an Employee, Key Advisor or member
of the Board (so that, for purposes of the Plan, cessation of service as an
Employee, Key Advisor and member of the Board shall not be treated as a
Termination of Service if the Grantee continues without interruption to
serve thereafter in another one (or more) of such other capacities) unless
the Committee determines other wise.
(f) Exercise of Options. A Grantee may exercise an Option that has
-------------------
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) by
delivering Shares owned by the Grantee for the period necessary to avoid a
charge to the Company's earnings for financial reporting purposes and to avoid
adverse accounting consequences to the Company (including Shares acquired in
connection with the exercise of an Option, subject to such restrictions as the
Committee deems appropriate) and having a Fair Market Value on the date of
exercise equal to the Exercise Price, or (z) by such other method as the
Committee may approve, including, after the Company becomes a Reporting Company,
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board; provided, that, for purposes of assisting a
Grantee to exercise an Option, the Company may make loans to the Grantee or
guarantee loans made by third parties to the Grantee, on such terms and
conditions as the Committee may authorize. The Grantee shall pay the Exercise
Price at the time of exercise and shall satisfy the withholding tax requirements
of Section 13.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
---------------------------------
shall provide that, if the aggregate Fair Market Value of the Shares on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan and any
other equity compensation plan of the Company or a parent or subsidiary, exceeds
$100,000, then the option, as to the excess, shall be treated as a Nonqualified
Option. No Incentive Stock Option shall be granted to any person who is not an
Employee of the Company or a parent or subsidiary of the Company (within the
meaning of Section 424(f) of the Code).
6. Automatic Option Grants to Non-Employee Directors
-------------------------------------------------
Non-Employee Directors shall be eligible to receive Options under this
Section 6; provided, however, that the following Non-Employee Directors shall
not be eligible to receive Options under this Section 6: (i) Non-Employee
Directors who at any time during their membership on the Board are employees of
Safeguard Scientifics, Inc. or any of its subsidiaries or affiliates, (ii) Non-
Employee Directors who at any time during their membership on the Board are
employees of TL Ventures, Inc. or any of its subsidiaries or affiliates or (iii)
Non-Employee Directors who receive an Option award under Section 5.
-6-
<PAGE>
(a) Initial Grants. On the date that an eligible Non-Employee Director
--------------
is first elected to the Board, such Non-Employee Director shall receive a
Nonqualified Option under the Plan to purchase 47,000 Shares (an "Initial
Grant"); provided, however, that any Director who was a member of the Board of
Managers of Internet Capital Group, L.L.C. and who became a member of the Board
immediately following the execution of the Agreement of Merger dated February 2,
1999 shall not be entitled to receive an Initial Grant. The Initial Grant shall
be subject to the availability and adjustment of Shares issuable under the Plan
pursuant to Section 3 and shall not be subject to the discretion of any person
or persons.
(b) Service Grants. Every two (2) years on the anniversary of the date
--------------
that an eligible Non-Employee Director was initially elected to the Board (or,
if applicable, the Board of Managers of Internet Capital Group, L.L.C.), such
Non-Employee Director shall be granted a Nonqualified Option for an additional
20,000 Shares (a "Service Grant").
(c) Conversion Grants. In its sole discretion, the Board may grant a
-----------------
Nonqualified Option to any eligible Non-Employee Director who was a member of
the Board of Managers of Internet Capital Group, L.L.C. and who became a member
of the Board immediately following the execution of the Agreement of Merger
dated February 2, 1999 to compensate such Non-Employee Director for the
cancellation of outstanding options held by such Non-Employee Director
immediately prior to the execution of such Agreement of Merger; provided,
however, that such grant shall be subject to the availability and adjustment of
Shares issuable under the Plan pursuant to Section 3 (a "Conversion Grant").
(d) Aggregate Limitation on Grants. Notwithstanding any provision of
-------------------------------
this Plan to the contrary, the maximum number of Shares subject to Initial
Grants, Service Grants and Conversion Grants which may be awarded to any Non-
Employee Director under the Plan shall not exceed 107,000 Shares.
(e) Terms of Initial Grants, Service Grants and Conversion Grants.
-------------------------------------------------------------
Unless otherwise determined by the Committee as reflected in the applicable
Grant Instrument, each Option granted pursuant to this Section 6 shall be
subject to the following terms:
(i) Each such Option shall have a term of eight years from the
date of the applicable Option is granted.
(ii) Each Initial Grant shall vest in four equal installments of a
whole number of Shares on the first, second, third and fourth anniversaries of
the date of grant of such Option. Each Service Grant shall vest in two equal
installments of a whole number of Shares on the first and second anniversaries
of the date of grant of such Option. Each Conversion Grant shall vest as set
forth in the applicable Grant Instrument.
7. Stock Appreciation Rights
-------------------------
(a) General Requirements. The Committee may grant SARs to an Employee,
--------------------
Non-Employee Director or Key Advisor separately from or in tandem with any
Option (for all or a portion of the applicable Option). Tandem SARs may be
granted either at the time the Option is
-7-
<PAGE>
granted or at any time thereafter while the Option remains outstanding;
provided, however, that, in the case of an Incentive Stock Option, SARs may be
granted only at the time of the grant of the Incentive Stock Option. The
Committee shall establish the base amount of the SAR at the time the SAR is
granted. Unless the Committee determines otherwise, the base amount of each SAR
shall be equal to the per Share Exercise Price of the related Option or, if
there is no related Option, the Fair Market Value of a Share as of the date of
grant of the SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs
-----------
granted to a Grantee that shall be exercisable during a specified period shall
not exceed the number of Shares that the Grantee may purchase upon the exercise
of the related Option during such period. Upon the exercise of an Option, the
SARs relating to the Shares covered by such Option shall terminate. Upon the
exercise of SARs, the related Option shall terminate to the extent of an equal
number of Shares.
(c) Exercisability. An SAR shall be exercisable during the period
--------------
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is as an
Employee, Key Advisor or member of the Board or during the applicable period
after Termination of Service as described in Section 5(e). A tandem SAR shall be
exercisable only during the period when the Option to which it is related is
also exercisable. No SAR may be exercised for cash by an executive officer or
director of the Company or any of its subsidiaries who is subject to Section 16
of the Exchange Act, except in accordance with Rule 16b-3 under the Exchange
Act.
(d) Value of SARs. When a Grantee exercises an SAR, the Grantee shall
-------------
receive in settlement of such SAR an amount, payable in cash, Shares or a
combination thereof equal to the amount by which the Fair Market Value of a
Share on the date of exercise of the SAR exceeds the base amount of the SAR as
described in Section 7(a).
(e) Form of Payment. The Committee shall determine whether the
---------------
appreciation in an SAR shall be paid in the form of cash, Shares, or a
combination of the two, in such proportion as the Committee deems appropriate.
For purposes of calculating the number of Shares to be received, Shares shall be
valued at their Fair Market Value on the date of exercise of the SAR. If Shares
are to be received upon exercise of a SAR, cash shall be delivered in lieu of
any fractional Share.
8. Restricted Shares
-----------------
The Committee may issue or transfer Shares to an Employee, Non-
Employee Director or Key Advisor under a Grant of Restricted Shares, upon such
terms as the Committee deems appropriate. The following provisions are
applicable to Restricted Shares:
-8-
<PAGE>
(a) General Requirements. Shares issued or transferred pursuant to
--------------------
Restricted Share Grants may be issued or transferred for consideration or for no
consideration, as determined by the Committee. The Committee may establish
conditions under which restrictions on Restricted Shares shall lapse over a
period of time or according to such other criteria as the Committee deems
appropriate. The period of time during which the Restricted Shares will remain
subject to restrictions will be designated in the Grant Instrument as the
"Restriction Period."
(b) Number of Shares. The Committee shall determine the number of
----------------
Restricted Shares to be issued or transferred and the restrictions applicable to
such Grant.
(c) Requirement of Employment. If the Grantee has a Termination of
-------------------------
Service during a period designated in the Grant Instrument as the Restriction
Period, or if other specified conditions are not met, the Restricted Share Grant
shall terminate as to all Shares covered by the Grant as to which the
restrictions have not lapsed, and those Shares must be immediately returned to
the Company, and the Company shall refund to the Grantee the lesser of (x) the
consideration, if any, paid by the Grantee for such Shares and (y) the Fair
Market Value of the Shares as of the date of such Termination of Service. The
Committee may, however, provide for complete or partial exceptions to these
requirements as it deems appropriate.
(d) Restrictions on Transfer and Legend on Certificate. During the
--------------------------------------------------
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the Restricted Shares except as permitted under Section 14.
Each certificate for Restricted Shares shall contain a legend giving appropriate
notice of the restrictions in the Grant. The Grantee shall be entitled to have
the legend removed from the certificate covering the Restricted Shares subject
to restrictions when all restrictions on such Shares have lapsed. The Committee
may determine that the Company will not issue certificates for Restricted Shares
until all restrictions on such Shares have lapsed, or that the Company will
retain possession of certificates for Restricted Shares until all restrictions
on such Shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
--------------------------------------
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote Restricted Shares and to receive any dividends or other
distributions paid on such Shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
---------------------
Shares shall lapse upon the expiration of the applicable Restriction Period and
the satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Share Grants, that the restrictions shall
lapse without regard to any Restriction Period.
9. Performance Shares
------------------
(a) General Requirements. The Committee may grant Performance Shares
--------------------
("Performance Shares") to an Employee or Key Advisor. Each Performance Share
shall represent the right of the Grantee to receive an amount based on the value
of the Performance Share, if performance goals established by the Committee are
met. The value of a Performance Share shall be based on the Fair Market Value of
a Share as of the date of payment in respect of such
-9-
<PAGE>
Performance Share is to be made or on such other measurement base as the
Committee deems appropriate. The Committee shall determine the number of
Performance Shares to be granted and the requirements applicable to such Shares.
(b) Performance Period and Performance Goals. When Performance Shares
----------------------------------------
are granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to the Shares ("Performance Goals"), if any, and such other
conditions of the Grant as the Committee deems appropriate. Performance Goals
may relate to the financial performance of the Company or its operating shares,
the performance of Shares, individual performance, or such other criteria as the
Committee deems appropriate.
(c) Payment with respect to Performance Shares. At the end of each
------------------------------------------
Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Shares have been met and the
amount, if any, to be paid with respect to the Performance Shares. Payments with
respect to Performance Shares shall be made in cash, in Shares, or in a
combination of the two, as determined by the Committee. Any fractional
Performance Share shall be paid in cash. Unless otherwise determined by the
Committee, any Performance Shares with respect to which the Committee determines
that the applicable Performance Goals or other conditions have not been met
within the Performance Period shall be forfeited.
(d) Requirement of Employment. If the Grantee has a Termination of
-------------------------
Service during a Performance Period, or if other conditions established by the
Committee are not met, the Grantee's Performance Shares shall be forfeited. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
(e) Restrictions on Transfer. Rights to payments with respect to
------------------------
Performance Shares granted under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, garnishment, levy, execution, or other legal or equitable process,
either voluntary or involuntary; and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, attach or garnish, or levy or execute on any
right to benefits payable hereunder, shall be void.
(f) Limited Rights. Performance Shares are solely a device for the
--------------
measurement and determination of the amounts to be paid to a Grantee under the
Plan. Each Grantee's right in the Performance Shares is limited to the right to
receive payment, if any, as may herein be provided. The Performance Shares do
not constitute Shares and shall not be treated as (or as giving rise to)
property or as a trust fund of any kind; provided, however, that the Company may
establish a mere bookkeeping reserve to meet its obligations hereunder or a
trust or other funding vehicle that would not cause the Plan to be deemed to be
funded for tax purposes or for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended. The right of any Grantee of Performance
Shares to receive payments by virtue of participation in the Plan shall be no
greater than the right of any unsecured general creditor of the Company. Nothing
contained in the Plan shall be construed to give any Grantee any rights with
respect to Shares or any ownership interest in the Company. Except as may be
provided in accordance with Section
-10-
<PAGE>
10, no provision of the Plan shall be interpreted to confer upon any Grantee any
voting, dividend or derivative or other similar rights with respect to any
Performance Share.
10. Dividend Equivalent Rights
--------------------------
(a) General Requirements. The Committee may grant Dividend Equivalent
--------------------
Rights to Employees Non-Employee Directors and Key Advisors. Each Dividend
Equivalent Right shall represent the right to receive, either credits for or
payments of, amounts based on the dividends declared on Shares, to be credited
or paid as of the dividend payment dates, during the term of the Dividend
Equivalent Right as determined by the Committee. With respect to Dividend
Equivalent Rights granted with respect to Options intended to be qualified
performance-based compensation for purposes of Section 162(m) of the Code, such
Dividend Equivalent Rights shall be payable regardless of whether such Option is
exercised.
(b) Certain Terms. Unless otherwise determined by the Committee, a
-------------
Dividend Equivalent Right is exercisable or payable only while the Grantee is an
Employee, member of the Board or Key Advisor. Payment of the amount determined
in accordance with Section 10(a) shall be in cash, in Shares or a combination of
the two, as determined by the Committee. The Committee may impose such other
terms conditions on the grant of a Dividend Equivalent Right as it deems
appropriate in its discretion as reflected by the terms of the Grant Instrument.
(c) Dividend Equivalent Right with Other Grants. The Committee may
-------------------------------------------
establish a program under which Dividend Equivalent Rights may be granted in
conjunction with other Grants. For example, and without limitation, the
Committee may grant a Dividend Equivalent Right in respect of each Share subject
to an Option or with respect to a Performance Share, which right would consist
of the right to receive a cash payment in an amount equal to the dividend
distributions paid on a Share from time to time.
(d) Deferral. The Committee may establish a program under which the
--------
payments with respect to Dividend Equivalent Rights may be deferred. Such
program may include, without limitation, provisions for the crediting of
earnings and losses on unpaid amounts, and, if permitted by the Committee,
provisions under which Grantees may select from among hypothetical investment
alternatives for such deferred amounts in accordance with procedures established
by the Committee.
11. Cash Awards
-----------
(a) General Requirements. The Committee may grant Cash Awards to
--------------------
Employees, Non-Employee Directors and Key Advisors. The cash payment due upon
settlement of a Cash Award shall be based on the attainment of performance goals
and shall be subject to such other conditions, restrictions and contingencies as
the Committee shall determine as reflected by the terms of the Grant
Instrument.
-11-
<PAGE>
12. Qualified Performance-Based Compensation
----------------------------------------
(a) Designation as Qualified Performance-Based Compensation. The
-------------------------------------------------------
Committee may determine that Restricted Shares, Performance Shares and Cash
Awards granted to an Employee shall be considered "qualified performance-based
compensation" under Section 162(m) of the Code. The provisions of this Section
12 shall apply to Grants of Restricted Shares Performance Shares and Cash Awards
that are intended to be "qualified performance-based compensation" under Section
162(m) of the Code.
(b) Performance Goals. When Restricted Shares, Performance Shares or
-----------------
Cash Awards that are intended to be "qualified performance-based compensation"
are granted, the Committee shall establish in writing (i) the objective
performance goals that must be met in order for restrictions on the Restricted
Shares to lapse or amounts to be paid under the Performance Shares or Cash
Awards as applicable, (ii) the Performance Period during which the performance
goals must be met, (iii) the threshold, target and maximum amounts that may be
paid if the performance goals are met, and (iv) any other conditions, including
without limitation provisions relating to death, Disability, other Termination
of Service or Reorganization, that the Committee deems appropriate and
consistent with the Plan and Section 162(m) of the Code and the Treasury
regulations thereunder. The performance goals may relate to the Employee's
individual performance or the performance of the Company and its subsidiaries as
a whole, or any combination of the foregoing. The Committee shall use
objectively determinable performance goals based on one or more of the following
criteria: Share price, earnings per Share, net earnings, operating earnings,
return on assets, shareholder return, return on equity, growth in assets, share
volume, sales, market share, or strategic business criteria consisting of one or
more objectives based on meeting specific revenue goals, market penetration
goals, geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
----------------------
performance goals in accordance with Section 12(b) in writing either before the
beginning of the Performance Period or during a period ending no later than the
earlier of (i) 90 days after the beginning of the Performance Period or (ii) the
date on which 25% of the Performance Period has been completed, or such other
date as may be required or permitted under applicable regulations under Section
162(m) of the Code. The performance goals shall satisfy the requirements for
"qualified performance-based compensation," including the requirement that the
achievement of the goals be substantially uncertain at the time they are
established and that the goals be established in such a way that a third party
with knowledge of the relevant facts could determine whether and to what extent
the performance goals had been met. The Committee shall not have discretion to
increase the amount of compensation that is payable upon achievement of the
designated performance goals.
(d) Maximum Payment. If Restricted Shares, or Performance Shares
---------------
measured with respect to the Fair Market Value of Shares, are granted pursuant
to this Section 12, not more than 25,000 Shares may be granted to an Employee
under such Restricted Shares or Performance Shares for any Performance Period.
If Cash Awards, or Performance Shares measured with respect to criteria other
than the Fair Market Value of Shares, are granted pursuant to this Section 12,
the maximum amount that may be paid to an Employee under such
-12-
<PAGE>
Cash Awards or Performance Shares with respect to a Performance Period is
$2,000,000.
(e) Performance Certification. The Committee shall certify and
-------------------------
announce the results for each Performance Period to all Grantees immediately
following the announcement of the Company's financial results for the
Performance Period. If and to the extent that the Committee does not certify
that the performance goals have been met, the grants of Restricted Shares,
Performance Shares, or Cash Awards made pursuant to this Section 12 for the
Performance Period shall be forfeited.
13. Withholding of Taxes
--------------------
(a) Required Withholding. The Company shall be entitled to withhold
--------------------
from any payments or deemed payments any amount of tax withholding (including
all federal, state and local taxes) determined by the Committee to be required
by law. Without limiting the generality of the foregoing, the Committee may, in
its discretion, require the Grantee to pay to the Company at such time as the
Committee determines the amount that the Committee deems necessary to satisfy
the Company's obligation to withhold federal, state or local income or other
taxes incurred by reason of (i) the exercise of any Option or SAR, (ii) the
lapsing of any restrictions applicable to any Restricted Shares, (iii) the
receipt of a payment in respect of Performance Shares, Dividend Equivalent
Rights or Cash Awards or (iv) any other applicable income recognition event (for
example, an election under Section 83(b) of the Code). Notwithstanding anything
contained in the Plan to the contrary, the Grantee's satisfaction of any tax-
withholding requirements imposed by the Committee shall be a condition precedent
to the Company's obligation as may otherwise be provided hereunder to provide
Shares to the Grantee and to the release of any restrictions as may otherwise be
provided hereunder, as applicable; and the applicable options, SARs, Restricted
Shares, Performance Shares or Dividend Equivalent Rights shall be forfeited upon
the failure of the Grantee to satisfy such requirements with respect to, as
applicable, (i) the exercise of the option or SAR, (ii) the lapsing of
restrictions on the Restricted Share (or other income recognition event) or
(iii) payments in respect of any Performance Share or Dividend Equivalent Right.
(b) Election to Withhold Shares. If the Committee so permits, a
---------------------------
Grantee may make a written election to satisfy the Company's income tax
withholding obligation with respect to an Option, an SAR, Restricted Shares,
Performance Shares or Dividend Equivalent Rights paid in Shares by having Shares
withheld by the Company from the Shares otherwise to be received, or to deliver
previously owned Shares (not subject to restrictions hereunder). In the event
that the Committee permits and Grantee makes such an election, the number of
Shares so withheld or delivered shall have an aggregate Fair Market Value on the
date of exercise sufficient to satisfy the applicable withholding taxes. Where
the exercise of an Incentive Stock Option does not give rise to an obligation by
the Company to withhold federal, state or local income or other taxes on the
date of exercise, but may give rise to such an obligation in the future, the
Committee may, in its discretion, make such arrangements and impose such
restrictions as it deems necessary or appropriate. The election must be in a
form and manner prescribed by the Committee and shall be subject to the prior
approval of the Committee.
-13-
<PAGE>
14. Transferability of Grants
-------------------------
(a) In General. Except as provided in Section 14(b), only the Grantee
----------
may exercise rights under a Grant during the Grantee's lifetime. A Grantee may
not transfer those rights except by will or by the laws of descent and
distribution. When a Grantee dies, the personal representative or other person
entitled to succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights in accordance with the terms of the Plan. A Successor
Grantee must furnish proof satisfactory to the Company of his or her right to
receive the Grant under the Grantee's will or under the applicable laws of
descent and distribution.
(b) Transfer of Nonqualified Options. Notwithstanding the foregoing,
--------------------------------
the Committee may provide in a Grant Instrument that a Grantee may transfer
Nonqualified Options to family members or other persons or entities according to
such terms as the Committee may determine where the Committee determines that
such transferability does not result in accelerated federal income taxation;
provided that the Grantee receives no consideration for the transfer of an
Option and the transferred Option shall continue to be subject to the same terms
and conditions as were applicable to the Option immediately before the transfer.
15. Right of First Refusal
----------------------
Prior to a Public Offering, as defined in Section 25(c), if at any
time an individual desires to sell, encumber, or otherwise dispose of Shares
distributed to him under this Plan, the individual shall first offer the Shares
to the Company by giving the Company written notice disclosing: (a) the name of
the proposed transferee of the Shares; (b) the certificate number and number of
Shares proposed to be transferred or encumbered; (c) the proposed price; (d) all
other terms of the proposed transfer; and (e) a written copy of the proposed
offer. Within 30 days after receipt of such notice, the Company shall have the
option to purchase all or part of such Shares at the same price and on the same
terms as contained in such notice.
In the event the Company (or a shareholder, as described below) does
not exercise the option to purchase Shares, as provided above, the individual
shall have the right to sell, encumber or otherwise dispose of his Shares on the
terms of the transfer set forth in the written notice to the Company, provided
such transfer is effected within 30 days after the expiration of the option
period. If the transfer is not effected within such period, the Company must
again be given an option to purchase, as provided above.
The Board, in its sole discretion, may waive the Company's right of
first refusal pursuant to this Section 15 and the Company's repurchase right
pursuant to Section 16 below. If the Company's right of first refusal or
repurchase right is so waived, the Board may, in its sole discretion, pass
through such right to the remaining shareholders of the Company in the same
proportion that each shareholder's Share ownership bears to the Share ownership
of all the shareholders of the Company, as determined by the Board. To the
extent that a shareholder has been given such right and does not purchase his or
her allotment, the other shareholders shall have the right to purchase such
allotment on the same basis.
-14-
<PAGE>
On and after a Public Offering, the Company shall have no further
right to purchase Shares under this Section 15 or Section 16 below, and its
limitations shall be null and void.
Notwithstanding the foregoing, the shareholders agreement described in
Section 19(a) may provide that the provisions of this Sections 15 and Section 16
shall not apply to any Share distributed pursuant to the Plan.
16. Purchase by the Company
-----------------------
Unless otherwise determined by the Board or Committee at or after
grant, in the event of the Grantee's Termination of Service, the Company shall
have the right to repurchase all Shares issued or to be issued to the Grantee
under this Plan at Fair Market Value as of the date of such Termination of
Service but not less than the amount paid by the Grantee for such shares. In
the event that the Board or Committee determines in good faith that the Grantee
has materially breached any non-compete or confidentiality agreement with the
Company after termination of his or her status as an Employee, Key Advisor or
member of the Board, the price at which the Company shall have the right to
repurchase such Shares shall be equal to the Exercise Price or purchase price
paid by the Grantee. Any repurchase shall be made in accordance with accounting
rules to avoid adverse accounting treatment.
The Company's right to repurchase shall be exercisable at any time
within one year after the date of Grantee's Termination of Service by the
delivery of written notice to such effect by the Company to the Grantee, his
executor, administrator or beneficiaries. Within 30 days after receipt of such
notice, the Grantee, his executor, administrator or beneficiaries shall deliver
a certificate or certificates for the shares being sold, together with
appropriate duly signed stock powers transferring such shares to the Company,
and the Company shall deliver to the Grantee, his executor, administrator or
beneficiaries the Company's check in the amount of the purchase price for the
shares being sold.
17. Reorganization of the Company
-----------------------------
(a) Reorganization. As used herein, a "Reorganization" shall be
--------------
deemed to have occurred if the shareholders of the Company approve (or, if
shareholder approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another corporation
where the shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, Shares entitling such shareholders to more than 50% of all votes
to which all shareholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), (ii) the sale or other disposition
of all or substantially all of the assets of the Company, or (iii) a liquidation
or dissolution of the Company.
-15-
<PAGE>
(b) Assumption of Grants. Upon a Reorganization where the Company is
--------------------
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
and SARs that are not exercised shall be assumed by, or replaced with comparable
options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, in the event
------------------
of a Reorganization, the Committee may take one or both of the following
actions: the Committee may (i) require that Grantees surrender their outstanding
Options and SARs in exchange for a payment by the Company, in cash or Shares as
determined by the Committee, in an amount equal to the amount by which the then
Fair Market Value of the Shares subject to the Grantee's unexercised Options and
SARs exceeds the Exercise Price of the Options or the base amount of the SARs,
as applicable, or (ii) after accelerating all vesting and giving Grantees an
opportunity to exercise their outstanding Options and SARs, terminate any or all
unexercised Options and SARs at such time as the Committee deems appropriate.
Such surrender or termination shall take place as of the date of the
Reorganization or such other date as the Committee may specify .
(d) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Reorganization, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Section 17(b)) that would make the Reorganization
ineligible for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the Company
intends to use such treatment with respect to the Reorganization.
18. Change of Control of the Company
--------------------------------
(a) Definition. As used herein, a "Change of Control" shall be deemed
-----------
to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than Safeguard Scientifics, Inc. or any of its
subsidiaries or affiliates becomes a "beneficial owner" (as defined in Rule 13d-
3 under the Exchange Act), directly or indirectly, of securities of the Company
representing a majority of the voting power of the then outstanding securities
of the Company except where the acquisition is approved by the Board; or
(ii) Any person has commenced a tender offer or exchange offer
for a majority of the voting power of the then outstanding Shares of the
Company.
(b) Notice and Acceleration. Upon a Change of Control, to the extent
------------------------
the Committee in its sole discretion determines, (i) the Company shall provide
each Grantee with outstanding Grants written notice of such Change of Control,
(ii) all outstanding Options and SARs shall automatically accelerate and become
fully exercisable, (iii) the restrictions and conditions on all outstanding
Restricted Shares shall immediately lapse, and (iv) Grantees holding Performance
Shares shall receive a payment in settlement of such Performance Shares, in an
amount determined by the Committee, based on the Grantee's target payment for
the Performance Period and the portion of the Performance Period that precedes
the Change of Control.
-16-
<PAGE>
(c) Other Alternatives. Notwithstanding the foregoing, subject to
------------------
Section (d) 18 below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and SARs in exchange for a payment
by the Company, in cash or Shares as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the Shares subject to
the Grantee's unexercised Options and SARs exceeds the Exercise Price of the
Options or the base amount of the SARs, as applicable, or (ii) after giving
Grantees an opportunity to exercise their outstanding Options and SARs,
terminate any or all unexercised Options and SARs at such time as the Committee
deems appropriate. Such surrender or termination shall take place as of the date
of the Change of Control or such other date as the Committee may specify.
(d) Committee. The Committee making the determinations under this
---------
Section 18 following a Change of Control must be comprised of the same members
as those on the Committee immediately before the Change of Control. If the
Committee members do not meet this requirement, the automatic provisions of
Section 18(b) above shall apply in the case of such a Change of Control, and the
Committee shall not have discretion to vary them.
(e) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Section 18(c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
19. Requirements for Issuance or Transfer of Shares
-----------------------------------------------
(a) Shareholder's Agreement. The Committee may require that a Grantee
-----------------------
execute a shareholder's agreement, with such terms as the Committee deems
appropriate, with respect to any Shares distributed pursuant to the Plan.
(b) Limitations on Issuance or Transfer of Shares. No Shares shall be
---------------------------------------------
issued or transferred in connection with any Grant hereunder unless and until
all legal requirements applicable to the issuance or transfer of such Shares
have been complied with to the satisfaction of the Committee. The Committee
shall have the right to condition any Grant made to any Grantee hereunder on
such Grantee's undertaking in writing to comply with such restrictions on his or
her subsequent disposition of such Shares as the Committee shall deem necessary
or advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such Shares may be
legended to reflect any such restrictions. Certificates representing Shares
issued or transferred under the Plan will be subject to such stop-transfer
orders, registration and other restrictions as may be required by applicable
laws, regulations and interpretations, including any requirement that a legend
be placed thereon.
-17-
<PAGE>
20. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any
---------
time; provided that the Board may not make any amendment to the Plan that would,
if such amendment were not approved by the shareholders of the company, cause
the Plan to fail to comply with any requirement of applicable law or regulation,
unless and until the approval of the shareholders is obtained.
(b) Termination of Plan. The Plan shall terminate on the day
-------------------
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
-----------------------------------------------
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
amendment is required in order to comply with applicable law. The termination of
the Plan shall not impair the power and authority of the Committee with respect
to an outstanding Grant. Whether or not the Plan has terminated, an outstanding
Grant may be terminated or amended in accordance with the Plan or may be amended
by agreement of the Company and the Grantee consistent with the Plan .
(d) Governing Document. The Plan shall be the controlling document.
------------------
No other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
21. Funding of the Plan
-------------------
The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under the Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
22. Rights of Participants
----------------------
Nothing in the Plan shall entitle any Employee, Non-Employee Director,
Key Advisor or other person to any claim or right to be granted a Grant under
the Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
23. No Fractional Shares
--------------------
No fractional Shares shall be issued or delivered pursuant to the Plan
or any Grant. The Committee shall determine whether cash, other awards or other
property shall be issued or paid in lieu of such fractional Shares or whether
such fractional Shares or any rights thereto shall be forfeited or otherwise
eliminated.
-18-
<PAGE>
24. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
25. Effective Date of the Amended and Restated Plan; Definition of Certain
----------------------------------------------------------------------
Terms
- -----
(a) Effective Date. The Plan, as amended and restated, shall be
--------------
effective on May 1, 1999.
(b) Reporting Company. The provisions of the Plan that refer to the
-----------------
Company becoming a Reporting Company, or that refer to, or are applicable to
persons subject to, Section 16 of the Exchange Act or Section 162(m) of the
Code, shall be effective, if at all, upon the initial registration of the Shares
under Section 12(g) of the Exchange Act, and shall remain effective thereafter
for so long as such Shares are so registered.
(c) Public Offering. All references in the Plan to a Public Offering
---------------
shall refer to the consummation of the first registered public offering of
Shares of the Company in a firm commitment underwriting.
26. Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise.
--------------------------------------------------------------
Nothing contained in the Plan shall be construed to (i) limit the right of the
Committee to make Grants under the Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees or for other proper corporate purposes, or (ii) limit the
right of the Company to grant stock options or make other awards outside of the
Plan; provided, that the total number of Shares issuable upon exercise of all
outstanding options shall not exceed 30% of the then outstanding Shares of the
Company unless approved by a two-thirds vote of the shareholders. Without
limiting the foregoing, the Committee may make a Grant to an employee of another
corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted share grant made to such employee by such corporation. The
terms and conditions of the substitute grants may vary from the terms and
conditions required by the Plan and from those of the substituted stock
incentives. The Committee shall prescribe the provisions of the substitute
grants.
(b) Compliance with Law. The Plan, the exercise of Options and SARs
-------------------
and the obligations of the Company to issue or transfer Shares under Grants
shall be subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject to Section
16 of the Exchange Act, it is the intent of the Company that the Plan and all
transactions under the Plan comply with all applicable provisions of Rule 16b-3
or its successors under the Exchange Act. The Committee may revoke any Grant if
it is contrary to law or modify a Grant to bring it into compliance with any
valid and mandatory government regulation. The Committee may, in its sole
discretion, agree to limit its authority
-19-
<PAGE>
under this Section 26(b).
(c) Governing Law. The validity, construction, interpretation and effect
-------------
of the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Delaware.
* * * * * *
Date: May 1, 1999 INTERNET CAPITAL GROUP, INC.
By: /s/ Walter W. Buckley, III
__________________________
Walter W. Buckley, III
President and Chief Executive Officer
Attest:
By: /s/ Donna M. Lightner
_____________________
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<PAGE>
EXHIBIT 10.2
INTERNET CAPITAL GROUP, L.L.C.
OPTION PLAN FOR NON-EMPLOYEE MANAGERS
[As amended and restated by the Board of Manager on April 13, 1998]
Section 1. Purpose.
-------
The purpose of the Plan is to promote the interests of the
Company and its members by attracting and retaining highly qualified independent
Managers with an investment interest in the future success of the Company.
Section 2. Definitions.
-----------
Unless the context clearly indicates otherwise, the following
terms, when used in the Plan, shall have the meanings set forth in this Section.
(a) "Board" shall mean the Board of Managers of the Company.
(b) "Company" shall mean Internet Capital Group, L.L.C., a
Delaware limited liability company, or any successor company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) [Intentionally Omitted]
(e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(f) "Fair Market Value" shall mean the fair market value of a
Unit as determined by the Board in good faith based on the best available facts
and circumstances at the time; provided, however, that where there is a public
market for the Units and the Units are registered under the Exchange Act, Fair
Market Value shall mean the per share or aggregate value of a Unit as of any
given date, determined as follows: (i) if the principal trading market for the
Units is a national securities exchange or the Nasdaq National Market, the last
reported sale price thereof on the relevant date or, if there were no trades on
that date, the latest preceding date upon which a sale was reported, or (ii) if
the Units are not principally traded on such exchange or market, the mean
between the last reported "bid" and "asked" prices of Units on the relevant
date, as reported on Nasdaq or, if not so reported, as reported by the National
Daily Quotation Bureau, Inc. or as reported in a customary financial reporting
services, as applicable and as the Board determines.
(g) "Grantee" shall mean a person granted an Option under the
Plan.
(h) "Manager" shall mean: (i) any individual serving as a member
of the Board or (ii) if approved by the Board in advance, any entity designated
by such individual.
<PAGE>
(i) "Non-Employee Managers" shall mean Managers who are not also
employees of the Company or any of its consolidated subsidiaries, Safeguard
Scientifics, Inc., TL Ventures or any of their consolidated subsidiaries.
(j) "Options" shall mean non-qualified options granted under the
Plan.
(k) "Plan" shall mean this Option Plan for Non-Employee Managers as
set forth herein and as amended from time to time.
(l) "Publicly Traded" means the Company is required to register
shares of any class of common equity under Section 12 of the Exchange Act.
(m) "Unit" shall mean: (i) prior to the Company becoming Publicly
Traded, one Membership Interest of the Company and (ii) on and after the Company
becomes Publicly Traded, one or more units of equity interest in the Company as
determined pursuant to Section 6.
Section 3. Units Subject to the Plan.
-------------------------
Subject to the provisions of Section 6, the Units which may be
issued pursuant to Options granted under the Plan shall not exceed 470,000 Units
in the aggregate. Units issuable upon the exercise of any Option may be
authorized but unissued Units or reacquired Units of Interests. Units subject to
an Option which are not issued pursuant to the exercise of such Option shall be
available for subsequent issuance under the Plan.
Section 4. Grant of Options.
----------------
(a) Eligibility. Only Non-Employee Managers of the Company shall
-----------
be eligible to receive Options under the Plan. Upon election as a Non-Employee
Manager, any person who has not theretofore been a manager of the Company shall
receive an Option under the Plan to purchase 47,000 Units (the "Initial Grant").
Thereafter, Options under the Plan to purchase an additional 20,000 Units (the
"Service Grants") shall be granted to each Non-Employee Manager every two years
on the anniversary in such year of the date the person became a Non-Employee
Manager, provided that the maximum number of Units subject to Options which may
be granted to a Non-Employee Manager under the Plan shall not exceed 107,000
Units. The Initial Grant shall be subject to the availability of Interests
issuable under the Plan pursuant to Section 3 hereof, shall be subject to
adjustment as provided in Section 6 hereof, and shall not be subject to the
discretion of any person or persons.
(b) Exercise Price. The exercise price of each Unit subject to
--------------
an shall be eligible equal the Fair Market Value of a Unit on the date such
Option is granted.
(c) Term; Exercise. Each Option shall have a term of eight years
--------------
of Option grant or until the date the Company liquidates, whichever occurs
earlier. Each Initial Grant shall become exercisable in four equal installments
of a whole number of Units on the first,
-2-
<PAGE>
second, third and fourth anniversaries of the date of grant of such Option. Each
Service Grant shall become exercisable in two equal installments of a whole
number of Units on the first and second anniversaries of the date of grant of
such Option.
Section 5. Exercise of Options.
-------------------
Upon the exercise of any Option, the Grantee shall pay the
exercise price of the Units being purchased (a) in cash or its equivalent; (b)
in Units previously acquired by the Grantee, provided that if such Units were
acquired through exercise of an option under this or a similar plan, such Units
have been held by the Grantee for a period of more than one year from the date
of exercise, and further provided that the Grantee shall not have tendered Units
in payment of the exercise price of any other Option under the Plan or any other
option plan of the Company within six calendar months of the date of exercise;
or (c) in any combination of (a) and (b) above. In the event the Option price is
paid, in whole or in part, with Units, the portion of the Option price so paid
shall be valued based upon the determination of the Board on the business date
of tender.
The number of Units which are issued pursuant to the exercise of
an Option shall be charged against the maximum limitation on Units set forth in
Sections 3 and 4 hereof.
Section 6. Certain Corporate Changes.
-------------------------
(a) Splits, Etc. In the event of any change in the number or
-----------
class of Units outstanding by reason of a dividend, split, subdivision or
combination of Units, the number and class of Units subject to the Plan and to
Options granted or to be granted under the Plan, and the exercise price of each
outstanding Option, shall be proportionately adjusted (rounded to the nearest
whole number of Units).
(b) Corporate Reorganizations. In the event of any corporation
-------------------------
transaction including, without limitation, a transaction in which: (i) the
Company is to be dissolved or liquidated, (ii) the Company is a party to a
merger or consolidation with another company in which the Company will not be
the surviving entity, (iii) the outstanding Units are converted into cash,
securities or other property, (iv) the Company becomes or is considered to be
Publicly Traded under Section 162(m) of the Code or (v) the Company is a party
to a reorganization, then upon exercise of the Options, the holder thereof shall
be entitled only to receive for the exercise price thereof the amount of cash,
securities or other property into or for which one Unit was converted or
exchanged multiplied by the number of Units subject to such Option.
Section 7. Termination of Managership.
--------------------------
Upon a Grantee ceasing to be a Non-Employee Manager of the
Company for any reason other than as a result of (i) the employment of such
person by the Company or a consolidated subsidiary or (ii) the Grantee's death,
such Grantee's Options shall be terminated 90 days after such Grantee's so
ceasing to be a Non-Employee Manager; provided, however, that in
-3-
<PAGE>
no event shall the period extend beyond the expiration of the Option term; and
provided further that such Option shall not be exercisable for more than the
maximum number of Units that the Grantee was entitled to purchase at the date of
the Grantee's so ceasing to be a Non-Employee Manager.
If a Grantee ceases to be a Non-Employee Manager as a result of the
employment of such person by the Company or a consolidated subsidiary, then the
Grantee's Options shall be terminated 90 days after the first date on which the
Grantee is neither an employee or a Manager; provided, however, than in no event
shall the period extend beyond the expiration of the Option term; and provided
further that such Option shall not be exercisable for more than the maximum
number of Units that the Grantee was entitled to purchase at the date of the
Grantee so ceasing to be an employee or a manager.
Upon the Grantee ceasing to be a Non-Employee Manager or an employee
as a result of death, the period during which such Grantee's estate or the
person or persons who acquired the right to exercise such Option by bequest or
inheritance, may exercise any outstanding installments of such Grantee's Options
which were exercisable as of the date of such death shall not exceed one year
from the date of death, provided, however, that in no event shall the period
extend beyond the expiration of the Option term. In no event shall any Option be
exercisable for more than the maximum number of Units that the Grantee was
entitled to purchase at the date of death.
Section 8. General Provisions.
------------------
(a) The Board shall have full power and authority to administer
and interpret the Plan, to make factual determinations and to adopt or amend
such rules, regulations, agreements and instruments for implementing the Plan
and for the conduct of its business as it deems necessary or advisable, in its
sole discretion. The Board's interpretations of the Plan and all determinations
made by the Board pursuant to the powers vested in it hereunder shall be
conclusive and binding on all persons having any interest in the Plan or in any
awards granted hereunder. All powers of the Board shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
(b) Each Option grant shall be evidenced by a written instrument
containing terms and conditions consistent with the Plan.
(c) No Grantee, and no beneficiary or other persons claiming
under or through the Grantee, shall have any right, title or interest by reason
of any Option to any particular assets of the Company, or any Units allocated or
reserved for the purposes of the Plan or subject to any Option except as set
forth herein. The Company shall not be required to establish any fund or make
any other segregation of assets to assure the payment of any Option.
-4-
<PAGE>
(d) No right under the Plan shall be subject to anticipation, sale,
assignment, pledge, encumbrance, or charge except by will or the laws of descent
and distribution, and an Option shall be exercisable during the Grantee's
lifetime only by the Grantee. Subject to the provisions of Section 7 hereof, in
the event of a Grantee's death, his Options may be exercised by the Grantee's
legal representatives.
(e) Notwithstanding any other provision of the Plan or agreements
made pursuant hereto, the Company shall not be required to issue or deliver any
certificate for Units under this Plan prior to fulfillment of all of the
following conditions:
(1) The listing, or approval for listing upon notice of
issuance, of such Units on any securities exchange on which the
Interests may then be traded;
(2) Any registration or other qualification of such Units under
any state or federal law or regulation, or other qualification which
the Board shall, upon the advice of counsel, deem necessary or
advisable;
(3) The obtaining of any other required consent, approval or
permit from any state or federal governmental agency; and
(4) The execution by the Grantee (or the Grantee's legal
representative) of such written representation that counsel for the
Company shall advise is necessary or advisable to the effect that the
Units then being purchased are being purchased for investment with no
present intention of reselling or otherwise disposing of such Units in
any manner which may result in a violation of the Securities Act of
1933, as amended, and the placement upon certificates for such Units
of an appropriate legend in connection therewith.
(f) In no event shall the Company be required to issue a fractional
Unit hereunder.
Section 9. Restrictions on Transfer.
------------------------
(a) Unless otherwise determined by the Board at or after grant,
the Company shall have the right of first offer to repurchase any Units offered
for sale by the Grantee, his executor, administrator, or beneficiaries, which
shares were issued to the Grantee pursuant to one or more Options awarded to the
Grantee under the Plan. Such offer shall be communicated to the Company by
written notice, stipulating the terms and conditions of such offer therein,
forwarded by registered or certified mail. The Company shall exercise its right
to repurchase (or to designate a third party to repurchase) by giving written
notice thereof by registered or certified mail to the Grantee, his executor,
administrator or beneficiaries no later than 30 days after the date of the
receipt of the offer. Within 30 days after receipt of such notice, the Grantee,
his executor, administrator or beneficiaries shall deliver a certificate or
certificates for the units being sold, together with appropriate duly signed
stock powers transferring such units to the Company, and
-5-
<PAGE>
the Company shall deliver to the Grantee, his executor, administrator or
beneficiaries the Company's check in the amount of the purchase price for the
units being sold.
In the event that such offer shall not be accepted by written notice
forwarded by registered or certified mail no later than 30 days after the date
of the receipt of the offer, the Grantee, his executor, administrator or
beneficiaries may dispose of the units offered to any person, firm or
corporation, without restriction, except that the subsequent transfer of such
units shall not be on terms more favorable to the transferee than the terms upon
which the units were originally offered to the Company. If, within 60 days after
the expiration of the 30-day period of any offer made hereunder, the Grantee,
his executor, administrator or beneficiaries offering to sell any units issued
hereunder, shall fail to consummate a sale thereof to any other purchaser, then
no sale of such units may be made thereafter without again reoffering the same
to the Company in accordance with the provisions of this subparagraph.
(b) Unless otherwise determined by the Board at or after grant, in
the event of the Grantee's termination of service on the Board, the Company
shall have the right to repurchase all units issued or to be issued to the
Grantee under this Plan at fair market value, as may be determined by the Board
from time to time, but not less than the Grantee's cost. In the event that the
Board determines in good faith that the Grantee has materially breached any non-
compete or confidentiality agreement with the Company after termination of his
tenure as a Manager or his employment, the price at which the Company shall have
the right to repurchase such units shall be equal to the exercise price or
purchase price paid by the Grantee.
The Company's right to repurchase shall be exercisable at any time
within one year after the date of Grantee's termination of service on the Board
by the delivery of written notice by the Company to such effect to the Grantee,
his executor, administrator or beneficiaries. Within 30 days after receipt of
such notice, the Grantee, his executor, administrator or beneficiaries shall
deliver a certificate or certificates for the shares being sold, together with
appropriate duly signed stock powers transferring such shares to the Company,
and the Company shall deliver to the Grantee, his executor, administrator or
beneficiaries the Company's check in the amount of the purchase price for the
shares being sold.
(c) The right of first refusal and buy-back rights shall terminate
when the Company has consummated a public offering of its Common Stock pursuant
to the Securities Act of 1933, as amended.
(d) The right of first refusal and buy-back rights granted to the
Company pursuant to subparagraphs in this Section 8 are separate and independent
obligations of the Grantee and shall survive any termination of Board service.
Furthermore, such rights shall not be construed as an absolute obligation on the
part of the Company to repurchase any shares tendered.
(e) Each certificate for shares issued by the Company to the Grantee
shall bear an appropriate legend that the transfer of such shares is restricted
by the provisions of this Plan.
-6-
<PAGE>
Section 10. Effective Date. The Plan originally became effective on January
--------------
16, 1997, the date of its initial adoption by the Board. This amended and
restated Plan shall be effective on April 13, 1998.
Section 11. Termination and Amendment. The Plan shall terminate on, and no
-------------------------
Option shall be granted under the Plan after, the tenth anniversary of the
Plan's effective date or the date the Company liquidates, whichever occurs
earlier. Unless otherwise terminated by action of the Board, the Plan will not
terminate automatically as a result of the Company becoming or becoming
considered Publicly Traded. The Board also may terminate the Plan or make such
modifications or amendments to the Plan as it shall deem advisable.
* * * * *
To record the adoption of this Plan, Internet Capital Group, L.L.C.
has caused its authorized officer to affix its corporate name and seal this
_____ day of _________, 1998.
CORPORATE SEAL INTERNET CAPITAL GROUP, L.L.C.
Attest: /s/ Donna M. Lightner /s/ Walter W. Buckley, III
______________________ __________________________________
By: Walter W. Buckley, III, President
-7-
<PAGE>
EXHIBIT 10.2.1
INTERNET CAPITAL GROUP, INC.
DIRECTORS' OPTION PLAN
Section 1. Purpose.
-------
The purpose of the Plan is to promote the interests of the Company
and its shareholders by attracting and retaining highly qualified independent
Directors with an investment interest in the future success of the Company.
Section 2. Definitions.
-----------
Unless the context clearly indicates otherwise, the following terms,
when used in the Plan, shall have the meanings set forth in this Section.
(a) "Board" means the Board of Directors of the Company.
(b) "Company" means Internet Capital Group, Inc., a Delaware
corporation, or any successor company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Director" means: (i) any individual serving as a member of the
Board or (ii) if approved by the Board in advance, any entity designated by such
individual.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(f) "Fair Market Value" means the fair market value of a Share as
determined by the Board in good faith based on the best available facts and
circumstances at the time; provided, however, that where there is a public
market for the Shares and the Shares are registered under the Exchange Act, Fair
Market Value shall mean the per Share value as of any given date, determined as
follows: (i) if the principal trading market for the Shares is a national
securities exchange or the Nasdaq National Market, the last reported sale price
thereof on the relevant date or, if there were no trades on that date, the
latest preceding date upon which a sale was reported, or (ii) if the Shares are
not principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Shares on the relevant date, as reported on
Nasdaq or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting services, as
applicable and as the Board determines.
(g) "Grantee" means a person granted an Option under the Plan.
(h) "ICG Stock" means the common stock of the Company, par value
$.001.
<PAGE>
(i) "Non-Employee Directors" means Directors who are not also
employees of the Company or any of its consolidated subsidiaries, Safeguard
Scientifics, Inc., TL Ventures or any of their consolidated subsidiaries.
(j) "Options" means non-qualified options granted under the Plan.
(k) "Option Agreement" means the written instrument containing the
terms and conditions applicable to an Option awarded under the Plan.
(l) "Plan" means this Internet Capital Group, Inc. Directors' Option
Plan.
(m) "Publicly Traded" means the Company is required to register
shares of any class of common equity under Section 12 of the Exchange Act.
(n) "Share" means one share of ICG Stock.
Section 3. Shares Subject to the Plan.
--------------------------
(a) Total Number. Subject to adjustment as provided in this Section
------------
3, the total number of Shares as to which Options may be granted under the Plan
shall be 470,000 Shares, all of which shall be issuable as Options. Any Shares
issued pursuant to Options hereunder may consist, in whole or in part, of
authorized but unissued ICG Stock or ICG Stock previously issued and outstanding
and reacquired by the Company.
(b) Reduction in Number of Shares Available. The grant of an Option
---------------------------------------
shall reduce the number of Shares available for grants under the Plan by the
number of Shares subject to such Option. Any Shares issued by the Company
through the assumption or substitution of outstanding grants of an acquired
company shall reduce the Shares available for grants under the Plan.
(c) Increase in Number of Shares Available. The lapse, expiration,
--------------------------------------
cancellation or other termination of an Option that has not been fully exercised
shall increase the number of Shares available under the Plan.
(d) Adjustments. In case of any reorganization, recapitalization,
-----------
stock split, stock dividend, combination of shares, merger, consolidation,
rights offering, or any other changes in the corporate structure or Shares of
the Company, appropriate adjustments may be made by the Board (or if the Company
is not the surviving corporation in any such transaction, the board of directors
of the surviving corporation) in the aggregate number and kind of shares subject
to the Plan, and the number and kind of shares and the price per share subject
to outstanding Options. Appropriate adjustments may also be made by the
Committee in the terms of any Option Agreement under the Plan, to reflect such
changes and to modify any other terms of outstanding Option Agreement on an
equitable basis. In the event of any such corporate transaction, then upon
exercise of the Options, the holder thereof shall be entitled only to receive
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<PAGE>
for the exercise price thereof the amount of cash, securities or other property
into or for which one Share was converted or exchanged multiplied by the number
of Shares subject to such Option.
Section 4. Grant of Options.
----------------
(a) Eligibility. Subject to the provisions outlined in this
-----------
Section 4(a), only Non-Employee Directors of the Company shall be eligible to
receive Options under the Plan.
(1) Initial Grants. On the date that such Director is first
--------------
elected to the Board, each Non-Employee Director shall receive an
Option under the Plan to purchase 47,000 Shares; provided, however,
that any Director who was a member of the Board of Managers of
Internet Capital Group, L.L.C. and who became a member of the Board
immediately following the execution of the Agreement of Merger
dated February 4, 1999 shall not be entitled to receive an Initial
Grant. The Initial Grant shall be subject to the availability and
adjustment of Shares issuable under the Plan pursuant to Section 3
and shall not be subject to the discretion of any person or
persons.
(2) Service Grants. Every two (2) years on the anniversary
--------------
of the date that a Non-Employee Director was initially elected to
the Board (or, if applicable, the Board of Managers of Internet
Capital Group, L.L.C.), such Non-Employee Director shall be granted
an Option for an additional 20,000 Shares (a "Service Grant").
(3) Discretionary Grants. In its sole discretion, the Board
--------------------
may grant an Option to any Non-Employee Director who was a member
of the Board of Managers of Internet Capital Group, L.L.C. and who
became a member of the Board immediately following the execution of
the Agreement of Merger dated February 4, 1999 to compensate such
Non-Employee Director for the cancellation of outstanding options
held by such Non-Employee Director immediately prior to the
execution of such Agreement of Merger; provided, however, that such
grant shall be subject to the availability and adjustment of Shares
issuable under the Plan pursuant to Section 3 (a "Discretionary
Grant").
(4) Aggregate Limitation on Grants. Notwithstanding any
------------------------------
provision of this Plan to the contrary, the maximum number of
Shares subject to Initial Grants, Service Grant and Discretionary
Grants which may be awarded to any Non-Employee Director under the
Plan shall not exceed 1,070 Shares.
(b) Exercise Price. Unless specifically set forth to the contrary
--------------
in the applicable Option Agreement, the exercise price of each Share subject to
an Option shall equal the Fair Market Value of a Share on the date such Option
is granted.
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<PAGE>
(c) Term; Exercise. Unless specifically set forth to the contrary in
--------------
the applicable Option Agreement, each Option shall have a term of eight years
from the date of Option grant or until the date the Company liquidates,
whichever occurs earlier. Each Initial Grant shall become exercisable in four
equal installments of a whole number of Shares on the first, second, third and
fourth anniversaries of the date of grant of such Option. Each Service Grant
shall become exercisable in two equal installments of a whole number of Shares
on the first and second anniversaries of the date of grant of such Option. Each
Discretionary Grant shall become exercisable as set forth in the applicable
Option Agreement.
Section 5. Exercise of Options.
-------------------
Upon the exercise of any Option, the Grantee shall pay the exercise
price of the Shares being purchased (a) in cash or its equivalent; (b) in Shares
previously acquired by the Grantee, provided that if such Shares were acquired
through exercise of an option under this or a similar plan, such Shares have
been held by the Grantee for a period of more than one year from the date of
exercise, and further provided that the Grantee shall not have tendered Shares
in payment of the exercise price of any other Option under the Plan or any other
option plan of the Company within six calendar months of the date of exercise;
or (c) in any combination of (a) and (b) above. In the event the Option price
is paid, in whole or in part, with Shares, the portion of the Option price so
paid shall be valued based upon the determination of the Board on the business
date of tender.
The number of Shares which are issued pursuant to the exercise of an
Option shall be charged against the maximum limitation on Shares set forth in
Sections 3 and 4 hereof.
Section 6. Termination of Directorship.
---------------------------
Upon a Grantee ceasing to be a Non-Employee Director of the Company
for any reason other than as a result of (i) the employment of such person by
the Company or a consolidated subsidiary or (ii) the Grantee's death, such
Grantee's Options shall be terminated 90 days after such Grantee's so ceasing to
be a Non-Employee Director; provided, however, that in no event shall the period
extend beyond the expiration of the Option term; and provided further that such
Option shall not be exercisable for more than the maximum number of Shares that
the Grantee was entitled to purchase at the date of the Grantee's so ceasing to
be a Non-Employee Director.
If a Grantee ceases to be a Non-Employee Director as a result of the
employment of such person by the Company or a consolidated subsidiary, then the
Grantee's Options shall be terminated 90 days after the first date on which the
Grantee is neither an employee or a Director; provided, however, than in no
event shall the period extend beyond the expiration of the Option term; and
provided further that such Option shall not be exercisable for more than the
maximum number of Shares that the Grantee was entitled to purchase at the date
of the Grantee so ceasing to be an employee or a Director.
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<PAGE>
Upon the Grantee ceasing to be a Non-Employee Director or an employee
as a result of death, the period during which such Grantee's estate or the
person or persons who acquired the right to exercise such Option by bequest or
inheritance, may exercise any outstanding installments of such Grantee's Options
which were exercisable as of the date of such death shall not exceed one year
from the date of death, provided, however, that in no event shall the period
extend beyond the expiration of the Option term. In no event shall any Option
be exercisable for more than the maximum number of Shares that the Grantee was
entitled to purchase at the date of death.
Section 7. General Provisions.
------------------
(a) The Board shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and for
the conduct of its business as it deems necessary or advisable, in its sole
discretion. The Board's interpretations of the Plan and all determinations made
by the Board pursuant to the powers vested in it hereunder shall be conclusive
and binding on all persons having any interest in the Plan or in any awards
granted hereunder. All powers of the Board shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
(b) Each Option grant shall be evidenced by an Option Agreement.
(c) No Grantee, and no beneficiary or other persons claiming under
or through the Grantee, shall have any right, title or interest by reason of any
Option to any particular assets of the Company, or any Shares allocated or
reserved for the purposes of the Plan or subject to any Option except as set
forth herein. The Company shall not be required to establish any fund or make
any other segregation of assets to assure the payment of any Option.
(d) No right under the Plan shall be subject to anticipation, sale,
assignment, pledge, encumbrance, or charge except by will or the laws of descent
and distribution, and an Option shall be exercisable during the Grantee's
lifetime only by the Grantee. Subject to the provisions of Section 7 hereof, in
the event of a Grantee's death, his Options may be exercised by the Grantee's
legal representatives.
(e) Notwithstanding any other provision of the Plan or agreements
made pursuant hereto, the Company shall not be required to issue or deliver any
certificate for Shares under this Plan prior to fulfillment of all of the
following conditions:
(1) The listing, or approval for listing upon notice of
issuance, of such Shares on any securities exchange on which the
Interests may then be traded;
-5-
<PAGE>
(2) Any registration or other qualification of such Shares
under any state or federal law or regulation, or other qualification
which the Board shall, upon the advice of counsel, deem necessary or
advisable;
(3) The obtaining of any other required consent, approval or
permit from any state or f ederal governmental agency; and
(4) The execution by the Grantee (or the Grantee's legal
representative) of such written representation that counsel for the
Company shall advise is necessary or advisable to the effect that the
Shares then being purchased are being purchased for investment with
no present intention of reselling or otherwise disposing of such
Shares in any manner which may result in a violation of the
Securities Act of 1933, as amended, and the placement upon
certificates for such Shares of an appropriate legend in connection
therewith.
(f) In no event shall the Company be required to issue a fractional
Share hereunder.
Section 8. Restrictions on Transfer.
------------------------
(a) Right of First Refusal. Unless otherwise determined by the
----------------------
Board at or after grant, the Company shall have the right of first offer to
repurchase any Shares offered for sale by the Grantee, his executor,
administrator, or beneficiaries, which shares were issued to the Grantee
pursuant to one or more Options awarded to the Grantee under the Plan. Such
offer shall be communicated to the Company by written notice, stipulating the
terms and conditions of such offer therein, forwarded by registered or certified
mail. The Company shall exercise its right to repurchase (or to designate a
third party to repurchase) by giving written notice thereof by registered or
certified mail to the Grantee, his executor, administrator or beneficiaries no
later than 30 days after the date of the receipt of the offer. Within 30 days
after receipt of such notice, the Grantee, his executor, administrator or
beneficiaries shall deliver a certificate or certificates for the Shares being
sold, together with appropriate duly signed stock powers transferring such
Shares to the Company, and the Company shall deliver to the Grantee, his
executor, administrator or beneficiaries the Company's check in the amount of
the purchase price for the Shares being sold.
In the event that such offer shall not be accepted by written notice
forwarded by registered or certified mail no later than 30 days after the date
of the receipt of the offer, the Grantee, his executor, administrator or
beneficiaries may dispose of the Shares offered to any person, firm or
corporation, without restriction, except that the subsequent transfer of such
Shares shall not be on terms more favorable to the transferee than the terms
upon which the Shares were originally offered to the Company. If, within 60
days after the expiration of the 30-day period of any offer made hereunder, the
Grantee, his executor, administrator or beneficiaries offering to sell any
Shares issued hereunder, shall fail to consummate a sale thereof to any other
-6-
<PAGE>
purchaser, then no sale of such Shares may be made thereafter without again
reoffering the same to the Company in accordance with the provisions of this
subparagraph.
(b) Right to Repurchase. Unless otherwise determined by the Board
-------------------
at or after grant, in the event of the Grantee's termination of service on the
Board, the Company shall have the right to repurchase all Shares issued or to be
issued to the Grantee under this Plan at fair market value, as may be determined
by the Board from time to time, but not less than the Grantee's cost. In the
event that the Board determines in good faith that the Grantee has materially
breached any non-compete or confidentiality agreement with the Company after
termination of his tenure as a Director or his employment, the price at which
the Company shall have the right to repurchase such Shares shall be equal to the
exercise price or purchase price paid by the Grantee.
The Company's right to repurchase shall be exercisable at any time
within one year after the date of Grantee's termination of service on the Board
by the delivery of written notice by the Company to such effect to the Grantee,
his executor, administrator or beneficiaries. Within 30 days after receipt of
such notice, the Grantee, his executor, administrator or beneficiaries shall
deliver a certificate or certificates for the shares being sold, together with
appropriate duly signed stock powers transferring such shares to the Company,
and the Company shall deliver to the Grantee, his executor, administrator or
beneficiaries the Company's check in the amount of the purchase price for the
shares being sold.
(c) The right of first refusal and buy-back rights shall terminate
when the Company has consummated a public offering of its Common Stock pursuant
to the Securities Act of 1933, as amended.
(d) The right of first refusal and buy-back rights granted to the
Company to subparagraphs in this Section 8 are separate and independent
obligations of the Grantee and shall survive any termination of Board service.
Furthermore, such rights shall not be construed as an absolute obligation on the
part of the Company to repurchase any shares tendered.
(e) Each certificate for Shares issued by the Company to the
Grantee shall bear an appropriate legend that the transfer of such Shares is
restricted by the provisions of this Plan.
Section 9. Effective Date. The effective date of this Plan is February 2,
--------------
1999, the date of its adoption by the Board.
Section 10. Termination and Amendment. The Plan shall terminate on, and no
-------------------------
Option shall be granted under the Plan after, the tenth anniversary of the
Plan's effective date or the date the Company liquidates, whichever occurs
earlier. Unless otherwise terminated by action of the Board, the Plan will not
terminate automatically as a result of the Company becoming or becoming
considered Publicly Traded. The Board also may terminate the Plan or make such
modifications or amendments to the Plan as it shall deem advisable.
-7-
<PAGE>
* * * * *
To record the adoption of this Plan, Internet Capital Group, Inc. has
caused its authorized officer to affix its corporate name and seal this 2nd
day of February, 1999.
CORPORATE SEAL INTERNET CAPITAL GROUP, INC.
Attest: /s/ Donna M. Lightner /s/ Walter W. Buckley, III
______________________ ______________________________________
By: Walter W. Buckley, III, President
-8-
<PAGE>
EXHIBIT 10.3
INTERNET CAPITAL GROUP, L.L.C.
SUMMARY OF THE TERMS OF THE
MEMBERSHIP PROFIT INTERESTS
---------------------------
The shares of Membership Profit Interest ("MPI Shares") of Internet Capital
Group, L.L.C. (the "Company") represent the shares of membership interest to be
granted by the Company from time to time as performance incentives to those
officers or employees of, or consultants or advisors to, the Company (the
"Eligible Persons") designated by Walter W. Buckley, III and Kenneth A. Fox.
The MPI Shares shall be subject to the terms and conditions set forth herein and
in the Limited Liability Company Agreement of the Company, dated May 9, 1996, as
amended (the "LLC Agreement"), as the same may be amended from time to time by
the Board of Managers (the "Board") in accordance with the LLC Agreement.
The Board shall have full and final authority in its absolute discretion
with respect to the terms and conditions of any grant of MPI Shares. The Board
may correct any defect, supply any omission, and reconcile any inconsistency in
any grant of MPI Shares to the extent it shall deem desirable. The Board shall
also have the authority to make such determinations and interpretations under,
or in connection with, the grant of MPI Shares, as it deems necessary or
advisable. All such determinations and interpretations shall be binding and
conclusive upon the Company, its members, all of its current and former
officers, employees, consultants and advisors, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them. No member of the Board shall be
liable for any action or determination made in good faith with respect to any
grant of MPI Shares.
The total number of MPI Shares available for issuance will equal 14.5% of
the Company's membership interests, calculated by (i) dividing the total capital
contributions and outstanding capital commitments of all members by 85.5% and
(ii) subtracting from the quotient all members' capital contributions plus their
outstanding capital commitments. The MPI Shares will be allocated among Walter
Buckley, Ken Fox and the other Eligible Persons designated by them in such
proportions as Walter and Ken decide. No payment is required in exchange for
the grant of MPI Shares.
The MPI Shares will vest in equal annual installments over a five (5) year
period beginning on the date an Eligible Person is hired or retained by the
Company. If an Eligible Person dies, becomes disabled, or otherwise ceases to
provide services to the Company for any reason (with or without cause), then
such Eligible Person will only be entitled to receive that portion of his or her
MPI Shares that have vested through the date of such termination (or such
greater amount as the Board of Managers may determine in its discretion) and
will forfeit the unvested portion, if any, of his or her MPI Shares. Any MPI
Shares which are forfeited will continue to be available for issuance to other
Eligible Persons. The Board may accelerate the vesting date of any unvested MPI
Shares in its discretion, if it deems such acceleration to be desirable.
The MPI Shares granted by the Company shall be evidenced by a written
document in such form as the Board shall, from time to time, approve. An
Eligible Person receiving MPI Shares will be admitted as a member of the Company
and become bound by the LLC Agreement on the date on which the Company receives
his or her signed agreement reflecting the grant of such shares.
<PAGE>
EXHIBIT 10.5
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
Dated September 30, 1998
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
DELAWARE SECURITIES ACT OF 1972, AS AMENDED, OR SIMILAR LAWS OR ACTS OF OTHER
STATES IN RELIANCE UPON EXEMPTIONS UNDER THOSE ACTS. THE SALE OR OTHER
DISPOSITION OF THE MEMBERSHIP INTERESTS IS RESTRICTED AS STATED IN THIS AMENDED
AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, AND IN ALL EVENTS IS
PROHIBITED UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT
AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES ACTS AND LAWS. BY THE EXECUTION OF THIS AGREEMENT AND THE
ACQUISITION OF THE MEMBERSHIP INTEREST REPRESENTED HEREBY, THE MEMBER
REPRESENTS, INTER ALIA, THAT IT IS ACQUIRING ITS MEMBERSHIP INTEREST FOR
----- ----
INVESTMENT AND WITHOUT A VIEW TO DISTRIBUTION AND THAT IT WILL NOT SELL OR
OTHERWISE DISPOSE OF ITS MEMBERSHIP INTEREST WITHOUT REGISTRATION OR OTHER
COMPLIANCE WITH THE AFORESAID ACTS AND THE RULES AND REGULATIONS ISSUED
THEREUNDER.
<PAGE>
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
ARTICLE I DEFINITIONS................................................................................. 1
1.1 Definitions................................................................................. 1
1.2 Construction................................................................................ 5
ARTICLE II ORGANIZATION................................................................................ 5
2.1 Formation; Effective Date................................................................... 5
2.2 Name........................................................................................ 5
2.3 Registered Office; Registered Agent; Principal Office in the United States; Other Offices... 5
2.4 Purpose..................................................................................... 5
2.5 Foreign Qualification....................................................................... 5
2.6 Term........................................................................................ 6
2.7 No State-Law Company........................................................................ 6
2.8 Classification for Tax Purposes............................................................. 6
2.9 Management Company.......................................................................... 6
ARTICLE III MEMBERSHIP, DISPOSITIONS OF INTERESTS....................................................... 7
3.1 Current Members............................................................................. 7
3.2 Representations and Warranties.............................................................. 7
3.3 No Certification; Restrictions on the Disposition of an Interest............................ 8
3.4 New Members................................................................................. 10
3.5 Interests in a Member....................................................................... 11
3.6 Information................................................................................. 11
3.7 Liability to Third Parties.................................................................. 12
3.8 Lack of Authority........................................................................... 12
3.9 Withdrawal.................................................................................. 12
3.10 Preemptive Rights........................................................................... 12
3.11 Right of First Refusal...................................................................... 13
3.12 Registration Rights......................................................................... 15
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE IV CAPITAL CONTRIBUTIONS....................................................................... 15
4.1 Contributions............................................................................... 15
4.2 Subsequent Contributions.................................................................... 15
4.3 Failure to Contribute....................................................................... 15
4.4 Return of Contributions..................................................................... 16
4.5 Advances by Members......................................................................... 16
4.6 Capital Account............................................................................. 16
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS............................................................... 17
5.1 Allocations................................................................................. 17
5.2 Distributions............................................................................... 18
ARTICLE VI.. MANAGERS.................................................................................... 19
6.1 Management by Managers...................................................................... 19
6.2 Actions by Managers; Committees; Delegation and Duties...................................... 19
6.3 Number and Term of Office of Managers....................................................... 20
6.4 Vacancies; Removal; Resignation............................................................. 20
6.5 Meetings.................................................................................... 20
6.6 Approval or Ratification of Acts or Contracts by Members.................................... 21
6.7 Action by Written Consent or Telephone Conference........................................... 21
6.8 Expenses; Compensation...................................................................... 22
6.9 Co-Investment Opportunities................................................................. 22
6.10 Advisory Board.............................................................................. 22
6.11 Conflicts of Interest....................................................................... 23
6.12 Related Party Transactions.................................................................. 23
ARTICLE VII OFFICERS.................................................................................... 23
7.1 Officers.................................................................................... 23
7.2 Compensation................................................................................ 23
7.3 Term of Office; Removal; Filling of Vacancies............................................... 23
7.4 Chairman.................................................................................... 23
7.5 President................................................................................... 24
7.6 Vice Presidents............................................................................. 24
7.7 Secretary................................................................................... 24
7.8 Assistant Secretary......................................................................... 24
7.9 Treasurer................................................................................... 24
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
7.10 Additional Powers and Duties................................................................ 24
ARTICLE VIII MEETINGS OF MEMBERS......................................................................... 24
8.1 Meetings.................................................................................... 24
8.2 Voting List................................................................................. 25
8.3 Proxies..................................................................................... 25
8.4 Conduct of Meetings......................................................................... 26
8.5 Action by Written Consent or Telephone Conference........................................... 26
ARTICLE IX INDEMNIFICATION............................................................................. 26
9.1 Right to Indemnification.................................................................... 26
9.2 Advance Payment............................................................................. 27
9.3 Indemnification of Employees and Agents..................................................... 27
9.4 Appearance as a Witness..................................................................... 27
9.5 Nonexclusivity of Rights.................................................................... 27
9.6 Insurance................................................................................... 27
9.7 Savings Clause.............................................................................. 28
9.8 Limitation on Liability..................................................................... 28
ARTICLE X TAXES....................................................................................... 28
10.1 Tax Returns................................................................................. 28
10.2 Tax Elections............................................................................... 28
10.3 Tax Matters Partner......................................................................... 29
ARTICLE XI BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS.................................................. 29
11.1 Maintenance of Books........................................................................ 29
11.2 Reports..................................................................................... 29
11.3 Accounts.................................................................................... 29
ARTICLE XII BANKRUPTCY OF A MEMBER...................................................................... 30
12.1 Bankrupt Members............................................................................ 30
ARTICLE XIII DISSOLUTION, LIQUIDATION, AND TERMINATION................................................... 30
13.1 Dissolution................................................................................. 30
13.2 Liquidation and Termination................................................................. 31
13.3 Deficit Capital Accounts.................................................................... 32
13.4 Certificate of Cancellation................................................................. 32
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE XIV 1940 ACT.................................................................................... 33
14.1 Expulsion................................................................................... 33
14.2 Purchase of Expelled Member's Membership Interest........................................... 33
ARTICLE XV GENERAL PROVISIONS.......................................................................... 33
15.1 Offset...................................................................................... 33
15.2 Notices..................................................................................... 33
15.3 Entire Agreement; Supersedure............................................................... 34
15.4 Effect of Waiver or Consent................................................................. 34
15.5 Amendment or Modification................................................................... 34
15.6 Binding Act................................................................................. 34
15.7 Governing Law; Severability................................................................. 34
15.8 Further Assurances.......................................................................... 35
15.9 No Third Party Benefit...................................................................... 35
15.10 Waiver of Certain Rights.................................................................... 35
15.11 Indemnification............................................................................. 35
15.12 Counterparts................................................................................ 35
15.13 Resolutions of Disputes..................................................................... 35
15.14 Estoppels................................................................................... 36
15.15 Reliance on Authority of Person Signing Agreement........................................... 37
</TABLE>
EXHIBIT A: NAMES, CAPITAL CONTRIBUTIONS, COMMITMENTS, COMMITMENT RATIOS,
MEMBERSHIP PROFIT INTERESTS AND TOTAL MEMBERSHIP INTERESTS OF
MEMBERS
EXHIBIT B: REQUIRED INFORMATION
EXHIBIT C: REGISTRATION RIGHTS
-iv-
<PAGE>
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") of INTERNET CAPITAL GROUP, L.L.C. (the "Company") dated as of
September 30, 1998 by and among the parties listed on Exhibit A attached hereto
---------
(the "Current Members") and those other persons who become Members of the
Company from time to time, as hereinafter provided.
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Act" means the Delaware Limited Liability Company Act (6 Del. C.
(S) 18-101 et. seq.), and any successor statute, as amended from time to
time.
"Agreement" has the meaning given that term in the introductory
paragraph as amended from time to time.
"Bankrupt" means, with respect to any person, a person (a) that (i)
makes an assignment for the benefit of creditors; (ii) files a voluntary
petition in bankruptcy; (iii) is adjudged a bankrupt or insolvent, or has
entered against him an order for relief, or is declared insolvent in any
bankruptcy or insolvency proceedings; (iv) files a petition or answer
seeking for the person a reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
statute, law, or regulation; (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the person in a proceeding of the type described in
subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
the person's or of all or any substantial part of the person's properties;
or (b) against whom, a proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any law has been commenced and 120 days have expired without
dismissal thereof or with respect to whom, without the person's consent or
acquiescence, a trustee, receiver, or liquidator of the person or of all or
any substantial part of the person's properties has been appointed and 90
days have expired without the appointment having been vacated or stayed, or
90 days have expired after the date of expiration of a stay, if the
appointment has not previously been vacated.
"Business Day" means any day other than a Saturday, a Sunday, or a
holiday on
<PAGE>
which national banking associations in the Commonwealth of Pennsylvania are
closed.
"Capital Contribution" means any contribution by a Member to the
capital of the Company; provided that, upon the admission of a new Member
after the date hereof, the Capital Contribution of each Current Member
shall be deemed to be equal to the capital account of such Current Member
as revalued pursuant to Section 4.6 hereof.
"Certificate" has the meaning given that term in Section 2.1.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Commitment" means the amount of subsequent contributions each
Member is obligated to contribute to the Company pursuant to Section 4.2 of
this Agreement. The initial Commitment of each Current Member or new
Member purchasing shares of Membership Interest pursuant to Section 3.4
shall be the Commitment established pursuant thereto. Each Member's
Commitment shall be reduced by the amount of any subsequent Capital
Contributions made by such Member and by the amount of any distribution
applied against such commitment under Section 5.2(a)(ii).
"Commitment Ratio" with respect to any Current Member or any new
Member purchasing Membership Interests pursuant to Section 3.4 hereof shall
mean a fraction (expressed as a percentage), the numerator of which is that
Member's Commitment and the denominator of which is the sum of the
Commitments of all Current Members and new Members purchasing shares of
Membership Interests pursuant to Section 3.4 hereof.
"Company" means Internet Capital Group, L.L.C., a Delaware limited
liability company.
"Default Interest Rate" means a rate per annum equal to 3% plus a
varying rate per annum that is equal to the prime rate of interest as
reported in the Wall Street Journal, with adjustments in that varying rate
to be made on the same date as any change in that rate.
"Delinquent Member" has the meaning given that term in Section 4.3.
"Dispose," "Disposing" or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or
other disposition or encumbrance (including, without limitation, by
operation of law), or the acts thereof.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, limited liability
company, limited liability partnership, cooperative or association.
-2-
<PAGE>
"General Interest Rate" means a rate per annum equal to a varying
rate per annum that is equal to the prime rate of interest as reported in
the Wall Street Journal, with adjustments in that varying rate to be made
on the same date as any change in that rate.
"Manager" means any Member designated as a manager of the Company in
this Agreement or hereafter appointed as a Manager as provided in this
Agreement, but does not include any person who has ceased to be a manager
of the Company. The Managers may collectively be referred to as the "Board
of Managers."
"Member" means (a) the Current Members and (b) any person executing
this Agreement as of the date of this Agreement as a member or hereafter
admitted to the Company as a member as provided in this Agreement, but does
not include any person who has ceased to be a member in the Company.
"Membership Interest" means the ownership interest of a Member in
the Company, including, without limitation, rights to distributions
(liquidating or otherwise), allocations, information, and to consent,
approve or vote upon matters upon which Members are entitled to so consent,
approve or vote upon hereunder. Each Member's Membership Interest shall be
represented by shares of Membership Interest. The number of shares of
Membership Interest owned by a Member at any time shall be equal to the sum
of (1) the quotient obtained by dividing that Member's Capital Contribution
plus then outstanding Commitment by $2.00 (provided that, solely for this
purpose, Capital Contributions attributable to Membership Profit Interests
upon a revaluation of the Company's capital accounts in accordance with
Treas. Reg. (S)1.704-1(b)(2)(iv)(f) shall be disregarded) plus (2) the
number of then outstanding shares of Membership Profit Interest owned by
such Member, if any plus (3) the number of then outstanding shares of
Membership Interests with respect to any vested and exercised Options owned
by such Member. The number of shares of Membership Interest owned on the
date hereof by the Current Members is shown on Exhibit A. As new Members
---------
are admitted to the Company, the Managers shall prepare and distribute to
all Members a revised Exhibit A showing the shares of Membership Interest
---------
then owned by all Members and their respective Capital Contributions,
Commitments, Commitment Ratios and shares of Membership Profit Interests,
if any.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Membership Profit Interest" means the 6,783,625 shares of
Membership Interest granted by the Company as performance incentives to
certain officers or employees of, or consultants or advisors to, the
Company designated by Walter W. Buckley, III and Kenneth A. Fox pursuant to
the Membership Profit Interest Plan.
"Offering" means the offering of shares of Membership Interest in
the Company made by the Company pursuant to the Private Placement
Memorandum on the terms and conditions set forth in the Private Placement
Memorandum.
-3-
<PAGE>
"Options" means (1) the non-qualified options to purchase 470,000
shares of Membership Interests that may be granted to non-employee Managers
of the Company pursuant to the Company's Option Plan For Non-Employee
Managers, which was adopted by the Company's Board of Managers on January
16, 1997 and (2) the non-qualified options to purchase up to 10% of the
total shares of Membership Interests of the Company on a fully-diluted
basis after giving effect to this Offering that may be granted to
employees, officers, consultants and advisors to the Company pursuant to
the Company's Option Plan For Employees and Consultants, which plan has
been adopted by the Board of Managers.
"Private Placement Memorandum" means the Company's private placement
memorandum dated May 1998, as amended, providing for the offering of shares
of Membership Interest in the amount of up to $70,000,000.
"Public Offering" has the meaning given that term in Section 3.3(g).
"Proceeding" has the meaning given that term in Section 9.1.
"Required Interest" means one or more Members having among them more
than 50% of the then outstanding Membership Interests of all Members.
"Safeguard" means Safeguard Scientifics, Inc., a Pennsylvania
corporation which owns all of the outstanding equity interests of SSI-
Delaware.
"Securities Act" has the meaning given that term in Section 3.2(h).
"SSI-Delaware" means Safeguard Scientifics (Delaware), Inc., a
Delaware Corporation and a wholly owned subsidiary of Safeguard.
"Strategic Partner" has the meaning given that term in Section 6.3.
"Subscription Agreement" has the meaning given that term in Section
3.4(a).
"Successor Corporation" means any C corporation into, or with which,
the Company merges or consolidates, or to which the Company transfers its
assets in exchange for stock of such corporation.
"TL" means collectively Technology Leaders II, L.P., a Delaware
limited partnership and Technology Leaders II Offshore C.V., a Netherlands
Antilles limited partnership, and the TL Corporations.
"TL Corporations" means any corporations wholly owned by either
Technology Leaders II, L.P. or Technology Leaders II Offshore C.V. which
acquire Membership Interests in the Company.
Other terms defined herein have the meanings so given them.
-4-
<PAGE>
1.2 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter. All
references to Articles and sections refer to articles and Sections of this
Agreement, and all references to Exhibits are to Exhibits attached hereto, each
of which is made a part hereof for all purposes.
ARTICLE II
ORGANIZATION
2.1 Formation; Effective Date. The Company was organized as a Delaware
limited liability company on March 4, 1996 by the filing of a certificate of
formation (the "Certificate") with the Office of the Secretary of the State of
Delaware under and pursuant to the Act signed by Walter W. Buckley, III as an
"authorized person" within the meaning of the Act, and this Agreement shall be
effective as of the time of the filing of the Certificate. This Agreement amends
and restates in its entirety the Limited Liability Company Agreement entered
into on May 9, 1996 by and among SSI-Delaware and the original Members (the
"Original Agreement"), as amended and restated by the Amended and Restated
Limited Company Agreement dated May 13, 1998 (the "May Agreement").
2.2 Name. The name of the Company is "Internet Capital Group, L.L.C." and
all Company business must be conducted in that name or such other names that
comply with applicable law as the Managers may select from time to time.
2.3 Registered Office; Registered Agent; Principal Office in the United
States; Other Offices. The registered agent and office of the Company required
by the Act to be maintained in the State of Delaware shall be Corporation
Service Company, 1013 Centre Road, Wilmington, Delaware 19805 or such other
agent or office (which need not be a place of business of the Company) as the
Managers may designate from time to time in the manner provided by law. The
principal office of the Company shall be at such place as the Managers may
designate from time to time and the Company shall maintain such records as are
set forth on Exhibit B attached hereto. The Company may have such other offices
---------
as the Managers may designate from time to time.
2.4 Purpose. The purpose of the Company is to (a) acquire equity interests
in companies engaged in businesses related to the Internet, to actively
participate in the management and operations of those companies, and to hold,
manage and sell its investments, as described in the Private Placement
Memorandum; (b) engage in any such other activities permitted under Delaware law
as the Members holding a Required Interest shall determine; and (c) engage in
all other activities incidental or related thereto. Incident to such purposes
and as part of its business, the Company is authorized to do all things
necessary or appropriate to carry out the foregoing purposes or purposes related
or incidental thereto.
2.5 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than the State of Delaware, the Managers shall cause
the Company to comply with all requirements necessary to qualify the Company as
a foreign limited liability company in that jurisdiction if the nature of its
business makes such qualification necessary. At the request of the Managers,
each Member shall execute, acknowledge, swear to, and deliver all certificates
and other
-5-
<PAGE>
instruments conforming with this Agreement that are necessary or appropriate to
qualify, continue, and terminate the Company as a foreign limited liability
company in all such jurisdictions in which the Company may conduct business.
2.6 Term. The Company commenced on the date the Certificate was filed with
the Secretary of State of the State of Delaware and shall continue in existence
until April 30, 2008, unless the Board of Managers shall, in its sole
discretion, approve extension(s) of time for the orderly liquidation of the
Company, such extension(s) not to exceed two periods of one year each, or such
earlier time as this Agreement may specify.
2.7 No State-Law Partnership. The Members intend that the Company not be a
partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member or Manager be a partner or joint venturer of any
other Member or Manager, for any purposes other than Federal and, to the extent
permitted, state and local tax purposes, and this Agreement shall not be
construed to produce a contrary result.
2.8 Classification for Tax Purposes. It is the express intention of the
Members that the Company lack the corporate characteristics of continuity of
life, centralized management and free transferability of interests (as those
terms are defined and utilized in Treas. Reg. (S) 301.7701-2) and, therefore, be
classified as a partnership for purposes of Federal income taxation and not as
an association taxable as a corporation. It is the further intention of the
Members that this Agreement be interpreted and applied accordingly.
2.9 Management Company. (a) The Company is authorized to enter into an
agreement with a management company selected by the Managers (such company, the
"Management Company"), in a form acceptable to the Managers (such agreement, the
"Management Agreement") pursuant to which the Management Company may provide
certain management and administrative services to the Company.
(b) The Managers shall be responsible for supervising the activities of the
Management Company and for enforcing the rights of the Company under the
Management Agreement. The Managers shall have final authority with respect to
the management, operations and policies of the Company and shall be solely
responsible for making all decisions with respect to the investment of the
Company's assets.
(c) In exchange for its services, the Management Company may be entitled to
receive from the Company a fee in such amount and payable at such times as
provided in the Management Agreement.
-6-
<PAGE>
ARTICLE III
MEMBERSHIP, DISPOSITIONS OF INTERESTS
3.1 Current Members. The Current Members of the Company are set forth
on the attached Exhibit A, which Exhibit A designates the Current Members as
---------- ---------
such and shall be amended from time to time to reflect the withdrawal of Members
and the admission of new Members pursuant to this Agreement.
3.2 Representations and Warranties. The Current Members hereby
acknowledge that the representations and warranties they made in the May
Agreement were true and correct at the time they were made and that such
representations and warranties remain true and correct as of the date hereof.
Each new Member hereby represents and warrants to the Company and each other
Member that:
(a) if that Member is a corporation, it is duly organized, validly
existing, and in good standing under the law of the state of its incorporation
and is duly qualified and in good standing as a foreign corporation in the
jurisdiction of its principal place of business (if not incorporated therein);
(b) if that Member is a limited liability company, it is duly organized,
validly existing, and (if applicable) in good standing under the law of the
state of its organization and is duly qualified and (if applicable) in good
standing as a foreign limited liability company in the jurisdiction of its
principal place of business (if not organized therein);
(c) if that Member is a partnership, trust, or other entity, it is duly
formed, validly existing, and (if applicable) in good standing under the law of
the state of its formation, and if required by law is duly qualified to do
business and (if applicable) is in good standing in the jurisdiction of its
principal place of business (if not formed therein), and the representations and
warranties in clauses (a), (b) or (c) above, if applicable, are true and correct
with respect to each partner (other than limited partners), trustee, or other
member thereof;
(d) if that Member is an Entity, it has full corporate, limited liability
company, partnership, trust, or other applicable power and authority to execute
and agree to this Agreement and to perform its obligations hereunder and all
necessary actions by the board of directors, shareholders, managers, members,
partners, trustees, beneficiaries, or other persons necessary for the due
authorization, execution, delivery, and performance of this Agreement and the
Subscription Agreement by that Member have been duly taken;
(e) such Member has duly executed and delivered this Agreement and/or the
Subscription Agreement;
(f) such Member's authorization, execution, delivery, and performance of
this Agreement and the Subscription Agreement do not conflict with any other
agreement or arrangement to which that Member is a party or by which it is
bound;
-7-
<PAGE>
(g) such Member is acquiring its Membership Interest for its own account,
for investment only and not with a view to the distribution thereof, except to
the extent provided in or contemplated by this Agreement;
(h) such Member recognizes that (i) the Membership Interests have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an exemption from such registration, and agrees that it will
not sell, offer for sale, transfer, pledge or hypothecate its Membership
Interests, in whole or in part, (A) in the absence of an effective registration
statement covering such Membership Interests under the Securities Act, unless
such sale, offer of sale, transfer, pledge or hypothecation is exempt from
registration for any proposed sale, as confirmed in the opinions of counsel
required under Section 3.3(e) and (B) except in compliance with all applicable
provisions of this Agreement, and (ii) the restrictions on transfer imposed by
this Agreement may severely affect the liquidity of an investment in the
Membership Interests;
(i) the Company has made available to that Member the opportunity to ask
questions of and receive answers from the Company's Managers and officers
concerning the terms and conditions of the Offering and the business and
financial condition of the Company, and to acquire, and each Member has received
to its satisfaction, such additional information, in addition to that set forth
herein, about the business and financial condition of the Company and the terms
and conditions of the Member's investment in the Company as it has requested;
(j) such Member (i) is an "accredited investor" as such term is defined in
Rule 501 promulgated under the Securities Act, (ii) its financial situation is
such that it can afford to bear the economic risk of holding the Membership
Interests for an indefinite period of time and suffer complete loss of its
investment in the Membership Interests, and (iii) its knowledge and experience
in financial and business matters are such that it is capable of evaluating the
merits and risks of its purchase of the Membership Interests as contemplated by
this Agreement; and
(k) if that Member is an investment company, or would be an investment
company but for the exemption provided for by Section 3(c)(1) or Section 3(c)(7)
of the 1940 Act, the Member recognizes that it may acquire no more than 9% of
the Membership Interests, and that such Member's acquisition of more than 9% of
the Membership Interests will subject the Member to expulsion from the Company
under the terms and conditions of Article 14.
3.3 No Certification; Restrictions on the Disposition of an Interest.
(a) No Membership Interest in the Company shall be represented by a
separate certificate.
(b) Except as specifically provided in this Section 3.3 or in Section 3.11,
a Disposition of an interest in the Company may not be effected without the
consent of a majority of the non-transferring Managers (which consent may be
granted or withheld in each Manager's sole discretion). No consent shall be
required for the Disposition of a Membership Interest (i) by will or operation
of the intestacy laws upon the death of a Member who is a natural person, or
(ii) by a Strategic Partner (or Comcast Corporation ("Comcast")), or any direct
or indirect subsidiary of a Strategic Partner (or Comcast), to a direct or
indirect subsidiary of a Strategic Partner (or Comcast), or by any such
subsidiary to a Strategic Partner (or Comcast). Any attempted
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Disposition by a person of an interest or right, or any part thereof, in or in
respect of the Company other than in accordance with this Section 3.3 shall be,
and is hereby declared, null and void ab initio.
(c) Subject to the provisions of Section 3.3(d), (e), and (f), and Section
3.11 (i) a person to whom an interest in the Company is transferred has the
right to be admitted to the Company as a Member with the Membership Interest and
the Commitment so transferred to such person, if (A) the Member making such
transfer grants the transferee the right to be so admitted, and (B) such
transfer is consented to in accordance with Section 3.3(b) or is made in
accordance with Section 3.11.
(d) The Company shall not recognize for any purpose any purported
Disposition of all or part of a Membership Interest unless and until the other
applicable provisions of this Section 3.3 have been satisfied and the Managers
have received, on behalf of the Company, a document (i) executed by both the
Member effecting the Disposition (or if the transfer is on account of the death,
incapacity, or liquidation of the transferor, its representative) and the person
to whom the Membership Interest or part thereof is Disposed, (ii) including the
notice address of any person to be admitted to the Company as a Member and its
agreement to be bound by this Agreement in respect of the Membership Interest or
part thereof being obtained, (iii) setting forth the Membership Interests and
the Commitments after the Disposition of the Member effecting the Disposition
and the person to whom the Membership Interest or part thereof is Disposed
(which together must total the Membership Interest and the Commitment of the
Member effecting the Disposition before the Disposition), and (iv) containing a
representation and warranty that the Disposition was made in accordance with all
applicable laws and regulations (including securities laws) and, if the person
to whom Membership Interest or part thereof is Disposed is to be admitted to the
Company, its representation and warranty that the representations and warranties
in Section 3.2 are true and correct with respect to that person. Each
Disposition and, if applicable, admission complying with the provisions of this
Section 3.3(d) shall be effective as of the first day of the calendar month
immediately succeeding the month in which the Managers receive the notification
of Disposition and the other requirements of this Section 3.3 have been met.
(e) Prior to the exercise of the right of a Member to Dispose of a
Membership Interest or any part thereof or of any person to be admitted to the
Company in connection therewith (i) either (A) the Membership Interest or part
thereof subject to the Disposition or admission must be registered under the
Securities Act, and any applicable state securities laws or (B) the Company must
receive a favorable opinion of the Company's legal counsel or of other legal
counsel reasonably acceptable to the Managers to the effect that the Disposition
or admission is exempt from registration under those laws, and (ii) the Company
must receive a favorable opinion of the Company's legal counsel or of other
legal counsel reasonably acceptable to the Managers to the effect that (C) the
Disposition or admission, when added to the total of all other sales,
assignments, or other Dispositions within the preceding 12 months, would not
result in the Company's being considered to have terminated within the meaning
of Section 708(b)(1)(B) of the Code and (D) the Disposition or admission would
not result in the Company having to register as an investment company under the
1940 Act. The Managers, however, may waive the requirements of this Section
3.3(e), in whole or in part, in such circumstances as they deem appropriate.
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(f) The Member effecting a Disposition and any person admitted to the
Company as a Member in connection therewith shall pay, or reimburse the Company
for, all costs incurred by the Company in connection with such Disposition or
admission (including, without limitation, the legal fees incurred in connection
with the legal opinions referred to in Section 3.3(e)) on or before the tenth
day after the receipt by that person of the Company's invoice for the amount
due. If payment is not made by the date due, the person owing that amount shall
pay interest on the unpaid amount from the date due until paid at a rate per
annum equal to the Default Interest Rate.
(g) The restrictions in this Section 3.3 shall terminate upon consummation
of a Successor Corporation's initial underwritten public offering of stock
registered under the Securities Act (the "Public Offering").
3.4 New Members. (a) Pursuant to the Offering, the Company is offering
to sell up to $70,000,000 of shares of Membership Interest in the Company to
certain investors. Subject to the discretion of the Managers to terminate,
alter or amend the Offering at any time, the Company shall offer to sell
Membership Interests to investors in accordance with the terms of the Private
Placement Memorandum used in the Offering. A person subscribing for shares of
Membership Interest after the date hereof pursuant to the Offering shall be
admitted as a Member of the Company and shall become bound by this Agreement on
the date on which the Company accepts such person's executed subscription
agreement in a form acceptable to the Company (the "Subscription Agreement") and
receives payment of 50% of the subscription price as a Capital Contribution.
Each Member admitted pursuant to this 3.4(a) shall be obligated to pay an
initial Capital Contribution on the date of his or its admission as a Member of
the Company equal to 50% of the subscription price and the Membership Interest
subscribed for by him or it in the Offering shall have a Commitment equal to 50%
of such subscription price. The execution and delivery by any person of a
Subscription Agreement and payment of 50% of the subscription price shall
constitute a request by such person that the Company's records reflect his or
its admission as a Member. The Managers may not extend the Offering period in
which Membership Interests are offered to investors beyond October 31, 1998
without the consent of a Required Interest and each Strategic Partner, or
materially modify the terms on which the Membership Interests are being offered
and sold in the Offering from the terms disclosed in the Private Placement
Memorandum without the consent of a Required Interest and each Strategic
Partner.
(b) The Company is authorized to enter into agreements with the
individuals to whom it grants Membership Profit Interests and Options
providing for the vesting of such Membership Profit Interests and Options
and granting the Company the right and option to reacquire such Membership
Profit Interests and Options under certain circumstances on such terms and
conditions as the Managers shall determine. Any Membership Profit Interest
or Option reacquired by the Company pursuant to such agreements or
otherwise may be regranted by the Company to other officers and employees
of the Company or other eligible persons from time to time for such
consideration, if any, as they shall deem appropriate, and on such other
terms and conditions as they shall deem appropriate, provided that the
purpose of such issuance is to provide incentives for performance of
services to the Company, and not as part of a capital raising transaction.
A person receiving Membership Profit Interests or Options shall be admitted
as a Member and become bound by this Agreement on the date on which the
Company receives an executed agreement from
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such person, in form acceptable to the Company, containing such terms and
conditions as are determined by the Managers. The execution of such
agreement by any such person shall constitute a request by such person that
the Company reflect his or her admission as a Member.
(c) After the Offering has been completed or terminated, additional
persons may be admitted to the Company as Members and Membership Interests
may be created and issued to those persons and to existing Members with the
approval of a Required Interest on such terms and conditions as the
Managers may determine. The terms of admission or issuance must specify
the Membership Interests, Commitment Ratios and the Commitments applicable
thereto and may provide for the creation of different classes or groups of
Members having different rights, powers, and duties. The Managers shall
reflect the creation of any new class or group in an amendment to this
Agreement indicating the different rights, powers, and duties, and such an
amendment need be executed only by the Managers. Any such admission shall
be effective only after the new Member has executed and delivered to the
Managers a document including the new Member's notice address, its
agreement to be bound by this Agreement, and its representation and
warranty that the representations and warranties in Section 3.2 are true
and correct with respect to the new Member. The provisions of this Section
3.4 shall not apply to Dispositions of Membership Interests.
3.5 Interests in a Member. A Member that is not a natural person may
not cause or permit an interest, direct or indirect, in itself to be Disposed of
such that, after the Disposition, (a) the Company would be considered to have
terminated within the meaning of Section 708(b)(1)(B) of the Code or (b) without
the consent of the Managers, that Member shall cease to be controlled by
substantially the same persons who control it as of the date of its admission to
the Company; provided, however, that the provisions of this Section 3.5(b) shall
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not apply to a transfer of an interest in a Strategic Partner (or Comcast), or
to a transfer of an interest in any direct or indirect subsidiary of a Strategic
Partner (or Comcast) as long as such Member remains a subsidiary of such
Strategic Partner (or Comcast). On any breach of the provisions of clause (b)
of the immediately preceding sentence, the Company shall have the option to buy,
and on exercise of that option the breaching Member shall sell, the breaching
Member's Membership Interest, all in accordance with Section 12.1 as if the
breaching Member were a Bankrupt Member.
3.6 Information. (a) Each Member shall have the right to access all
information to which that Member is entitled to have access pursuant to Section
18-305 of the Act, provided that such Member provides five days prior written
notice to the Company of the materials such Member requests be made available
and the purpose for inspecting such materials. Such materials shall be provided
at the executive headquarters of the Company during its regular business hours.
All expenses of providing the materials requested pursuant to this Section 3.6,
including, without limitation, duplication fees, shall be paid by the Member
requesting the information. Anything in this Section to the contrary
notwithstanding, the Managers shall have the right to keep confidential from the
Members, for such period of time as the Managers deem reasonable, any
information which the Managers reasonably believe to be in the nature of trade
secrets or other information the disclosure of which the Managers in good faith
believe is not in the best interest of the Company or
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<PAGE>
could damage the Company or its business or the Company is required by law or by
agreement with a third party to keep confidential.
(b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is confidential, the release of which may be damaging to the Company
or persons with which it does business. Each Member shall hold in strict
confidence any information it receives regarding the Company that is identified
as being confidential (and if that information is provided in writing, that is
so marked) and may not disclose it to any person other than another Member or a
Manager, except for disclosures (i) compelled by law (but the Member must notify
the Managers promptly of any request for that information before disclosing it,
if practicable), (ii) to advisers or representatives of the Member or persons to
which that Member's Membership Interest may be Disposed as permitted by this
Agreement, but only if the recipients have agreed to be bound by the provisions
of this Section 3.6(b), or (iii) of information that Member also has received
from a source independent of the Company that the Member reasonably believes
obtained that information without breach of any obligation of confidentiality.
The Members acknowledge that breach of the provisions of this Section 3.6(b) may
cause irreparable injury to the Company for which monetary damages are
inadequate, difficult to compute, or both. Accordingly, the Members agree that
the provisions of this Section 3.6(b) may be enforced by specific performance.
3.7 Liability to Third Parties. Except as to any obligation it may have
under the Act to repay funds that may have been wrongfully distributed to it, no
Member or Manager shall be liable for the debts, obligations or liabilities of
the Company, including under a judgment decree or order of a court.
3.8 Lack of Authority. No Member (other than a Member who is, and who
is acting in the capacity of, a Manager) has the authority or power to act for
or on behalf of the Company, to do any act that would be binding on the Company,
or to incur any expenditures on behalf of the Company.
3.9 Withdrawal. A Member does not have the right to withdraw from the
Company as a Member (except in connection with a transfer of its entire
Membership Interest in accordance with this Agreement) and any attempt to
violate the provisions hereof shall be legally ineffective.
3.10 Preemptive Rights. (a) If at any time the Company proposes to
issue any equity securities, other than equity securities described in Section
3.10(d) below, the Company shall first offer in writing to sell to each
Strategic Partner its pro rata share of the proposed issue of such equity
securities, at the same price and on the same terms at which the Company
proposes to sell such issue to others. For purposes hereof, each Strategic
Partner's "pro rata share" of an issue of equity securities shall be that amount
of such equity securities which would result in such Strategic Partner owning
the same percentage of the Company's issued and outstanding Membership Interests
after the issuance of the equity securities as such Strategic Partner owned
immediately prior to the issuance (assuming the issuance of all Membership
Interests, if any, issuable upon conversion of such equity securities). The
term "equity security" when used in this Section 3.10 shall mean any shares of
Membership Interest of the Company, or any security convertible, with or without
consideration, into shares of Membership Interest, or any security carrying any
warrant,
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option, or right to subscribe to, or to purchase any shares of Membership
Interest, or any such warrant, option, or right.
(b) The Company's offer shall describe the equity securities proposed to be
issued by the Company, specifying the quantity, the price and payment terms.
Each Strategic Partner shall have thirty (30) days from receipt of such offer to
accept the offer in writing, which acceptance may be as to all or any part of
its pro rata share of such issue. Sale of the portion of the equity securities
subscribed for hereunder shall be held on a date acceptable to the Company and
each Strategic Partner, but in no event more than sixty (60) days after the date
of the Company's offer to the Strategic Partners.
(c) In the event the Strategic Partners do not subscribe for all of the
issue of equity securities offered to them pursuant to this Section 3.10, the
Company may sell the portion of the securities not subscribed for, together with
the portion of such issue of securities, if any, not subject to preemptive
rights under this Section 3.10, at a price no less favorable to the Company than
that specified in such offer and on payment terms no less favorable to the
Company than those specified in such offer; provided, however, that if such sale
-------- -------
is not consummated within one hundred twenty (120) days after the date the offer
pursuant to this Section 3.10 was made to the Strategic Partners, the Company
shall not sell such securities without again complying with this Section 3.10.
(d) The rights of Strategic Partners under this Section 3.10 shall not
apply to the following securities:
(i) the shares of Membership Interest issued with respect to the
Options;
(ii) the shares of Membership Profit Interest issued in
accordance with this Agreement; and
(iii) any securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination.
(e) Notwithstanding the foregoing provisions of this Section 3.10, the
rights of Strategic Partners and the obligations of the Company under this
Section 3.10 shall be inapplicable to the Public Offering and the provisions of
this Section 3.10 shall terminate upon the consummation of such Public Offering.
3.11 Right of First Refusal. (a) Any Strategic Partner (other than TL
or SSI-Delaware) (each, a "Transferring Member") may at any time offer to sell
to the Company any or all of the shares of Membership Interest then owned by it
upon written notice to the Company (the "Notice") which Notice shall set forth
(i) the number of shares of Membership Interest the Transferring Member desires
to sell (the "Offered Shares") and the price per share, (ii) the proposed date
of the transfer, and (iii) the percentage which the number of Offered Shares
constitutes with respect to the aggregate number of Shares of Membership
Interest then held by the Transferring Member.
(b) Company's Option. The Company shall have the option, but not the
----------------
obligation, to purchase all or any part of the Offered Shares on the same terms
as specified in the Notice. Within
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thirty (30) days after the giving of the Notice, the Company shall give written
notice to the Transferring Member stating the number of Offered Shares it
desires to purchase and a date and time for consummation of the purchase not
less than sixty (60) or more than ninety (90) days after the giving of the
Notice. Failure by the Company to give such notice within such time period shall
be deemed an election by it not to purchase any Offered Shares. The Transferring
Member shall not be entitled to vote as a Manager in connection with the
decision of the Company whether to exercise its option to purchase its Offered
Shares, provided that if the Transferring Member's vote is required for valid
--------
legal action it shall vote in accordance with the decision of the majority of
the other Managers.
(c) If the Company elects not to exercise its option with respect to all of
the Offered Shares (the Offered Shares which the Company elects not to purchase
being referred to as the "Refused Shares"), it may offer such Refused Shares to
one or more Members, or to another person or entity selected by it that is
reasonably acceptable to the Transferring Member (collectively, the "Permitted
Offerees"), by delivering written notice to such Permitted Offerees concurrently
with the delivery of its notice to the Transferring Member under subsection (b)
above. The number of Refused Shares offered to any Permitted Offeree shall be
determined by the Company in its sole discretion. Each such Permitted Offeree
shall thereupon have the option, but not the obligation, to purchase the number
of Refused Shares offered to it or him on the same terms as specified in the
Notice. After the expiration of the thirty (30)-day period described in Section
3.11(b), but within forty-five (45) days after the giving of the Notice, each
such Permitted Offeree shall give written notice to the Transferring Member and
the Company stating whether or not he or it elects to exercise his or its
option, and a date and time for consummation of the purchase not more than
ninety (90) days after the giving of the Notice by the Transferring Member.
Failure by a Permitted Offeree to give such notice within such time period shall
be deemed an election by him or it not to exercise his or its option. If the
Permitted Offerees and the Company do not purchase all of the Offered Shares,
the Transferring Member may sell all of the Offered Shares (and therefore the
rights of the Company and the Permitted Offerees under this Section 3.11 shall
be terminated) at any time within 180 days after the date the Notice was
delivered to the Company, to a person or Entity selected by the Transferring
Member who is reasonably acceptable to the Company (the "Proposed Transferee").
Any such sale shall be to the Proposed Transferee at the price and upon the
other terms and conditions set forth in the Notice, or at least terms no less
favorable to the Transferring Member or more favorable to the Proposed
Transferee, as the terms contained in the Notice. The Transferring Member shall
provide at least 20 days' prior written notice of such sale to the Company. Any
Offered Shares not sold within the 180 day period shall again be subject to the
requirements of a prior offer pursuant to this Section 3.11. If the
Transferring Member at any time proposes to sell the Offered Share at a price,
or on terms and conditions, less favorable to the Transferring Member or more
favorable to the Proposed Transferee than those set forth in the Notice, then
the Offered Shares shall again be subject to the requirements of a prior offer
pursuant to this Section 3.11. Any transfer pursuant to this Section 3.11 shall
be subject to the provisions of Sections 3.3(d), (e) and (f). The preemptive
rights granted under Section 3.10 shall not apply to any offering by the
Company of Refused Shares under this Section 3.11(c).
(d) The provisions of this Section 3.11 shall terminate upon the
consummation of the Public Offering.
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<PAGE>
3.12 Registration Rights. The Company hereby grants to each Strategic
Partner the registration rights described on Exhibit C hereto (which Exhibit is
---------
hereby incorporated by reference in its entirety) which registration rights will
become effective after completion of the Public Offering. Upon the merger or
consolidation of the Company with or into, or the sale of the Company's assets
to, a Successor Corporation, the Successor Corporation will assume the
obligation to register each Strategic Partner's equity interests as provided in
Exhibit C, and the agreements providing for such merger, consolidation or sale
- ---------
will contain a provision expressly requiring the Successor Corporation to assume
such obligations. The Company hereby grants to each Member who has made (or
makes) and maintains a Capital Contribution equal to or greater than one million
dollars ($1,000,000) the piggyback registration rights set forth in Section 1.1
of the attached Exhibit C. Notwithstanding the definition of "Holder" contained
---------
in Section 1.1, each such Member shall be deemed a "Holder" for purposes of
Exhibit C.
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ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Contributions. (a) The Capital Contributions of the Current Members
is as set forth on Exhibit A attached hereto, which Exhibit A designates the
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Current Members as such and shall be revised from time to time to reflect the
withdrawal of Members and the admission of new Members.
(b) Current Members and the persons admitted as new Members of the Company
after the date hereof pursuant to their subscription for Membership Interests in
the Private Placement Memorandum, shall make their Capital Contribution, in
cash, representing 50% of the subscription price of the total shares of
Membership Interest being subscribed for pursuant to the Private Placement
Memorandum, on the date of admission as a Member of the Company. Exhibit A
---------
shall be amended from time to time to reflect the Capital Contributions,
Commitments, Membership Interests and Membership Profit Interests, if any, of
each Member.
4.2 Subsequent Contributions. Each Member shall contribute to the
Company, in cash, on or before the date specified as hereinafter described, from
time to time that Member's Commitment Ratio of all monies that in the judgment
of the Managers, are necessary to make portfolio investments or to otherwise
conduct the business of the Company; provided, however, that a Member is not
obligated to contribute an amount that exceeds that Member's Commitment. The
Managers shall notify each Member of the need for Capital Contributions pursuant
to this Section 4.2 from time to time as and when appropriate, which notice
shall specify a date (which date may be no earlier than thirty (30) days
following each Member's receipt of its notice) before which the Capital
Contributions must be made. Notices for Capital Contributions must be made to
all Members in accordance with their Commitment Ratios. Member's Commitments
will expire on April 30, 2000 if not fully taken down prior to that time.
4.3 Failure to Contribute. Unless the Managers shall otherwise
determine by agreement with the delinquent Member, if a Member (a "Delinquent
Member") does not contribute by the time required all or any portion of a
Capital Contribution which that member is required to make as provided in this
Agreement, unless payment of such Capital Contribution would be unlawful, 100%
of such Member's Membership Interest will be forfeited to the Company, a
corresponding
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reduction will be made to such Member's Capital Account, such Delinquent Member
shall no longer be a Member of the Company, and its forfeited Membership
Interest shall no longer be outstanding.
4.4 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is
not required to contribute or to lend any cash or property to the Company to
enable the Company to return any Member's Capital Contributions.
4.5 Advances by Members. With the Managers' consent, any Member may
advance funds to or on behalf of the Company on terms approved by the Managers.
An advance described in this Section 4.5 constitutes a loan from the Member to
the Company, and is not a Capital Contribution.
4.6 Capital Account. A capital account shall be established and
maintained for each Member. The capital accounts of the Members were revalued
as of May 29, 1998 on the Company's books in accordance with Treas. Reg.
(S)1.704-1(b)(2)(iv)(f), and the property of the Company was adjusted and
reflected on a Schedule 4.6 to this Agreement to reflect the fair market value
------------
of such property as of the date of such revaluation. Such capital accounts
shall be subject to further revaluation in accordance with Treas. Reg. (S)1.704-
1(b)(2)(iv)(f) at such time as the Board of Managers shall determine. Each
Member's capital account (a) shall be increased by (i) the amount of money
contributed by that Member to the Company, (ii) the fair market value of
property contributed by that Member to the Company (net of liabilities secured
by the contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code), and (iii) allocations to that Member
of Company income and gain (or items thereof), including income and gain exempt
from tax and income and gain described in Treas. Reg. (S) 1.704-1(b)(2)(iv)(g),
but excluding income and gain described in Treas. Reg. (S) 1.704-1(b)(4)(i), and
(b) shall be decreased by (i) the amount of money distributed to that Member by
the Company, (ii) the fair market value of property distributed to that Member
by the Company (net of liabilities secured by the distributed property that the
Member is considered to assume or take subject to under Section 752.of the
Code), (iii) allocations to that Member of expenditures of the Company described
in Section 705(a)(2)(B) of the Code, and (iv) allocations of Company loss and
deduction (or items thereof), including loss and deduction described in Treas.
Reg. (S) 1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii)
above and loss or deduction described in Treas. Reg. (S) 1.704-1(b)(4)(i) or (S)
1.704-1(b)(4)(iii). The Members' capital accounts also shall be maintained and
adjusted as permitted by the provisions of Treas. Reg. (S) 1.704-1(b)(2)(iv)(f)
and as required by the other provisions of Treas. Reg. (S)(S) 1.704-1(b)(2)(iv)
and 1.704-1(b)(4), including adjustments to reflect the allocations to the
Members of depreciation, depletion, amortization, and gain or loss as computed
for book purposes rather than the allocation of the corresponding items as
computed for tax purposes, as required by Treas. Reg. (S) 1.704-l(b)(2)(iv)(g).
A Member that has more than one Membership Interest shall have a single capital
account that reflects all its Membership Interests, regardless of the class of
Membership Interests owned by that Member and regardless of the time or manner
in which those Membership Interests were acquired. On the transfer of all or
part of a Membership Interest, the capital account of the transferor that is
attributable to the transferred Membership Interest or part thereof shall carry
over to the transferee Member in accordance with the provisions of Treas. Reg.
(S) 1.704-1(b)(2)(iv)(1).
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ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations. (a) All items of income and gain of the Company shall
be allocated:
(i) first, to each Member, if any, with a negative capital
account balance, in proportion to such negative balances, until any
such negative balances have been eliminated;
(ii) second, if any Member's Capital Contributions (less any
amounts previously distributed to such Member) exceed his capital
account balance, to such Members in proportion to such excesses until
any such excesses have been eliminated;
(iii) third, if the excesses, if any, of (x) the sum of (A) the
capital account balance of each Member and (B) the cumulative
distributions made to such Member over (y) such Member's Capital
Contributions are not in proportion to their Membership Interests, to
the Members in such manner as will, as quickly as possible, cause such
excesses to be in such proportion; and
(iv) fourth, to all Members in proportion to their Membership
Interests.
And all items of loss and deduction of the Company shall be allocated:
(v) first, if the excesses, if any, of (x) the sum of (A) the
capital account balances of each Member and (B) the cumulative
distributions made to such Member over (y) such Member's Capital
Contributions are not in proportion to their Membership Interests, to
the Members in such manner as will, as quickly as possible, cause such
excesses to be in such proportion;
(vi) second, if the sum of (A) the capital account balance of any
Member and (B) the cumulative distributions made to such Member
exceeds the Capital Contributions of such Member, to such Member in
proportion to such excesses until such excesses have been eliminated;
and
(vii) third, to the Members in proportion to Capital
Contributions.
(b) All items of income, gain, loss, deduction, and credit allocable to any
Membership Interest that may have been transferred shall be allocated between
the transferor and the transferee based on the portion of the calendar year
during which each was recognized as owning that Membership Interest, without
regard to the results of Company operations during any particular portion of
that calendar year and without regard to whether cash distributions were made to
the transferor or the transferee during that calendar year; provided, however,
that this allocation must be made in accordance with a method permissible under
section 706 of the Code and the regulations thereunder.
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(c) Solely for tax purposes, income, gain, loss and deduction with respect
to any property contributed to the capital of the Company or for which the
adjusted tax basis and book value differ shall be allocated among the Members so
as to take account of any variation between adjusted tax basis and book value.
The allocations provided in this Section 5.1 are intended to comply with the
requirements of section 704 of the Code and Treasury Regulations thereunder and
shall be interpreted (or modified, to the extent necessary) in such manner as is
consistent with such requirements, as determined by the "tax matters partner" of
the Company. For purposes of allocations under section 704(c) of the Code, the
Partnership shall use the remedial allocation method, as described in Treas.
Reg. (S) 1.704-3(d).
5.2 Distributions. (a) The Managers shall have the authority to reinvest
the Company's cash from operations and dispositions of its assets, including the
sale or other disposition of equity interests in a related company in which the
Company invests. Consequently, distributions to Members of the Company's cash or
other assets shall be made only at such times and in such amounts as authorized
by the Managers and the Managers shall have no obligation or duty to distribute
cash or other assets to the Members prior to the dissolution and liquidation of
the Company, except as otherwise provided in paragraph (b) below. Distributions,
if any, shall be made as follows:
(i) first, to all Members in proportion to their Capital
Contributions up to the amount of their Capital Contribution; and
(ii) then, to all Members in proportion to their Membership
Interests, provided that, if any Commitments remain outstanding, a
distribution payable to a Member with an outstanding Commitment shall
be retained by the Company and applied to reduce its outstanding
Commitment up to the amount of its remaining outstanding Commitment.
(b) Notwithstanding anything to the contrary, on or before March 15
following each taxable year of the Company, the Company shall distribute to each
Member, to the extent of available cash, an amount of cash equal to the excess
of (x) 40% of the excess of (A) such Member's cumulative share of income and
gain of the Company as of the end of such taxable year over (B) such Member's
cumulative share of loss and deduction of the Company as of the end of such
taxable year over (y) all prior distributions to such Member. Any amounts
distributed to a Member pursuant to this Section 5.2(b) shall be credited toward
the amounts that would otherwise be required to be distributed to such Member
pursuant to Section 5.1(a).
(c) From time to time the Managers also may cause property of the Company
other than cash to be distributed to the Members, which distribution must be
made in accordance with Section 5.2(a) and may be made subject to existing
liabilities and obligations.
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ARTICLE VI
MANAGERS
6.1 Management by Managers. (a) Except for any matters for which the
approval of the Members is required by this Agreement or by nonwaivable
provisions of applicable law, (i) the powers of the Company shall be exercised
by or under the authority of, and the business and affairs of the Company shall
be managed under the direction of, the Board of Managers; and (ii) the Board of
Managers may make all decisions and take all actions for the Company.
(b) The powers of the Company which may be exercised by the Managers
without the approval of the Members shall include, without limitation, the power
to purchase, hold and sell investments; to borrow and loan funds and provide
guarantees of the obligations of others; to acquire other companies; and to
dissolve and liquidate.
(c) Notwithstanding the provisions of Section 6.1(a) and 6.1(b), the Board
of Managers may not cause the Company to do any of the following without the
consent of a Required Interest:
(i) amend the Certificate (except for amendments described in
Section 18-202(b) of the Act);
(ii) amend this Agreement (except as otherwise provided in
Section 15.5 hereof);
(iii) remove a Manager from the Board of Managers for cause
pursuant to Section 6.4; and
(iv) issue the Membership Interests described in Section 3.4(c).
(d) The Managers shall have the power and authority to approve and
authorize the Company to merge with or into, or transfer its assets to, another
limited liability company or "other business entity," as such term is defined in
Section 18-209 of the Act, with the consent of a Required Interest. No
appraisal rights with respect to Membership Interests in the Company shall be
available for any class or group of Members in connection with any amendment of
this Agreement, any merger or consolidation in which this Company is a
constituent party to the merger or consolidation, or in the sale of all or
substantially all of the Company's assets.
6.2 Actions by Managers; Committees; Delegation and Duties. (a) In
managing the business and affairs of the Company and exercising its powers, the
Board of Managers shall act (i) collectively through meetings and written
consents pursuant to Sections 6.5 and 6.7; and (ii) through committees pursuant
to Section 6.2(b).
(b) The Board of Managers may, from time to time, designate one or more
committees, each of which shall be comprised of one or more Managers. Any such
committee, to the extent provided in such resolution or in the Certificate or
this Agreement, shall have and may exercise all of the authority of the Board of
Managers, subject to the limitations set forth in the Act. At every meeting of
any such committee, the presence of a majority of all the members thereof shall
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constitute a quorum, and the affirmative vote of a majority of the members
present shall be necessary for the adoption of any resolution. The Board of
Managers may dissolve any committee at any time, unless otherwise provided in
the Certificate or this Agreement.
6.3 Number and Term of Office of Managers. The number of Managers on
the Board of Managers of the Company shall be five or such greater number as to
provide each Strategic Partner with a seat on the Board of Managers; provided
that the number of Managers on the Board of Managers shall not exceed nine. For
so long as (i) any of SSI-Delaware, TL, Comcast ICG, Inc. (an indirect wholly
owned subsidiary of Comcast Corporation) and CPQ Holdings, Inc. (a wholly owned
subsidiary of Compaq Computer Corp.) maintains a Capital Contribution equal to
or greater than three million dollars ($3,000,000) in the Company, (ii) GE
Capital maintains a Capital Contribution and Commitment that aggregate equal to
or greater than seven million dollars ($7,000,000) in the Company, and (iii) any
Entity subsequent to the date hereof that makes or has made and maintains a
Capital Contribution and Commitment that aggregate ten million dollars
($10,000,000) or greater, such Entity described in clauses (i), (ii) or (iii)
shall be a Manager of the Company (each, a "Strategic Partner").
Notwithstanding anything to the contrary herein, for purposes of calculating the
amounts set forth in clauses (i), (ii) or (iii) in the immediately preceding
sentence, distributions by the Company to any Manager described in such clauses
shall be disregarded. In addition, the number of Managers may also be amended
by action of the then incumbent Managers. Each Manager shall hold office as
long as he is a Member, or until his earlier death, insanity, Bankruptcy,
retirement, resignation or removal. Managers must be Members but need not be
residents of the State of Delaware. Any Entity that is a Manager shall
designate an officer or other employee of such Entity as a nominee to represent
it as Manager and such Entity will act through its nominee. Such Entity may
change its nominee, or appoint an alternate nominee to attend meetings of the
Managers and vote on its behalf when its primary nominee is unavailable, at any
time upon written notice to the Company. Except as expressly provided in this
Section 6.3 and Section 6.4, the Members shall not have the authority to
increase or decrease the number of Managers and neither the Members nor the
Managers shall have the authority to remove or replace any Managers.
6.4 Vacancies; Removal; Resignation. Any vacancy occurring pursuant to
Sections 6.3 and 6.4 may be filled, at the sole discretion of the Board of
Managers, by the affirmative vote of a majority of the remaining Managers though
less than a quorum. If the Board of Managers determines that there is cause to
remove a Manager, such Manager can be removed by the affirmative vote of a
Required Interest at any meeting of Members called expressly for that purpose
and at which a quorum of Members is present. Any Manager may resign at any
time. Such resignation shall be made in writing and shall take effect at the
time specified therein, or if no time be specified, at the time of its receipt
by the remaining Managers. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the resignation.
6.5 Meetings. (a) Unless otherwise required by law or provided in the
Certificate or this Agreement, a majority of the total number of Managers fixed
by, or in the manner provided in, the Certificate or this Agreement shall
constitute a quorum for the transaction of business of the Managers, and the act
of a majority of the Managers present at a meeting at which a quorum is present
shall be the act of the Managers unless otherwise provided herein. A Manager
who is
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present at a meeting of the Managers at which action on any Company matter is
taken shall be presumed to have assented to the action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as secretary of the meeting before
the adjournment thereof or shall deliver such dissent to the Company immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
Manager who voted in favor of such action.
(b) Meetings of the Managers may be held at such place or places as shall
be determined from time to time by resolution of the Managers. At all meetings
of the Managers, business shall be transacted in such order as shall from time
to time be determined by resolution of the Managers. Attendance of a Manager at
a meeting shall constitute a waiver of notice of such meeting, except where a
Manager attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
(c) Regular meetings of the Managers shall be held at such times and places
as shall be designated from time to time by resolution of the Managers, provided
that such meetings shall be held no less frequently than quarterly. Notice of
such regular meetings shall not be required.
(d) Special meetings of the Managers may be called by any Manager on at
least 48 hours notice to each other Manager. Such notice need not state the
purpose or purposes of, nor the business to be transacted at, such meeting,
except as may otherwise be required by law or provided for by the Certificate or
this Agreement.
6.6 Approval or Ratification of Acts or Contracts by Members. The
Managers, in their sole discretion, may submit any act or contract for approval
or ratification at any meeting of the Members called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by a Required Interest shall be as valid and as binding
upon the Company and upon all the Members as if it shall have been approved or
ratified by every Member of the Company.
6.7 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the Certificate or this Agreement to be taken
at a meeting of the Managers or of any committee designated by the Managers may
be taken without a meeting if a consent in writing, setting forth the action to
be taken, is signed by all the Managers or members of such committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote at a meeting and may be stated as such in any document or instrument filed
with the Secretary of State of Delaware, and the execution of such consent shall
constitute attendance or presence in person at a meeting of the Managers or any
such committee, as the case may be. Subject to the requirements of the Act, the
Certificate or this Agreement for notice of meetings, Managers, or members of
any committee designated by the Managers, may participate in and hold a meeting
of the Managers or any committee of Managers, as the case may be, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
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6.8 Expenses; Compensation. (a) Except as otherwise provided herein,
the Company shall pay or cause to be paid (i) all costs and expenses incurred in
connection with the formation and organization of the Company, and (ii) all
costs and expenses of the Company incurred in pursuing and conducting, or
otherwise related to, the business of the Company. The Managers shall be
entitled to reimbursement of their reasonable expenses incurred on behalf of the
Company as and to the extent provided in paragraph (b) below. Subject to the
Act, no amount so paid to the Manager shall be deemed to be a distribution of
Company assets for purposes of this Agreement. Except for reimbursement of such
expenses as provided for in this Section 6.8 and its right to distributions as
provided in this Agreement, the Manager shall not receive any compensation for
its services as such.
(b) Unless otherwise approved by a Required Interest, the Managers shall
not receive compensation for their services as Managers. However, the Managers
shall be entitled to be reimbursed for reasonable out-of-pocket costs and
expenses incurred in the course of their service as Managers hereunder.
6.9 Co-Investment Opportunities. The Company, Safeguard and TL will
each present to each other and to each other Strategic Partner, in writing, any
Internet-related investment opportunity that it receives, and each of the
Company, TL, Safeguard (or Safeguard 98 L.P.) and such other Strategic Partner
will have the right on all Internet-related investments to invest equally in the
opportunity regardless of the origin of the deal, provided it gives written
notice of its election to invest to the party originating the deal within thirty
(30) days after receipt of the offer. No Strategic Partner (other than TL or
Safeguard) will be required to offer to the Company, TL or Safeguard any
Internet-related investment opportunity received by it. Notwithstanding the
above, Safeguard will not be required to offer to the Company, TL or any other
Strategic Partner any Internet-related investment originated by it in which it
intends to acquire a majority interest, or to offer to the Company or any
Strategic Partner (other than TL) any Internet-related investment to the extent
such offer would cause Safeguard to be in breach of its obligations or
commitments to TL or any future TL funds.
The Company has an understanding and acknowledgment from the other
parties that, for strategic reasons, it will have the right to take majority
ownership in four to six core portfolio companies, and that any such investment
will not be subject to the co-investment rules described above. This right will
be negotiated on a deal by deal basis. Notwithstanding anything in this
Agreement to the contrary, if the exercise by a Strategic Partner of any right
under this Section 6.9 shall cause the Company, in the written opinion of
outside counsel, to be an investment company subject to registration under the
1940 Act, such Strategic Partner will not be permitted to exercise any such
right. As soon as reasonably practicable after the date hereof, each of the
Strategic Partners and the Company agree to discuss and negotiate in good faith
the modification or termination of this Section 6.9 in the context of the
Company's goal of effecting a Public Offering in the future.
6.10 Advisory Board. The Managers may, in their sole discretion, form
and appoint persons to an advisory board of the Company (the "Advisory Board")
and pay compensation to persons serving on the Advisory Board. The sole purpose
of the Advisory Board shall be to advise the Board of Managers and the Advisory
Board shall have no other powers.
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6.11 Conflicts of Interest. The parties hereto acknowledge that there
may be conflicts of interest that arise from time to time due to existing
investments of the Strategic Partners and prospective investments by the
Company. The Company shall notify each Strategic Partner in writing before
acquiring the securities of any portfolio company, which notice shall identify
the portfolio company and contain a brief description of the terms of the
acquisition and the portfolio company's business. The Company will not invest
in a portfolio company if within ten (10) days after receipt of the Company's
notice, a Strategic Partner notifies the Company in writing that such investment
would cause such Strategic Partner to be in breach of its contractual
obligations, or be subject to penalties, arising from its existing investments,
and the Strategic Partner provides evidence reasonably satisfactory to the
Company of such contractual obligations or penalties. The Company also intends
to use outside independent financial advisors to value investments in companies
where a Member already has an existing investment.
6.12 Related Party Transactions. The Company may transact business with any
Manager or Member or affiliate thereof, provided the terms of those transactions
are no less favorable than those the Company could obtain from unrelated third
parties.
ARTICLE VII
OFFICERS
7.1 Officers. The Managers may designate one or more individuals (who
may or may not be Managers) to serve as officers of the Company. The Company
shall have such officers as the Managers may from time to time determine, which
officers may (but need not) include a Chairman, a President, one or more Vice
Presidents (and in case of each such Vice President, with such descriptive
title, if any, as the Managers shall deem appropriate), a Secretary, an
Assistant Secretary and a Treasurer. Any two or more offices may be held by the
same person.
7.2 Compensation. The Company shall have the authority to pay and
provide compensation and other benefits to its officers and employees. The
compensation and benefits of all officers of the Company shall be fixed from
time to time by the Managers, unless otherwise delegated by the Managers to a
particular officer.
7.3 Term of Office; Removal; Filling of Vacancies. Each officer of the
Company shall hold office at the pleasure of the Managers until his successor is
chosen and qualified in his stead or until his earlier death, resignation,
retirement, disqualification or removal from office. Any officer designated by
the Managers may be removed at any time by the Managers for any reason, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Designation of an officer shall not of itself create contract
rights. If the office of any officer becomes vacant for any reason, the vacancy
may be filled by the Managers. The Managers may abolish any office at any time.
7.4 Chairman. The Chairman, if one is designated by the Managers, shall
preside at meetings of the Managers and the Members. He shall assist the
Managers in the formulation of policies of the Company, and shall be available
to other officers for consultation and advice.
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7.5 President. The President, if one is designated by the Managers,
shall be the chief executive officer of the Company and shall have day-to-day
supervision of the affairs of the Company, subject at all times to the authority
of the Managers.
7.6 Vice Presidents. Each Vice President that is designated by the
Managers shall generally assist the President and shall have such powers and
perform such duties and services as shall from time to time be prescribed or
delegated to him by the President or the Managers.
7.7 Secretary. The Secretary, if one is designated by the Managers,
shall keep and account for the records of the Company.
7.8 Assistant Secretary. The Assistant Secretary, if one is designated
by the Managers, shall generally assist the Secretary.
7.9 Treasurer. The Treasurer, if one is designated by the Managers,
shall be the chief accounting and financial officer of the Company and shall
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Company.
7.10 Additional Powers and Duties. In addition to the foregoing
especially enumerated duties, services and powers, the several officers of the
Company shall perform such other duties and services and exercise such further
powers as may be provided by statute, the Certificate or this Agreement, or as
the Managers may from time to time determine or as may be assigned to them by
any competent superior officer. The Managers may also at any time limit or
circumvent the enumerated duties, services and powers of any officer. In
addition to the designation of officers and the enumeration of their respective
duties, services and powers, the Managers may grant powers of attorneys to
individuals to act as agent for or on behalf of the Company, to do any act which
would be binding on the Company, to incur any expenditures on behalf of or for
the Company, or to execute, deliver and perform any agreements, acts,
transactions or other matters on behalf of the Company. Such powers of attorney
may be revoked or modified as deemed necessary by the Managers.
ARTICLE VIII
MEETINGS OF MEMBERS
8.1 Meetings. (a) A quorum shall be present at a meeting of Members if
the holders of a Required Interest are represented at the meeting in person or
by proxy. With respect to any matter, the affirmative vote of a Required
Interest at a meeting of Members at which a quorum is present shall be the act
of the Members.
(b) All meetings of the Members shall be held at the principal place of
business of the Company or at such other place within or without the State of
Delaware as shall be specified or fixed in the notices or waivers of notice
thereof; provided that any or all Members may participate in any such meeting by
means of conference telephone or similar communications equipment pursuant to
Section 8.5.
(c) The chairman of the meeting or the holders of a Required Interest shall
have the power to adjourn such meeting from time to time, without any notice
other than announcement at the
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meeting of the time and place of the holding of the adjourned meeting. If such
meeting is adjourned by the Members, such time and place shall be determined by
a vote of the holders of a Required Interest. Upon the resumption of such
adjourned meeting, any business may be transacted that might have been
transacted at the meeting as originally called.
(d) An annual meeting of the Members, for the purpose of the delivery of an
annual report of the Managers, may be held, but no meeting of Members need be
held. Any meeting of Members shall be held at such place, within or without the
State of Delaware, on such date and at such time as the Managers shall fix and
set forth in the notice of the meeting.
(e) Special meetings of the Members for any proper purpose or purposes may
be called at any time by the Managers. Only business within the purpose or
purposes described in the notice (or waiver thereof) required by this Agreement
may be conducted at a special meeting of the Members. No Member shall have the
power to require that a meeting of the Members be held or that any matter be
voted upon by the Members.
(f) Written or printed notice stating the place, day and hour of the
meeting and the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the Managers or
person calling the meeting, to each Member entitled to vote at such meeting. If
mailed, any such notice shall be deemed to be delivered on the third day after
it is deposited in the United States mail, addressed to the Member at such
Member's address provided for in Section 15.2, with postage thereon prepaid.
(g) The date on which notice of a meeting of Members is mailed or the date
on which the resolution of the Managers declaring a distribution is adopted, as
the case may be, shall be the record date for the determination of the Members
entitled to notice of or vote at such meeting, including any adjournment
thereof, or the Members entitled to receive such distribution.
8.2 Voting List. At the request of any Member, the Managers shall make
available, at least ten days before a meeting of Members, a complete list of the
Members entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the Membership Interest held by
each, which list, for a period of ten days prior to such meeting, shall be kept
on file at the registered office or principal place of business of the Company
and shall be subject to inspection by any Member at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any Member during
the whole time of the meeting. The original membership records shall be prima-
facie evidence as to who are the Members entitled to examine such list or
transfer records or to vote at any meeting of Members. Failure to comply with
the requirements of this Section shall not affect the validity of any action
taken at the meeting.
8.3 Proxies. A Member may vote either in person or by proxy executed in
writing by the Member. A telegram, telex, cablegram or similar transmission by
the Member, or a photographic, photostatic, facsimile or similar reproduction of
a writing executed by the Member shall be treated as an execution in writing for
purposes of this Section. A proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable.
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8.4 Conduct of Meetings. All meetings of the Members shall be presided
over by the chairman of the meeting, who shall be a Manager (or representative
thereof) designated by a majority of the Managers. The chairman of any meeting
of Members shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
8.5 Action by Written Consent or Telephone Conference.
(a) Any action which is submitted by the Managers to the Members and which
could be taken by the Members at a meeting of Members may be taken by the
Members by unanimous written consent.
(b) Subject to Section 8.1(f), Members may participate in and hold a
meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in person
at such meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE IX
INDEMNIFICATION
9.1 Right to Indemnification. Subject to the limitations and conditions
as provided in this Article IX, each person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (hereinafter a "Proceeding"), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a person of whom he or she
is the legal representative, is or was a Manager or officer of the Company or
while a Manager or officer of the Company is or was serving at the request of
the Company as a Manager, director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise shall be
indemnified by the Company, against judgments, penalties (including excise and
similar taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, attorneys' fees) actually incurred by such
person in connection with such Proceeding, and indemnification under this
Article IX shall continue as to a person who has ceased to serve in the capacity
which initially entitled such person to indemnity hereunder. The rights granted
pursuant to this Article IX shall be deemed contract rights, and no amendment,
modification or repeal of this Article IX shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal. The indemnification
provided in this Article IX could involve indemnification for negligence or
under theories of strict liability but shall not extend to any matter for which
the final disposition of the Proceeding determines that the conduct of such
Manager constituted recklessness, self-dealing or willful misconduct.
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9.2 Advance Payment. The right to indemnification conferred in this
Article IX shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a person of the type entitled to be indemnified
under Section 9.1 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such person in advance of the final disposition of a Proceeding shall be
made only upon delivery to the Company of a written affirmation by such Manager
or officer of his or her good faith belief that he has met the standard of
conduct necessary for indemnification under this Article IX and a written
undertaking, by or on behalf of such person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified person is not entitled
to be indemnified under this Article IX or otherwise.
9.3 Indemnification of Employees and Agents. The Company, by adoption
of a resolution of the Managers, may indemnify and advance expenses to an
employee or agent of the Company to the same extent and subject to the same
conditions under which it may indemnify and advance expenses to Managers and
officers under this Article IX; and, the Company may indemnify and advance
expenses to persons who are not or were not Managers, officers, employees or
agents of the Company but who are or were serving at the request of the Company
as a Manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in such a capacity or arising out of his status
as such a person to the same extent that it may indemnity and advance expenses
to Managers and officers under this Article IX.
9.4 Appearance as a Witness. Notwithstanding any other provision of
this Article IX, the Company shall pay or reimburse expenses incurred by a
Manager or officer in connection with his appearance as a witness or other
participation in a Proceeding at a time when he is not a named defendant or
respondent in the Proceeding.
9.5 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Article IX shall not be
exclusive of any other right which a Manager, officer or other person
indemnified pursuant to Section 9.3 may have or hereafter acquire under any law
(common or statutory), provision of the Certificate or this Agreement,
agreement, vote of Members or disinterested Managers or otherwise.
9.6 Insurance. The Company shall purchase and maintain insurance, at
its expense, to protect itself and any person who is or was serving as a
Manager, officer, employee or agent of the Company or is or was serving at the
request of the Company as a Manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic limited liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any expense, liability or loss, whether or not the Company would have the power
to indemnify such person against such expense, liability or loss under this
Article IX.
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9.7 Savings Clause. If this Article IX or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Manager or officer
or any other person indemnified pursuant to this Article IX as to costs, charges
and expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article IX that shall not have been
invalidated and to the fullest extent permitted by applicable law.
9.8 Limitation on Liability. No Manager or officer shall be personally
liable, as such, for any action taken or omitted from being taken unless: (i)
such Manager or officer breached or failed to perform the duties of his office;
and (ii) the breach or failure to perform constituted recklessness, self-dealing
or willful misconduct. The foregoing shall not apply to any responsibility or
liability under a criminal statute or liability for the payment of taxes under
Federal, state, or local law.
ARTICLE X
TAXES
10.1 Tax Returns. The Managers shall cause to be prepared and filed all
necessary Federal, state and local tax returns for the Company including making
the elections described in Section 10.2. Each Member shall furnish to the
Managers all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's tax returns to be prepared
and filed.
10.2 Tax Elections. To the extent permitted by applicable tax law, the
Company shall make the following elections on the appropriate tax returns:
(a) to adopt the calendar year as the Company's taxable year;
(b) to adopt the accrual method of accounting and to keep the
Company's books and records on the income-tax method;
(c) if a transfer of a Membership Interest as described in section 743
of the Code occurs, on written request of any transferee Member, or if a
distribution of Company property is made on which gain described in section
734(b)(1)(A) of the Code is recognized or there is an excess of adjusted
basis as described in section 734(b)(1)(B) of the Code, to elect, pursuant
to section 754 of the Code, to adjust the basis of Company properties;
(d) to elect to amortize the organizational expenses of the Company
and the start-up expenditures of the Company ratably over a period of 60
months as permitted by Sections 195 and 709(b) of the Code; and
(e) any other election the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Manager or Member may make an election for the
Company to be excluded from the application of the provisions of subchapter K of
chapter 1 of subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this Agreement
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<PAGE>
(including, without limitation, Section 2.8) shall be construed to sanction or
approve such an election.
10.3 Tax Matters Partner. SSI-Delaware shall be the "tax matters partner"
of the Company pursuant to section 6231(a)(7) of the Code. The tax matters
partner shall take such action as may be necessary to cause each other Member to
become a "notice partner" within the meaning of section 6223 of the Code. The
tax matters partner shall inform each other Member of all significant matters
that may come to its attention in its capacity as tax matters partner by giving
notice thereof on or before the fifth Business Day after becoming aware thereof
and, within that time, shall forward to each other Member copies of all
significant written communications it may receive in that capacity. The tax
matters partner may not take any action contemplated by sections 6222 through
6232 of the Code without the consent of a Required Interest, but this sentence
does not authorize the tax matters partner to take any action left to the
determination of an individual Member under sections 6222 through 6232 of the
Code.
ARTICLE XI
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
11.1 Maintenance of Books. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members, its Managers
and each committee of the Managers. The Company shall also maintain the books
and records on Exhibit B. The books of account for the Company shall be
---------
maintained on the accrual method of accounting in accordance with generally
accepted accounting principles and the terms of this Agreement, except that the
capital accounts, of the Members shall be maintained in accordance with Section
4.6. The accounting year of the Company shall be the same as its taxable year.
11.2 Reports. On or before the 90th day following the end of each
fiscal year during the term of the Company, the Managers shall cause each Member
to be furnished with (i) an Internal Revenue Service Form K-1 and similar forms
required for the filing of such Member's state and local income tax returns and
(ii) a balance sheet, a statement of operations and cash flows, a statement of
changes in Members, capital of the Company and a statement of value of the
Company's portfolio securities for, or as of the end of, that year certified by
a recognized firm of certified public accountants. These financial statements
shall be prepared in accordance with generally accepted accounting principles
for accrual-basis records consistently applied (except as therein noted) and be
accompanied by a report of the certified public accountants. In addition, the
Company shall provide each Member with quarterly unaudited financial statements
within forty-five (45) days after the end of each of the first three quarters in
each fiscal year. The Managers also may cause to be prepared or delivered such
other reports as they may deem appropriate. The Company shall bear the costs of
all of these reports.
11.3 Accounts. The Managers shall establish and maintain one or more
separate bank and investment accounts and arrangements for Company funds in the
Company name with financial institutions and firms that the Managers determine.
The Managers may not commingle the Company's funds with the funds of any Member.
The Company's funds may be invested in such manner as the Managers determine.
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<PAGE>
ARTICLE XII
BANKRUPTCY OF A MEMBER
12.1 Bankrupt Members. Subject to Section 13.1 (c), if any Member becomes a
Bankrupt Member, the Company shall have the option, exercisable by notice from
the Managers to the Bankrupt Member (or its representative) at any time prior to
the 180th day after receipt of notice of the occurrence of the event causing it
to become a Bankrupt Member, to buy, and on the exercise of this option the
Bankrupt Member or its representative shall sell, its Membership Interest. The
purchase price shall be an amount equal to the fair market value thereof
determined by agreement by the Bankrupt Member (or its representative) and the
Managers; however, if those persons do not agree on the fair market value on or
before the 30th day following the exercise of the option, either such person, by
notice to the other, may require the determination of fair market value to be
made by an independent appraiser. The independent appraiser shall be selected in
good faith by the Managers and reasonably acceptable to the Bankrupt Member. The
determination of the independent appraiser is final and binding on all parties.
The Bankrupt Member and the Company each shall pay one-half of the costs of the
appraisal. The Company shall pay the fair market value as so determined in four
equal cash installments, the first due on closing and the remainder (together
with accumulated interest on the amount unpaid at the General Interest Rate) due
on each of the first three anniversaries thereof. The payment to be made to the
Bankrupt Member or its representative pursuant to this Section 12.1 is in
complete liquidation and satisfaction of all the rights and interest of the
Bankrupt Member and its representative (and of all persons claiming by, through,
or under the Bankrupt Member and its representative) in and in respect of the
Company, including, without limitation, any Membership Interest, any rights in
specific Company property, and any rights against the Company and (insofar as
the affairs of the Company are concerned) against the Members.
ARTICLE XIII
DISSOLUTION, LIQUIDATION, AND TERMINATION
13.1 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the decision of the Managers to dissolve and liquidate the
Company;
(b) the written consent of all the Members;
(c) the expiration of the period fixed for the duration of the Company
in this Agreement;
(d) any Member that is a Manager shall die, become insane, retire,
resign, be expelled, become a Bankrupt Member (with or without the consent
of a Required Interest) or dissolve, or there shall occur any other event
that terminates the continued membership in the Company of any such Member,
unless, in any such case, within 90 days of such event, Members owning a
majority of the remaining Membership Interests elect to continue the
business of the Company; and
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<PAGE>
(e) entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Act.
The Company shall not be dissolved by the admission of Members in
accordance with the terms of this Agreement. Except as provided in Section
13.1(d), the death, insanity, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of an event that terminates the
continued membership of a Member in the Company, shall not cause the Company to
be dissolved and its affairs wound up so long as the Company at all times has at
least two Members. Upon the occurrence of any such event, the business of the
Company shall be continued without dissolution.
13.2 Liquidation and Termination. (a) On dissolution of the Company,
the Managers who have not wrongfully dissolved the Company shall act as
liquidator or may appoint one or more Members as liquidator. The liquidator
shall wind up the affairs of the Company as provided in the Act and shall have
all the powers set forth in the Act. The costs of liquidation shall be a
Company expense.
(b) Upon the winding up of the Company, the assets of the Company shall
first be distributed to creditors, including Members and Managers who are
creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof) other than liabilities for which reasonable
provision for payment has been made.
(c) Any assets remaining after the Company's liabilities and obligations
have been paid or reasonable provision for the payment thereof has been made,
shall be distributed to the Members in accordance with the positive capital
account balances of the Members, as determined after taking into account all
capital account adjustments for the Company's taxable year during which such
liquidation occurs (other than those made as a result of this Section), by the
end of such taxable year or, if later, within 90 days after the date of such
liquidation, except as permitted by Treas. Reg. (S) 1.704-1(b)(2)(ii)(b).
(d) If, at the discretion of the Managers, any assets of the Company are
distributed to the Members in-kind, such assets shall be valued on the basis of
the fair market value thereof as determined by the Managers in their reasonable
discretion on the date of distribution. Without limiting the managers,
discretion to make such a valuation or requiring that any such appraisal be
made, the valuation of any asset by the Managers on the basis of the
determination of its fair market value by an independent appraiser shall be
deemed to be a reasonable value for such asset and a reasonable exercise of such
discretion. Upon any such in-kind distribution to a Member, the Capital Account
of the Members shall be adjusted to reflect the manner in which the unrealized
income, gain, loss or deduction inherent in such property (that has not
previously been reflected in the Members' Capital Accounts) would be allocated
among the Members if there had been a taxable disposition of such property at
its fair market value on the date of distribution. The Capital Accounts of the
Members receiving a distribution in-kind shall then be reduced by the fair
market value of the property distribution.
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<PAGE>
(e) Nothing in this Article 13 shall be construed to extend the time period
prescribed under Section 13.2(c) above and Treas. Reg. (S) 1.704-1(b)(2)(ii)(b)
for making liquidating distributions of the Company's assets. If the Liquidator
deems it impracticable to cause the Company to make distributions of the
liquidating proceeds to the Members within the time period described under
Treas. Reg. (S) 1.704-l(b)(2)(ii)(b), the Liquidator may make any arrangement
that is considered for federal income tax purposes to effectuate liquidating
distributions of all of the Company's assets to the Members within the time
period prescribed in such regulation and that will permit the sale of the non-
cash assets considered so distributed in a manner that gives effect, to the
extent possible, to the intent of the preceding provisions of this Article 13.
(f) Notwithstanding anything contained herein to the contrary, upon the
merger or consolidation of the Company into, or transfer of its assets to, a
Successor Corporation in connection with a public offering of shares of such
Successor Corporation, shares in such Successor Corporation will be allocated
among the Members in the following proportions, based upon the price at which
such shares are initially offered to the public:
(i) first, to all Members in proportion to their Capital
Contributions, up to the amount of the excess, if any, of (x) their
Capital Contributions over (y) prior distributions to them;
(ii) second, to the Members in proportion to their Membership
Profit Interests until the aggregate shares distributed to all Members
are in proportion to their Membership Interests; and
(iii) third, to the Members in proportion to their Membership
Interests.
In addition, upon such merger, consolidation or sale of the Company in
connection with a public offering, the Successor Corporation shall acquire the
TL Corporations in exchange for stock of the Successor Corporation in a tax-free
transaction.
13.3 Deficit Capital Accounts. Notwithstanding anything to the contrary
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, to the extent that the deficit, if any, in the Capital Account of
any Member results from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or distributions of
assets pursuant to this Agreement to all Members, upon dissolution of the
Company such deficit shall not be an asset of the Company and such Members shall
not be obligated to contribute such amount to the Company to bring the balance
of such Member's capital account to zero.
13.4 Certificate of Cancellation. On the completion of the winding up of
the Company following its dissolution, the Company is terminated, and the
Managers (or such other person or persons as the Act may require or permit)
shall file a Certificate of Cancellation with the Office of the Secretary of
State of the State of Delaware, and cancel any other filings made pursuant to
Section 2.5.
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<PAGE>
ARTICLE XIV
1940 ACT
14.1 Expulsion. Anything herein to the contrary notwithstanding, no Member
that is an investment company, or would be an investment company but for the
exception provided by Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, may at
any time own more than nine percent of the aggregate shares of Membership
Interests then outstanding. If, at any time, the Company is informed that any
such Member has acquired more than nine percent of the shares of Membership
Interests (an "Investment Company Violation"), such Member shall be deemed to
have given notice of withdrawal pursuant to this Article 14, effective as of the
last day of the fiscal quarter Preceding such Investment Company Violation (the
"Investment Company Withdrawal Date"), of such portion or all of the Capital
Accounts of such Member as the Manager may determine is necessary or advisable
to cure such Investment Company Violation, and such withdrawal shall be
consummated as provided in this Article 14 to the maximum feasible extent. The
Company may expel such Member's Membership Interest at any time while such
Investment Company Violation continues by notice to such Member and such
expulsion shall be effective as of the Investment Company Withdrawal Date. On
advice of counsel for the Company, the Manager may waive the restrictions in
this Section with respect to a new or existing Member if the number of holders
of such securities would not prevent the Company from relying on the exclusion
from the definition of "investment company" under Section 3(c)(1) of the 1940
Act. Such a waiver may only be granted if such Member makes a written
representation to the Company as to the number of holders of such securities and
such waiver shall only be effective so long as the number of holders of such
securities does not exceed the number so represented to the Member.
14.2 Purchase of Expelled Member's Membership Interest. Upon the
occurrence of an Investment Company Violation, the Managers shall redeem such
portion of such Member's Membership Interest as the Managers determine is
necessary or advisable to cure such violation, all in accordance with Section
12.1 as if the breaching Member were a Bankrupt Member.
ARTICLE XV
GENERAL PROVISIONS
15.1 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment.
15.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under this Agreement is
effective on receipt by the person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the addresses given
for that Member on Exhibit A or in the instrument described in 3.3(d) or 3.4, or
---------
such other address as that Member may specify by notice to the other Members.
Any notice, request, or consent to the Company or the Managers must be given to
the Managers at the following address: 103 Springer Building, 1st Floor Concord
Plaza, 3411 Silverside Road, Wilmington, DE 19810.
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<PAGE>
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
15.3 Entire Agreement; Supersedure. This Agreement constitutes the
entire agreement of the Members and their affiliates relating to the Company and
supersedes all prior contracts or agreements with respect to the Company,
whether oral or written.
15.4 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any person in the performance by that
person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that person of the
same or any other obligations of that person with respect to the Company.
Failure on the part of a person to complain of any act of any person or to
declare any person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.
15.5 Amendment or Modification. This Agreement may be amended or
modified from time to time only by a written instrument adopted by the Managers
and executed and agreed to by a Required Interest and each Strategic Partner;
provided, however, that (a) an amendment or modification reducing a Member's
- -------- -------
Membership Interest or increasing its Commitment (other than to reflect changes
otherwise provided by this Agreement) or reducing a Member's distributions under
Section 5.2 is effective only with that Member's consent, (b) an amendment or
modification reducing the required Membership Interest or other measure for any
consent or vote in this Agreement is effective only with the consent or vote of
Members having the Membership Interest or other measure theretofore required,
(c) amendments of the type described in Section 3.4 may be adopted as therein
provided, (d) an amendment to Section 6.9 is effective only with the consent of
Members' holding at least 66 2/3% of all Membership Interests and (e) amendments
to this Agreement that (i) the Managers have reasonably determined do not
adversely affect the Members, (ii) are required or contemplated by this
Agreement, (iii) are reasonable and necessary or appropriate in the sole
discretion of the Managers to qualify or continue the qualification of the
Company as a limited liability company under the laws of any state, (iv) are
advisable in the opinion of the Managers to cure any ambiguity in any provision
herein, or (v) are required to effect a change in the name of the Company, in
the registered office or registered agent of the Company or in the location of
the principal place of business of the Company or the admission, substitution or
termination of Members in accordance with this Agreement, may be made by the
Managers without the consent of the Members.
15.6 Binding Act. Subject to the restrictions on Dispositions set forth
in this Agreement, this Agreement is binding on and inures to the benefit of the
Members and their respective heirs, legal representatives, successors, and
assigns.
15.7 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AGREEMENT
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<PAGE>
TO THE LAW OF ANOTHER JURISDICTION. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other persons or circumstances is not affected thereby and
that provision shall be enforced to the greatest extent permitted by law.
15.8 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
15.9 No Third Party Benefit. The provisions hereof are solely for the
benefit of the Company and its Members and Managers and are not intended to, and
shall not be construed to, confer a right or benefit on any creditor of the
Company or any other person.
15.10 Waiver of Certain Rights. Each Member irrevocably waives any right it
may have to maintain any action for dissolution of the Company or for partition
of the property of the Company.
15.11 Indemnification. To the fullest extent permitted by law, each Member
shall indemnify the Company, each Manager and each other Member and hold them
harmless from and against all losses, costs, liabilities, damages, and expenses
(including, without limitation, costs of suit and attorney's fees) they may
incur on account of any breach by that Member of this Agreement.
15.12 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
15.13 Resolutions of Disputes.
(a) If any dispute arises under this Agreement that is not settled promptly
in the ordinary course of business, the parties shall seek to resolve any such
dispute between them, first, by negotiating promptly with each other in good
faith in face-to-face negotiations. These face-to-face negotiations shall be
conducted by the respective designated senior management representative of each
party. If the parties are unable to resolve the dispute between them within 20
business days (or such period as the parties shall otherwise agree) through
these face-to-face negotiations, then any such disputes shall be resolved in the
manner set forth in subsections (b) through (d) below.
(b) Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $1,000,000 Dollars (a
"Summary Proceeding"), arising out of or relating to this Agreement or the
breach, termination or validity thereof, shall be litigated exclusively in the
Superior Court of the State of Delaware (the "Delaware Superior Court") as a
summary proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or
any successor rules (the "Summary Proceeding Rules") for as long as such rules
are in effect. Each of the parties hereto hereby irrevocably and
unconditionally (i) submits to the jurisdiction of the Delaware Superior Court
for any Summary Proceeding, (ii) agrees not to commence any Summary
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<PAGE>
Proceeding except in the Delaware Superior Court, (iii) waives, and agrees not
to plead or to make, any objection to the venue of any Summary Proceeding in the
Delaware Superior Court, (iv) waives, and agrees not to plead or to make, any
claim that any Summary Proceeding brought in the Delaware Superior Court has
been brought in an improper or otherwise inconvenient forum, (v) waives, and
agrees not to plead or to make, any claim that the Delaware Superior Court lacks
personal jurisdiction over it, (vi) waives its right to remove any Summary
Proceeding to the federal courts except where such courts are vested with sole
and exclusive jurisdiction by statute and (vii) understands and agrees that it
shall not seek a jury trial or punitive damages in any Summary Proceeding based
upon or arising out of or otherwise related to this Agreement or any other
agreement executed in connection herewith or the breach, termination or validity
thereof, and waives any and all rights to any such jury trial or to seek
punitive damages.
(c) In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $1,000,000 Dollars (a "Proceeding"), arising out of or relating to this
Agreement or any other agreement executed in connection herewith or the breach,
termination or validity thereof is brought, the parties to such Proceeding agree
to make application to the Delaware Superior Court to proceed under the Summary
Proceeding Rules. Until such time as such application is rejected, such
Proceeding shall be treated as a Summary Proceeding and all of the foregoing
provisions of this Section relating to Summary Proceedings shall apply to such
Proceeding.
(d) If a Summary Proceeding is not available to resolve any dispute
hereunder, the controversy or claim shall be settled by arbitration conducted on
a confidential basis, under the U.S. Arbitration Act, if applicable, and the
then current Commercial Arbitration Rules of the American Arbitration
Association (the "Association") strictly in accordance with the terms of the
Agreement and the substantive law of the State of Delaware. The arbitration
shall be conducted at the Association's regional office located closest to the
Company's principal place of business by three arbitrators, at least one of whom
shall be knowledgeable in general business practices, one of whom shall be an
attorney and one of whom shall be a member of a "Big Five" accounting firm
familiar with businesses engaged in asset management. Judgment upon the
arbitrators, award may be entered and enforced in any court of competent
jurisdiction. Neither party shall institute a proceeding hereunder unless at
least 60 days prior thereto such party shall have given written notice to the
other party of its intent to do so.
(e) Neither party shall be precluded hereby from securing equitable
remedies in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but shall not be sought as a means to avoid or stay arbitration or
Summary Proceeding.
15.14 Estoppels. Each Member shall, upon not less than fifteen (15)
days written notice from any Member, execute and deliver to such other Member a
statement certifying that this Agreement is unmodified and in full force and
effect (or, if modified, the nature of the modification) and whether or not
there are, to such Member's knowledge, any uncured defaults on the part of the
other Member, specifying such defaults if any are claimed. Any such statement
may be relied upon by third parties.
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15.15 Reliance on Authority of Person Signing Agreement. If a Member is
an Entity, the Company and the Members shall:
(a) not be required to determine the authority of the person signing this
Agreement to make any commitment or undertaking on behalf of such Entity or to
determine any fact or circumstance bearing upon the existence of the authority
of such Entity or to determine any fact or circumstance bearing upon the
existence of the authority of such person;
(b) not be required to see to the application or distribution of proceeds
paid or credited to persons signing this Agreement on behalf of such Entity;
(c) be entitled to rely on the authority of the person signing this
Agreement or the Subscription Agreement with respect to the voting of the
Membership Interest of such Entity and with respect to the giving of consent on
behalf of such Entity in connection with any matter for which consent is
permitted or required under this Agreement; and
(d) be entitled to rely upon the authority of any general partner, joint
venturer, trustee, or president or vice president, as the case may be, of any
such Entity the same as if such person were the person originally signing this
Agreement on behalf of such Entity.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as
of the date first set forth above.
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
/s/ Michael W. Miles
--------------------------------------
By: Michael W. Miles
Title: Vice President
COMCAST ICG, INC.
/s/ Julian A. Brodsky
--------------------------------------
By: Julian A. Brodsky
Title: Vice Chairman
CPQ HOLDINGS, INC.
/s/ Linda S. Auwers
--------------------------------------
By: Linda S. Auwers
Title: Secretary
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<PAGE>
TL VENTURES (DELAWARE) INC.
/s/ Jordan B. Savitch
-------------------------------------
By: Jordan B. Savich
Title: Assistant Secretary
TL VENTURES SECOND CORPORATION
/s/ Jordan B. Savitch
-------------------------------------
By: Jordan B. Savitch
Title: Assistant Secretary
INTERNET ASSETS, INC.
/s/ Bader F. Al-Rezaiham
-------------------------------------
By: Bader F. Al-Rezaiham
Title: President/Director
/s/ Julian Brodsky
--------------------------------------
JULIAN BRODSKY, Manager
/s/ Michael Forgash
--------------------------------------
E. MICHAEL FORGASH, Manager
/s/ Robert E. Keith
--------------------------------------
ROBERT E. KEITH, Manager
/s/ Walter W. Buckley, III
--------------------------------------
WALTER W. BUCKLEY, III, Manager
/s/ Walter W. Buckley, III,
--------------------------------------
WALTER W. BUCKLEY, III, individually
/s/ Kenneth A. Fox
--------------------------------------
KENNETH A. FOX, individually
/s/ Douglas A. Alexander
--------------------------------------
DOUGLAS A. ALEXANDER, individually
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<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Safeguard Scientifics (Delaware), Inc. $34,125,00 $8,125,000 N/A 21,125,000
- ------------------------------------------------------------------------------------------------------------------------------------
Comcast ICG, Inc. $16,100,000 $6,100,000 N/A 10,600,000
- ------------------------------------------------------------------------------------------------------------------------------------
CPQ Holdings, Inc. $10,000,000 0 N/A 5,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
BancBoston Investments Inc. $6,000,000 0 N/A 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
TL Ventures (Delaware), Inc. $6,557,300 $557,300 N/A 3,557,300
(TL II LP)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TL Ventures Second Corp. $442,700 $442,700 N/A 442,700
(TL II CV)
- ------------------------------------------------------------------------------------------------------------------------------------
R.A.F. Ventures VII. L.P. $5,000,000 $1,000,000 N/A 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Walter W. Buckley, Jr. $2,000,000 0 N/A 1,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Walter W. Buckley, III $4,692,999.67 $125,000 2,567,999.67 3,692,999.67
- ------------------------------------------------------------------------------------------------------------------------------------
J. Christopher Burch $2,750,000 $750,000 N/A 1,750,000
- ------------------------------------------------------------------------------------------------------------------------------------
Robert L. Burch $2,750,000 $750,000 N/A 1,750,000
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. Fox $4,286,549.69 $1,000,000 1,286,549.69 3,286,549.69
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Graham Family Growth Partnership, L.P. $1,500,000 0 N/A 750,000
$500,000 0 250,000
Steven C. Graham
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert Lotman $800,000 0 N/A 400,000
Karen Lotman
F.E.A. Trust F/B/O Shelly Lotman Fisher $300,000 0 150,000
John Pelin & George Ginader Trustees
F.E.A. Trust F/B/O Jeffrey Lotman $300,000 0 150,000
John Pelin & George Ginader Trustees
- ------------------------------------------------------------------------------------------------------------------------------------
Poduska Family Limited Partnership $1,250,000 $250,000 N/A 750,000
John William Poduska, Sr. $250,000 $250,000 250,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SMM Internet $1,225,000 $525,000 N/A 875,000
Robert A. Sargent
John C. Marshall
Doug Marzone
Hall Vetterlein
- ------------------------------------------------------------------------------------------------------------------------------------
M. Reid & Company $1,000,000 $350,000 N/A 675,000
Michael M. Reid
- ------------------------------------------------------------------------------------------------------------------------------------
The HRG Corporation $450,000 $150,000 N/A 300,000
Robert S. Adelson $150,000 $50,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas A. Alexander $1,416,374.26 0 1,216,374.26 1,316,374.26
- ------------------------------------------------------------------------------------------------------------------------------------
Warren V. Musser $400,000 0 N/A 200,000
- ------------------------------------------------------------------------------------------------------------------------------------
Jean C. Tempel $650,000 $250,000 N/A 450,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Electronics, L.L.C. $100,000 0 N/A 50,000
John C. Maxwell, III
- ------------------------------------------------------------------------------------------------------------------------------------
Tom Kippola Pension Plan $123,333 0 $23,333 73,333
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Keith $150,000 $50,000 N/A 100,000
Margot Keith
- ------------------------------------------------------------------------------------------------------------------------------------
James I. Cash, Jr., Ph.D-PSRP $100,000 0 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
Peter and Patricia Solvik $295,035.09 $75,000 70,035.09 220,035.09
- ------------------------------------------------------------------------------------------------------------------------------------
Esther Dyson $170,175.44 0 70,175.44 120,175.44
- ------------------------------------------------------------------------------------------------------------------------------------
Britton H. Murdoch $250,000 $150,000 150,000 350,000
- ------------------------------------------------------------------------------------------------------------------------------------
Ann B. Alexander $50,000 0 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 5 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Don E. Bonazzo $50,000 0 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------------------
Internet Assets, Inc. $5,000,000 $5,000,000 N/A 5,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
River Light, LLC $1,100,000 $1,100,000 N/A 1,100,000
- ------------------------------------------------------------------------------------------------------------------------------------
Austin Hearst $500,000 $500,000 N/A 500,000
- ------------------------------------------------------------------------------------------------------------------------------------
Keystone Foods Corporation $500,000 $500,000 N/A 500,000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher Greendale $416,959.06 $300,000 116,959.06 416,959.06
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas M. Marzonie $200,000 $200,000 N/A 200,000
- ------------------------------------------------------------------------------------------------------------------------------------
Crockett Family, L.P. $200,000 $200,000 N/A 200,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 6 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Silicon Valley Bancshares $125,000 $125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------------------
William L. Powar $125,000 $125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------------------
RMDG Investors, L.L.C. $125,000 $125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------------------
David Chu $125,000 $125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------------------
Ira Lubert $125,000 $125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------------------
Susan R. Buckley $125,000 $125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------------------
Ramsey Beirne Partners, LLC $100,000 $100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------------------
David Solomont $50,000 $50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 7 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John S. Scott $50,000 $50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Murphy $50,000 $50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
Edward Sickles $50,000 $50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
Lou Ryan $50,000 $50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
James Patterson $40,000 $40,000 N/A 40,000
- ------------------------------------------------------------------------------------------------------------------------------------
Blair La Corte $25,000 $25,000 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Loftus, Jr. $12,500 $12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------------------
William C. Loftus $12,500 $12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 8-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
- ------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henry N. Nassau $12,500 $12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------------------
James J. Lawless, Jr. $12,500 $12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------------------
GE Capital $7,000,000 0 N/A 3,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
John Burch $100,000 $100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Pollan $100,000 $100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------------------
Karl I. Peterson $75,000 $75,000 N/A 75,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 9 -
<PAGE>
EXHIBIT B
REQUIRED INFORMATION
(1) A current and a past list, setting forth the full name and last known
mailing address of each Member and Manager, set forth in alphabetical order;
(2) A copy of the Certificate of Formation and all amendments thereto;
(3) Copies of the Company's Federal, state and local income tax returns and
financial statements for the three most recent years or, if those returns and
statements were not prepared for any reason, copies of the information and
statements provided to, or which should have been provided to, the Members to
enable them to prepare their Federal, state and local tax returns for the
period; and
(4) Copies of the Company's written Amended and Restated Limited Liability
Company Agreement, and all amendments thereto, and copies of any operating
agreements no longer in effect.
- 1 -
<PAGE>
EXHIBIT C
---------
REGISTRATION RIGHTS
-------------------
1.1 Piggyback Registration.
----------------------
(a) If the Company at any time after the consummation of its
initial public offering proposes for any reason, whether for its own account or
the account of others, to register any of its securities under the Securities
Act, other than pursuant to a Special Registration Statement (as hereinafter
defined), it shall each such time promptly give written notice to the registered
Holders of the Eligible Securities (as defined in Section 1.2(c)) of its
intention to do so, and, upon the written request, given within twenty (20) days
after receipt of any such notice, of a Holder to register any of its Eligible
Securities, the Company shall (subject to Section 1.1(b) hereof) use its best
efforts to cause all Eligible Securities with respect to which Holders shall
have so requested registration to be registered under the Securities Act
promptly upon receipt of the written request of such Holders for such
registration, all to the extent required to permit the sale or other disposition
by the Holders of the Eligible Securities so registered in the manner
contemplated by such registration statement. "Special Registration Statement"
means a registration statement on Forms S-8 or S-4 or any successor form or
other registration statement relating to shares of Common Stock issued in
connection with an acquisition of an entity or business or other business
combination, or shares of Common Stock issued in connection with stock option or
other employee benefit plans.
(b) In connection with any exercise by a Holder of its
"piggyback" registration rights pursuant to this Section 1.1 in connection with
any underwritten offering of securities of the Company, if the Company is
advised in writing (with a copy to the Holders requesting registration) by the
lead underwriter for the offering that, in such firm's opinion, a registration
of Eligible Securities at that time would interfere with the orderly sale and
distribution of the securities being sold by the Company for its own account,
then the number of shares that may be included in the underwriting shall be
allocated, first, to the Company, second, to each of the Holders requesting
inclusion of their Eligible Securities in such registration statement on a pro
rata basis based on the total number of Eligible Securities held by each such
Holder and, third, to any other shareholders requesting registration.
(c) For purposes of this Exhibit C, the following terms shall
have the following meanings: (i) "Common Stock" shall mean the shares of common
stock of any Successor Corporation; (ii) "Company" shall mean and include
Internet Capital and any Successor Corporation; (iii) "Holders" shall mean each
Strategic Partner for so long as (and to the extent that) it owns any Eligible
Securities, and each of their respective successors, assigns, and transferees
who become registered owners of Eligible Securities; and (iv) "Internet Capital"
shall mean Internet Capital Group, L.L.C., a Delaware limited liability company.
Any capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in this Amended and Restated Limited Liability Company
Agreement of Internet Capital, as amended, to which this Exhibit C is attached.
- 1 -
<PAGE>
1.2 Demand Registration.
-------------------
(a) Any Holder may, at any time after consummation of the
Company's initial public offering of equity securities, request in writing that
the Company cause a registration statement to be filed under the Securities Act
(on any Form then available to the Company) with respect to such of its Eligible
Securities as it shall specify in such request, provided that (i) the gross
proceeds from such offering will be or are reasonably expected to be not less
than $5 million and (ii) such Holder includes at least 25% of its Eligible
Securities in its request. The Company shall promptly give written notice of
such request to the other Holders of Eligible Securities and afford them the
opportunity of including in the requested registration statement such of their
Eligible Securities as they shall specify in a written notice given to the
Company within thirty (30) days after their receipt of the Company's notice of
the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which Holders shall have so requested
registration to be registered under the Securities Act, all to the extent
required to permit the sale or other disposition by the Holders of the Eligible
Securities so registered in the manner specified by such Holders in their
notices and pursuant to this Section.
(b) The Company shall not be required to file and cause to become
effective more than two (2) registration statements at the demand of any Holder
made under this Section 1.2.
(c) The term "Eligible Securities" shall mean, on any date, (i)
the shares of Common Stock issued and issuable in exchange for a Holder's shares
of Memberships Interests upon the merger or consolidation of Internet Capital
into a Successor Corporation (the "Merger Shares"), (ii) plus all shares of
Common Stock or other securities of the Company issued in respect of such Merger
Shares (and such other securities of the Company) by way of a stock split, stock
dividend, recapitalization, merger or consolidation, (iii) but exclusive of any
Merger Shares or other securities described in clause (i) or (ii) which have
been (A) sold in a public offering registered under Securities Act or (B) sold
pursuant to Rule 144 under the Securities Act.
(d) If the Holders of the Eligible Securities making such demand
propose to sell their Eligible Securities in a firm commitment underwriting and
the managing underwriter advises such Holders that not all Eligible Securities
of such Holders can be included in such offering, then the requisite number of
Eligible Securities shall be excluded from registration on a basis pro rata
among the Holders of the Eligible Securities requesting such registration on the
basis of the number of Eligible Securities held by each of them. If by virtue of
this Section 1.2(d), more than 50% of the Eligible Securities which a Holder has
demanded be registered are excluded from the registration statements then such
Holder shall not be deemed to have exercised a demand registration right under
this Section 1.2.
(e) Provided the Company has honored its obligations under
Section 1.1, no demand registration right granted in this Section may be
exercised by any Holder during any period of time beginning on the date the
Company (i) files a registration statement with the
- 2 -
<PAGE>
Securities and Exchange Commission registering any of its securities for sale to
the public or (ii) files a registration statement upon the demand of any other
Holder pursuant to this Section 1.2, and ending on the earlier to occur of (A)
90 days after the date on which such registration statement is declared
effective by the Securities and Exchange Commission or otherwise becomes
effective, and (B) the 180th day after the date of such filing.
(f) The demand registration rights granted in this Section 1.2
shall expire, if not exercised prior thereto, on the date on which more than 90%
of the Eligible Securities (as of the date of this Agreement) shall have been
publicly sold by the Holders thereof in a public offering registered under the
Securities Act of 1933 or pursuant to Rule 144 thereunder.
1.3 Form S-3 Registrations. In addition to the rights provided the
----------------------
Holders of registrable securities in Sections 1.1 and 1.2 above, if the
registration of Eligible Securities under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), then upon the
written request of one or more Holders of Eligible Securities, the Company will
so notify each Holder of Eligible Securities, including each Holder who has a
right to acquire Eligible Securities, and then will, as expeditiously as
possible, use its best efforts to effect qualification and registration under
the Securities Act on Form S-3 of all or such portion of the Eligible Securities
as the Holder or Holders shall specify pursuant to this Section 1.3, provided
that the Company shall have no obligation to file a registration statement under
this Section 1.3 unless the gross proceeds from the offering will be or are
reasonably expected to be not less than $500,000.
1.4 Registration Procedures. If and whenever the Company is under an
-----------------------
obligation pursuant to the provisions of this Exhibit C to use its best efforts
to effect the registration of any Eligible Securities the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission
a registration statement with respect to such Eligible Securities and use its
best efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective under the Securities Act until the earlier of
such time as all securities covered thereby have been sold or one hundred and
eighty (180) days after such registration statement becomes effective, as such
period may be extended pursuant to Section 1.5, and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Eligible Securities covered by such registration statement for such
period;
(c) furnish to each selling stockholder such numbers of copies of
each prospectus (including each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of such Eligible Securities;
- 3 -
<PAGE>
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter, if any, or if there
is no managing underwriter, the Holders of at least 25% of the Eligible
Securities, shall request, (provided that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
reasonably necessary or advisable to enable such seller to consummate the public
sale or other disposition in such jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in clause (b) of this Section 1.4, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish on the date that such Eligible Securities are
delivered to the underwriters for sale pursuant to such registration or, if such
Eligible Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Eligible Securities becomes
effective, (i) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and at the request of any Holder or Holders of Eligible
Securities requesting registration pursuant to this Exhibit C, to the Holder or
Holders making such request, stating that such registration statement has become
effective under the Securities Act and that (i) no stop order suspending the
effectiveness thereof has been issued and, to the best knowledge of such
counsel, no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (2) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein); (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no
opinion as to financial statements contained therein); (4) the description in
the registration statement or the prospectus, or any amendment or supplement
thereto, of all legal and governmental matters and all contracts and other legal
documents or instruments are accurate and fairly present the information
required to be shown; (5) such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be described in
the registration statement or prospectus, or any
- 4 -
<PAGE>
amendment or supplement thereto, which are not described as required, nor of any
contracts or documents or instruments of a character required to be described in
the registration statement or prospectus, or any amendment or supplement
thereto, or to be filed as exhibits to the registration statement which are not
described and filed as required, and (6) such other legal matters with respect
to such registration as the underwriters, if any, and any such Holder or Holders
requesting such opinion may reasonably request; and (ii) in the case of an
underwritten offering a comfort letter, dated such date, from the independent
certified public accountants of the Company, addressed to the underwriters and
the Company's Board of Directors in the customary form.
1.5 Delay in Registration. Notwithstanding anything contained in
---------------------
this Agreement to the contrary, the Company reserves the right to delay any such
registration pursuant to this Exhibit C for a period of not more than one
hundred and twenty (120) days, or to withhold efforts to cause such registration
statement to become effective for a period of not more than one hundred twenty
(120) days, if the Board of Directors of the Company determines in good faith
that such registration might (A) interfere with or affect the negotiation or
completion of any material transaction that is being contemplated by the
Company, or (B) involve initial or continuing disclosure obligations materially
adverse to the best interests of the Company's shareholders. If, after a
registration statement becomes effective, the Company advises the Holders of the
registrable securities covered by such registration statement that the Company
considers it appropriate for the registration statement to be amended, the
Holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The time periods referred to this Exhibit C shall be extended for an
additional number of business days during which the rights to sell shares was
suspended.
1.6 Information to be Furnished by Holders of Eligible Securities.
-------------------------------------------------------------
Each prospective seller of Eligible Securities, registered or to be registered
under any registration statement shall furnish to the Company such information
and execute such documents regarding the Eligible Securities held by such seller
and the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company.
1.7 Expenses of Registration.
------------------------
(a) All expenses incurred by the Company in complying with this
Exhibit C (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (iv) printing expenses; (v) fees and
disbursements of Company counsel and of one counsel for the participating
Holders together, which counsel is reasonably acceptable to the Holders; and
(vi) the fees and expenses of the independent public accountants (including the
expense of any special audits in connection with any such registration), are
hereinafter called "Registration Expenses." All underwriting discounts and
commissions applicable to the Eligible Securities covered by any such
registration, are herein called "Selling Expenses."
- 5 -
<PAGE>
(b) The Company shall pay all Registration Expenses in connection
with all piggyback registrations under Section 1.1 and all demand registrations
under Section 1.2 plus up to one (1) S-3 registration per year pursuant to
Section 1.3. All Selling Expenses in connection with each registration pursuant
to this Exhibit C and any legal fees and expenses of additional special counsel
for the sellers shall be borne by the seller or sellers therein in proportion to
the number of Eligible Securities included by each in such registration, or in
such other proportions as they may agree upon.
1.8 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each Holder of
Eligible Securities, its executive officers, directors and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to this
Exhibit C against any loss, claims, damages or liabilities to which any of them
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in a
registration statement including Eligible Securities owned by such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any of them for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable hereunder to a
particular Holder in any such case if any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company for such purpose by such Holder or by its representative or by any
underwriter on behalf of such Holder or if the untrue statement or omission is
corrected in a supplement or amendment to the prospectus provided by the Company
to such Holder in a timely fashion in accordance with this Exhibit C which was
not used by such Holder.
(b) Each Holder of Eligible Securities joining in any
registration statement of the Company pursuant to Exhibit C of this Agreement
shall indemnify and hold harmless the Company, its executive officers,
directors, and controlling persons (within the meaning of the Securities Act)
and each person who participates as an underwriter or controlling person of an
underwriter (within the meaning of the Securities Act) with respect to a
registration statement pursuant to Exhibit C against any losses, claims,
damages, or liabilities to which any of them may become subject under the
Securities Act or otherwise insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in such registration statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, made in reliance upon and in
conformity
- 6 -
<PAGE>
with written information furnished to the Company by such Holder or by its
representative or by any underwriter on behalf of such Holder for such purpose,
and will reimburse any of them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending, any such loss,
claim, damage, liability or action provided, however, that the total amount
-------- -------
payable by a Holder under this Section 1.8(b) shall not exceed the net proceeds
received by such Holder in such registered offering.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
unavailable to or insufficient to hold harmless an amount in excess of the
proceeds received by such Holder in the offering.
1.9 Underwriting Agreement. If Eligible Securities are sold pursuant
----------------------
to a registration statement in an underwritten offering pursuant to this Exhibit
C, the Company and the Holders participating therein agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of, or, as the case may be,
the seller of the securities being registered and customary covenants and
agreements to be performed by such issuer or seller, including, without limiting
the generality of the foregoing, customary provisions with respect to
indemnification by the Company of the underwriter(s) of such offering.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
----------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any Eligible
Securities for up to that period of time following the effective date of a
registration statement of the Company filed under the Securities Act as is
requested by the managing underwriters of such offering, not to exceed one
hundred and eighty (180) days.
1.11 Subsequent Registration Rights. The Company shall not grant any
------------------------------
registration rights to any other person that are more favorable to such person
than the registration rights granted to the Holders hereunder without the
consent of the Holders.
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1.12 Assignment. The registration rights granted hereunder may be
----------
assigned by a Holder to any person who acquires such Holder's Eligible
Securities in accordance with the Company's Amended and Restated Limited
Liability Company Agreement.
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Exhibit 10.5.1
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
Dated January 4, 1999
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
DELAWARE SECURITIES ACT OF 1972, AS AMENDED, OR SIMILAR LAWS OR ACTS OF OTHER
STATES IN RELIANCE UPON EXEMPTIONS UNDER THOSE ACTS. THE SALE OR OTHER
DISPOSITION OF THE MEMBERSHIP INTERESTS IS RESTRICTED AS STATED IN THIS AMENDED
AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, AND IN ALL EVENTS IS
PROHIBITED UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT
AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES ACTS AND LAWS. BY THE EXECUTION OF THIS AGREEMENT AND THE
ACQUISITION OF THE MEMBERSHIP INTEREST REPRESENTED HEREBY, THE MEMBER
REPRESENTS, INTER ALIA, THAT IT IS ACQUIRING ITS MEMBERSHIP INTEREST FOR
----- ----
INVESTMENT AND WITHOUT A VIEW TO DISTRIBUTION AND THAT IT WILL NOT SELL OR
OTHERWISE DISPOSE OF ITS MEMBERSHIP INTEREST WITHOUT REGISTRATION OR OTHER
COMPLIANCE WITH THE AFORESAID ACTS AND THE RULES AND REGULATIONS ISSUED
THEREUNDER.
<PAGE>
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I DEFINITIONS................................................................... 1
1.1 Definitions................................................................... 1
1.2 Construction.................................................................. 5
ARTICLE II ORGANIZATION.................................................................. 5
2.1 Formation; Effective Date..................................................... 5
2.2 Name.......................................................................... 5
2.3 Registered Office; Registered Agent; Principal Office in the United States;
Other Offices................................................................. 5
2.4 Purpose....................................................................... 5
2.5 Foreign Qualification......................................................... 5
2.6 Term.......................................................................... 6
2.7 No State-Law Company.......................................................... 6
2.8 Classification for Tax Purposes............................................... 6
2.9 Management Company............................................................ 6
ARTICLE III MEMBERSHIP, DISPOSITIONS OF INTERESTS......................................... 6
3.1 Current Members............................................................... 6
3.2 Representations and Warranties................................................ 7
3.3 No Certification; Restrictions on the Disposition of an Interest.............. 8
3.4 New Members................................................................... 10
3.5 Interests in a Member......................................................... 11
3.6 Information................................................................... 11
3.7 Liability to Third Parties.................................................... 12
3.8 Lack of Authority............................................................. 12
3.9 Withdrawal.................................................................... 12
3.10 Preemptive Rights............................................................. 12
</TABLE>
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<TABLE>
<S> <C> <C>
3.11 Right of First Refusal........................................................ 13
3.12 Registration Rights........................................................... 15
ARTICLE IV CAPITAL CONTRIBUTIONS......................................................... 15
4.1 Contributions................................................................. 15
4.2 Subsequent Contributions...................................................... 15
4.3 Failure to Contribute......................................................... 15
4.4 Return of Contributions....................................................... 16
4.5 Advances by Members........................................................... 16
4.6 Capital Account............................................................... 16
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS................................................. 17
5.1 Allocations................................................................... 17
5.2 Distributions................................................................. 18
ARTICLE VI. MANAGERS...................................................................... 19
6.1 Management by Managers........................................................ 19
6.2 Actions by Managers; Committees; Delegation and Duties........................ 19
6.3 Number and Term of Office of Managers......................................... 20
6.4 Vacancies; Removal; Resignation............................................... 20
6.5 Meetings...................................................................... 21
6.6 Approval or Ratification of Acts or Contracts by Members...................... 21
6.7 Action by Written Consent or Telephone Conference............................. 21
6.8 Expenses; Compensation........................................................ 22
6.9 Co-Investment Opportunities................................................... 22
6.10 Advisory Board................................................................ 23
6.11 Conflicts of Interest......................................................... 23
6.12 Related Party Transactions.................................................... 23
ARTICLE VII OFFICERS...................................................................... 23
7.1 Officers...................................................................... 23
7.2 Compensation.................................................................. 23
7.3 Term of Office; Removal; Filling of Vacancies................................. 24
7.4 Chairman...................................................................... 24
7.5 President..................................................................... 24
7.6 Vice Presidents............................................................... 24
</TABLE>
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<TABLE>
<S> <C> <C>
7.7 Secretary..................................................................... 24
7.8 Assistant Secretary........................................................... 24
7.9 Treasurer..................................................................... 24
7.10 Additional Powers and Duties.................................................. 24
ARTICLE VIII MEETINGS OF MEMBERS........................................................... 25
8.1 Meetings...................................................................... 25
8.2 Voting List................................................................... 26
8.3 Proxies....................................................................... 26
8.4 Conduct of Meetings........................................................... 26
8.5 Action by Written Consent or Telephone Conference............................. 26
ARTICLE IX INDEMNIFICATION............................................................... 26
9.1 Right to Indemnification...................................................... 26
9.2 Advance Payment............................................................... 27
9.3 Indemnification of Employees and Agents....................................... 27
9.4 Appearance as a Witness....................................................... 27
9.5 Nonexclusivity of Rights...................................................... 28
9.6 Insurance..................................................................... 28
9.7 Savings Clause................................................................ 28
9.8 Limitation on Liability....................................................... 28
ARTICLE X... TAXES......................................................................... 28
10.1 Tax Returns................................................................... 28
10.2 Tax Elections................................................................. 28
10.3 Tax Matters Partner........................................................... 29
ARTICLE XI BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS.................................... 29
11.1 Maintenance of Books.......................................................... 29
11.2 Reports....................................................................... 30
11.3 Accounts...................................................................... 30
ARTICLE XII BANKRUPTCY OF A MEMBER........................................................ 30
12.1 Bankrupt Members.............................................................. 30
ARTICLE XIII DISSOLUTION, LIQUIDATION, AND TERMINATION..................................... 31
13.1 Dissolution................................................................... 31
13.2 Liquidation and Termination................................................... 31
</TABLE>
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<TABLE>
<S> <C> <C>
13.3 Deficit Capital Accounts...................................................... 33
13.4 Certificate of Cancellation................................................... 33
ARTICLE XIV. 1940 ACT...................................................................... 33
14.1 Expulsion..................................................................... 33
14.2 Purchase of Expelled Member's Membership Interest............................. 33
ARTICLE XV GENERAL PROVISIONS............................................................ 34
15.1 Offset........................................................................ 34
15.2 Notices....................................................................... 34
15.3 Entire Agreement; Supersedure................................................. 34
15.4 Effect of Waiver or Consent................................................... 34
15.5 Amendment or Modification..................................................... 34
15.6 Binding Act................................................................... 35
15.7 Governing Law; Severability................................................... 35
15.8 Further Assurances............................................................ 35
15.9 No Third Party Benefit........................................................ 35
15.10 Waiver of Certain Rights...................................................... 35
15.11 Indemnification............................................................... 35
15.12 Counterparts.................................................................. 36
15.13 Resolutions of Disputes....................................................... 36
15.14 Estoppels..................................................................... 37
15.15 Reliance on Authority of Person Signing Agreement............................. 37
</TABLE>
EXHIBIT A: NAMES, CAPITAL CONTRIBUTIONS, COMMITMENTS, MEMBERSHIP PROFIT
INTERESTS AND TOTAL MEMBERSHIP INTERESTS OF MEMBERS
EXHIBIT B: REQUIRED INFORMATION
EXHIBIT C: REGISTRATION RIGHTS
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EXHIBIT 10.5.1
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") of INTERNET CAPITAL GROUP, L.L.C. (the "Company") dated as of
January 4, 1999 by and among the parties listed on Exhibit A attached hereto
---------
(the "Current Members") and those other persons who become Members of the
Company from time to time, as hereinafter provided.
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Act" means the Delaware Limited Liability Company Act (6 Del. C.
(S) 18-101 et. seq.), and any successor statute, as amended from time to
time.
"Agreement" has the meaning given that term in the introductory
paragraph as amended from time to time.
"Bankrupt" means, with respect to any person, a person (a) that (i)
makes an assignment for the benefit of creditors; (ii) files a voluntary
petition in bankruptcy; (iii) is adjudged a bankrupt or insolvent, or has
entered against him an order for relief, or is declared insolvent in any
bankruptcy or insolvency proceedings; (iv) files a petition or answer
seeking for the person a reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
statute, law, or regulation; (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the person in a proceeding of the type described in
subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
the person's or of all or any substantial part of the person's properties;
or (b) against whom, a proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any law has been commenced and 120 days have expired without
dismissal thereof or with respect to whom, without the person's consent or
acquiescence, a trustee, receiver, or liquidator of the person or of all or
any substantial part of the person's properties has been appointed and 90
days have expired without the appointment having been vacated or stayed, or
90 days have expired after the date of expiration of a stay, if the
appointment has not previously been vacated.
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"Business Day" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the Commonwealth of
Pennsylvania are closed.
"Capital Contribution" means any contribution by a Member to the
capital of the Company; provided that, upon the admission of a new Member
after the date hereof, the Capital Contribution of each Current Member
shall be deemed to be equal to the capital account of such Current Member
as revalued pursuant to Section 4.6 hereof.
"Certificate" has the meaning given that term in Section 2.1.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Commitment" means the amount of subsequent contributions each
Member is obligated to contribute to the Company pursuant to Section 4.2 of
this Agreement. The initial Commitment of each Current Member or new
Member purchasing shares of Membership Interest pursuant to Section 3.4
shall be the Commitment established pursuant thereto. Each Member's
Commitment shall be reduced by the amount of any subsequent Capital
Contributions made by such Member and by the amount of any distribution
applied against such commitment under Section 5.2(a)(ii).
"Commitment Ratio" with respect to any Current Member or any new
Member purchasing Membership Interests pursuant to Section 3.4 hereof shall
mean a fraction (expressed as a percentage), the numerator of which is that
Member's Commitment and the denominator of which is the sum of the
Commitments of all Current Members and new Members purchasing shares of
Membership Interests pursuant to Section 3.4 hereof.
"Company" means Internet Capital Group, L.L.C., a Delaware limited
liability company.
"Default Interest Rate" means a rate per annum equal to 3% plus a
varying rate per annum that is equal to the prime rate of interest as
reported in the Wall Street Journal, with adjustments in that varying rate
to be made on the same date as any change in that rate.
"Delinquent Member" has the meaning given that term in Section 4.3.
"Dispose," "Disposing" or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or
other disposition or encumbrance (including, without limitation, by
operation of law), or the acts thereof.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, limited liability
company, limited liability partnership, cooperative or association.
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<PAGE>
"General Interest Rate" means a rate per annum equal to a varying
rate per annum that is equal to the prime rate of interest as reported in
the Wall Street Journal, with adjustments in that varying rate to be made
on the same date as any change in that rate.
"Manager" means any Member designated as a manager of the Company in
this Agreement or hereafter appointed as a Manager as provided in this
Agreement, but does not include any person who has ceased to be a manager
of the Company. The Managers may collectively be referred to as the "Board
of Managers."
"Member" means (a) the Current Members and (b) any person executing
this Agreement as of the date of this Agreement as a member or hereafter
admitted to the Company as a member as provided in this Agreement, but does
not include any person who has ceased to be a member in the Company.
"Membership Interest" means the ownership interest of a Member in
the Company, including, without limitation, rights to distributions
(liquidating or otherwise), allocations, information, and to consent,
approve or vote upon matters upon which Members are entitled to so consent,
approve or vote upon hereunder. Each Member's Membership Interest shall be
represented by shares of Membership Interest. The number of shares of
Membership Interest owned by a Member at any time shall be equal to the sum
of (1) the quotient obtained by dividing that Member's Capital Contribution
plus then outstanding Commitment by $2.00 (provided that, solely for this
purpose, Capital Contributions attributable to Membership Profit Interests
upon a revaluation of the Company's capital accounts in accordance with
Treas. Reg. (S)1.704-1(b)(2)(iv)(f) shall be disregarded) plus (2) the
number of then outstanding shares of Membership Profit Interest owned by
such Member, if any plus (3) the number of then outstanding shares of
Membership Interests with respect to any vested and exercised Options owned
by such Member. The number of shares of Membership Interest owned on the
date hereof by the Current Members is shown on Exhibit A. As new Members
---------
are admitted to the Company, the Managers shall prepare and distribute to
all Members a revised Exhibit A showing the shares of Membership Interest
---------
then owned by all Members and their respective Capital Contributions,
Commitments, and shares of Membership Profit Interests, if any.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Membership Profit Interest" means the 6,783,625 shares of
Membership Interest granted by the Company as performance incentives to
certain officers or employees of, or consultants or advisors to, the
Company designated by Walter W. Buckley, III and Kenneth A. Fox pursuant to
the Membership Profit Interest Plan.
"Offering" means the offering of shares of Membership Interest in
the Company made by the Company pursuant to the Private Placement
Memorandum on the terms and conditions set forth in the Private Placement
Memorandum.
"Options" means (1) the non-qualified options to purchase 470,000
shares of
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Membership Interests that may be granted to non-employee Managers
of the Company pursuant to the Company's Option Plan For Non-Employee
Managers, which was adopted by the Company's Board of Managers on January
16, 1997 and (2) the non-qualified options to purchase up to 10% of the
total shares of Membership Interests of the Company on a fully-diluted
basis after giving effect to this Offering that may be granted to
employees, officers, consultants and advisors to the Company pursuant to
the Company's Option Plan For Employees and Consultants, which plan has
been adopted by the Board of Managers.
"Private Placement Memorandum" means the Company's private placement
memorandum dated May 1998, as amended, providing for the offering of shares
of Membership Interest in the amount of up to $70,000,000.
"Public Offering" has the meaning given that term in Section 3.3(g).
"Proceeding" has the meaning given that term in Section 9.1.
"Required Interest" means one or more Members having among them more
than 50% of the then outstanding Membership Interests of all Members.
"Safeguard" means Safeguard Scientifics, Inc., a Pennsylvania
corporation which owns all of the outstanding equity interests of SSI-
Delaware.
"Securities Act" has the meaning given that term in Section 3.2(h).
"SSI-Delaware" means Safeguard Scientifics (Delaware), Inc., a
Delaware Corporation and a wholly owned subsidiary of Safeguard.
"Strategic Partner" has the meaning given that term in Section 6.3.
"Subscription Agreement" has the meaning given that term in Section
3.4(a).
"Successor Corporation" means any C corporation into, or with which,
the Company merges or consolidates, or to which the Company transfers its
assets in exchange for stock of such corporation.
"TL" means collectively Technology Leaders II, L.P., a Delaware
limited partnership and Technology Leaders II Offshore C.V., a Netherlands
Antilles limited partnership, and the TL Corporations.
"TL Corporations" means any corporations wholly owned by either
Technology Leaders II, L.P. or Technology Leaders II Offshore C.V. which
acquire Membership Interests in the Company.
Other terms defined herein have the meanings so given them.
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<PAGE>
1.2 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter. All
references to Articles and sections refer to articles and Sections of this
Agreement, and all references to Exhibits are to Exhibits attached hereto, each
of which is made a part hereof for all purposes.
ARTICLE II
ORGANIZATION
2.1 Formation; Effective Date. The Company was organized as a Delaware
limited liability company on March 4, 1996 by the filing of a certificate of
formation (the "Certificate") with the Office of the Secretary of the State of
Delaware under and pursuant to the Act signed by Walter W. Buckley, III as an
"authorized person" within the meaning of the Act, and this Agreement shall be
effective as of the time of the filing of the Certificate. This Agreement
amends and restates in its entirety the Limited Liability Company Agreement
entered into on May 9, 1996 by and among SSI-Delaware and the original Members
(the "Original Agreement"), as amended and restated by the Amended and Restated
Limited Liability Company Agreement dated May 13, 1998 (the "May Agreement") and
by the Amended and Restated Limited Liability Company Agreement dated September
30, 1998 (the "September Agreement").
2.2 Name. The name of the Company is "Internet Capital Group, L.L.C."
and all Company business must be conducted in that name or such other names that
comply with applicable law as the Managers may select from time to time.
2.3 Registered Office; Registered Agent; Principal Office in the United
States; Other Offices. The registered agent and office of the Company
required by the Act to be maintained in the State of Delaware shall be
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805 or
such other agent or office (which need not be a place of business of the
Company) as the Managers may designate from time to time in the manner provided
by law. The principal office of the Company shall be at such place as the
Managers may designate from time to time and the Company shall maintain such
records as are set forth on Exhibit B attached hereto. The Company may have
---------
such other offices as the Managers may designate from time to time.
2.4 Purpose. The purpose of the Company is to (a) acquire equity
interests in companies engaged in businesses related to the Internet, to
actively participate in the management and operations of those companies, and to
hold, manage and sell its investments, as described in the Private Placement
Memorandum; (b) engage in any such other activities permitted under Delaware law
as the Members holding a Required Interest shall determine; and (c) engage in
all other activities incidental or related thereto. Incident to such purposes
and as part of its business, the Company is authorized to do all things
necessary or appropriate to carry out the foregoing purposes or purposes related
or incidental thereto.
2.5 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than the State of Delaware, the Managers shall cause
the Company to comply with all requirements necessary to qualify the Company as
a foreign limited liability company in that jurisdiction if the nature of its
business makes such qualification necessary. At the request of
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the Managers, each Member shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Agreement that are
necessary or appropriate to qualify, continue, and terminate the Company as a
foreign limited liability company in all such jurisdictions in which the Company
may conduct business.
2.6 Term. The Company commenced on the date the Certificate was filed
with the Secretary of State of the State of Delaware and shall continue in
existence until April 30, 2008, unless the Board of Managers shall, in its sole
discretion, approve extension(s) of time for the orderly liquidation of the
Company, such extension(s) not to exceed two periods of one year each, or such
earlier time as this Agreement may specify.
2.7 No State-Law Partnership. The Members intend that the Company not
be a partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member or Manager be a partner or joint venturer of any
other Member or Manager, for any purposes other than Federal and, to the extent
permitted, state and local tax purposes, and this Agreement shall not be
construed to produce a contrary result.
2.8 Classification for Tax Purposes. It is the express intention of the
Members that the Company lack the corporate characteristics of continuity of
life, centralized management and free transferability of interests (as those
terms are defined and utilized in Treas. Reg. (S) 301.7701-2) and, therefore, be
classified as a partnership for purposes of Federal income taxation and not as
an association taxable as a corporation. It is the further intention of the
Members that this Agreement be interpreted and applied accordingly.
2.9 Management Company. (a) The Company is authorized to enter into an
agreement with a management company selected by the Managers (such company, the
"Management Company"), in a form acceptable to the Managers (such agreement, the
"Management Agreement") pursuant to which the Management Company may provide
certain management and administrative services to the Company.
(b) The Managers shall be responsible for supervising the activities of the
Management Company and for enforcing the rights of the Company under the
Management Agreement. The Managers shall have final authority with respect to
the management, operations and policies of the Company and shall be solely
responsible for making all decisions with respect to the investment of the
Company's assets.
(c) In exchange for its services, the Management Company may be entitled to
receive from the Company a fee in such amount and payable at such times as
provided in the Management Agreement.
ARTICLE III
MEMBERSHIP, DISPOSITIONS OF INTERESTS
3.1 Current Members. The Current Members of the Company are set forth
on the attached Exhibit A, which Exhibit A designates the Current Members as
---------- ---------
such and shall be
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amended from time to time to reflect the withdrawal of Members and the admission
of new Members pursuant to this Agreement.
3.2 Representations and Warranties. The Current Members hereby
acknowledge that the representations and warranties they made in the May
Agreement and the September Agreement were true and correct at the time they
were made and that such representations and warranties remain true and correct
as of the date hereof. Each new Member hereby represents and warrants to the
Company and each other Member that:
(a) if that Member is a corporation, it is duly organized, validly
existing, and in good standing under the law of the state of its incorporation
and is duly qualified and in good standing as a foreign corporation in the
jurisdiction of its principal place of business (if not incorporated therein);
(b) if that Member is a limited liability company, it is duly organized,
validly existing, and (if applicable) in good standing under the law of the
state of its organization and is duly qualified and (if applicable) in good
standing as a foreign limited liability company in the jurisdiction of its
principal place of business (if not organized therein);
(c) if that Member is a partnership, trust, or other entity, it is duly
formed, validly existing, and (if applicable) in good standing under the law of
the state of its formation, and if required by law is duly qualified to do
business and (if applicable) is in good standing in the jurisdiction of its
principal place of business (if not formed therein), and the representations and
warranties in clauses (a), (b) or (c) above, if applicable, are true and correct
with respect to each partner (other than limited partners), trustee, or other
member thereof;
(d) if that Member is an Entity, it has full corporate, limited liability
company, partnership, trust, or other applicable power and authority to execute
and agree to this Agreement and to perform its obligations hereunder and all
necessary actions by the board of directors, shareholders, managers, members,
partners, trustees, beneficiaries, or other persons necessary for the due
authorization, execution, delivery, and performance of this Agreement and the
Subscription Agreement by that Member have been duly taken;
(e) such Member has duly executed and delivered this Agreement and/or the
Subscription Agreement;
(f) such Member's authorization, execution, delivery, and performance of
this Agreement and the Subscription Agreement do not conflict with any other
agreement or arrangement to which that Member is a party or by which it is
bound;
(g) such Member is acquiring its Membership Interest for its own account,
for investment only and not with a view to the distribution thereof, except to
the extent provided in or contemplated by this Agreement;
(h) such Member recognizes that (i) the Membership Interests have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an
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<PAGE>
exemption from such registration, and agrees that it will not sell, offer for
sale, transfer, pledge or hypothecate its Membership Interests, in whole or in
part, (A) in the absence of an effective registration statement covering such
Membership Interests under the Securities Act, unless such sale, offer of sale,
transfer, pledge or hypothecation is exempt from registration for any proposed
sale, as confirmed in the opinions of counsel required under Section 3.3(e) and
(B) except in compliance with all applicable provisions of this Agreement, and
(ii) the restrictions on transfer imposed by this Agreement may severely affect
the liquidity of an investment in the Membership Interests;
(i) the Company has made available to that Member the opportunity to ask
questions of and receive answers from the Company's Managers and officers
concerning the terms and conditions of the Offering and the business and
financial condition of the Company, and to acquire, and each Member has received
to its satisfaction, such additional information, in addition to that set forth
herein, about the business and financial condition of the Company and the terms
and conditions of the Member's investment in the Company as it has requested;
(j) such Member (i) is an "accredited investor" as such term is defined in
Rule 501 promulgated under the Securities Act, (ii) its financial situation is
such that it can afford to bear the economic risk of holding the Membership
Interests for an indefinite period of time and suffer complete loss of its
investment in the Membership Interests, and (iii) its knowledge and experience
in financial and business matters are such that it is capable of evaluating the
merits and risks of its purchase of the Membership Interests as contemplated by
this Agreement; and
(k) if that Member is an investment company, or would be an investment
company but for the exemption provided for by Section 3(c)(1) or Section 3(c)(7)
of the 1940 Act, the Member recognizes that it may acquire no more than 9% of
the Membership Interests, and that such Member's acquisition of more than 9% of
the Membership Interests will subject the Member to expulsion from the Company
under the terms and conditions of Article 14.
3.3 No Certification; Restrictions on the Disposition of an Interest.
(a) No Membership Interest in the Company shall be represented by a
separate certificate.
(b) Except as specifically provided in this Section 3.3 or in Section 3.11,
a Disposition of an interest in the Company may not be effected without the
consent of a majority of the non-transferring Managers (which consent may be
granted or withheld in each Manager's sole discretion). No consent shall be
required for the Disposition of a Membership Interest (i) by will or operation
of the intestacy laws upon the death of a Member who is a natural person, or
(ii) by a Strategic Partner (or Comcast Corporation ("Comcast")), or any direct
or indirect subsidiary of a Strategic Partner (or Comcast), to a direct or
indirect subsidiary of a Strategic Partner (or Comcast), or by any such
subsidiary to a Strategic Partner (or Comcast). Any attempted Disposition by a
person of an interest or right, or any part thereof, in or in respect of the
Company other than in accordance with this Section 3.3 shall be, and is hereby
declared, null and void ab initio.
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(c) Subject to the provisions of Section 3.3(d), (e), and (f), and Section
3.11 (i) a person to whom an interest in the Company is transferred has the
right to be admitted to the Company as a Member with the Membership Interest and
the Commitment so transferred to such person, if (A) the Member making such
transfer grants the transferee the right to be so admitted, and (B) such
transfer is consented to in accordance with Section 3.3(b) or is made in
accordance with Section 3.11.
(d) The Company shall not recognize for any purpose any purported
Disposition of all or part of a Membership Interest unless and until the other
applicable provisions of this Section 3.3 have been satisfied and the Managers
have received, on behalf of the Company, a document (i) executed by both the
Member effecting the Disposition (or if the transfer is on account of the death,
incapacity, or liquidation of the transferor, its representative) and the person
to whom the Membership Interest or part thereof is Disposed, (ii) including the
notice address of any person to be admitted to the Company as a Member and its
agreement to be bound by this Agreement in respect of the Membership Interest or
part thereof being obtained, (iii) setting forth the Membership Interests and
the Commitments after the Disposition of the Member effecting the Disposition
and the person to whom the Membership Interest or part thereof is Disposed
(which together must total the Membership Interest and the Commitment of the
Member effecting the Disposition before the Disposition), and (iv) containing a
representation and warranty that the Disposition was made in accordance with all
applicable laws and regulations (including securities laws) and, if the person
to whom Membership Interest or part thereof is Disposed is to be admitted to the
Company, its representation and warranty that the representations and warranties
in Section 3.2 are true and correct with respect to that person. Each
Disposition and, if applicable, admission complying with the provisions of this
Section 3.3(d) shall be effective as of the first day of the calendar month
immediately succeeding the month in which the Managers receive the notification
of Disposition and the other requirements of this Section 3.3 have been met.
(e) Prior to the exercise of the right of a Member to Dispose of a
Membership Interest or any part thereof or of any person to be admitted to the
Company in connection therewith (i) either (A) the Membership Interest or part
thereof subject to the Disposition or admission must be registered under the
Securities Act, and any applicable state securities laws or (B) the Company must
receive a favorable opinion of the Company's legal counsel or of other legal
counsel reasonably acceptable to the Managers to the effect that the Disposition
or admission is exempt from registration under those laws, and (ii) the Company
must receive a favorable opinion of the Company's legal counsel or of other
legal counsel reasonably acceptable to the Managers to the effect that (C) the
Disposition or admission, when added to the total of all other sales,
assignments, or other Dispositions within the preceding 12 months, would not
result in the Company's being considered to have terminated within the meaning
of Section 708(b)(1)(B) of the Code and (D) the Disposition or admission would
not result in the Company having to register as an investment company under the
1940 Act. The Managers, however, may waive the requirements of this Section
3.3(e), in whole or in part, in such circumstances as they deem appropriate.
(f) The Member effecting a Disposition and any person admitted to the
Company as a Member in connection therewith shall pay, or reimburse the Company
for, all costs incurred by the Company in connection with such Disposition or
admission (including, without limitation, the
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legal fees incurred in connection with the legal opinions referred to in Section
3.3(e)) on or before the tenth day after the receipt by that person of the
Company's invoice for the amount due. If payment is not made by the date due,
the person owing that amount shall pay interest on the unpaid amount from the
date due until paid at a rate per annum equal to the Default Interest Rate.
(g) The restrictions in this Section 3.3 shall terminate upon consummation
of a Successor Corporation's initial underwritten public offering of stock
registered under the Securities Act (the "Public Offering").
3.4 New Members.
(a) Pursuant to the Offering, the Company offered to sell up to $70,000,000
of shares of Membership Interest in the Company to certain investors. Subject
to the discretion of the Managers to terminate, alter or amend the Offering at
any time, the Company offered to sell Membership Interests to investors in
accordance with the terms of the Private Placement Memorandum used in the
Offering. A person subscribing for shares of Membership Interest pursuant to
the Offering has been admitted as a Member of the Company and has become bound
by this Agreement on the date on which the Company accepted such person's
executed subscription agreement in a form acceptable to the Company (the
"Subscription Agreement") and received payment of 50% of the subscription price
as a Capital Contribution. Each Member admitted pursuant to this 3.4(a) is
obligated to pay an initial Capital Contribution on the date of his or its
admission as a Member of the Company equal to 50% of the subscription price and
the Membership Interest subscribed for by him or it in the Offering shall have a
Commitment equal to 50% of such subscription price. The execution and delivery
by any person of a Subscription Agreement and payment of 50% of the subscription
price constituted a request by such person that the Company's records reflect
his or its admission as a Member. The Managers have not materially modified the
terms on which the Membership Interests are offered and sold in the Offering
from the terms disclosed in the Private Placement Memorandum without the consent
of a Required Interest and each Strategic Partner.
(b) The Company is authorized to enter into agreements with the individuals
to whom it grants Membership Profit Interests and Options providing for the
vesting of such Membership Profit Interests and Options and granting the Company
the right and option to reacquire such Membership Profit Interests and Options
under certain circumstances on such terms and conditions as the Managers shall
determine. Any Membership Profit Interest or Option reacquired by the Company
pursuant to such agreements or otherwise may be regranted by the Company to
other officers and employees of the Company or other eligible persons from time
to time for such consideration, if any, as they shall deem appropriate, and on
such other terms and conditions as they shall deem appropriate, provided that
the purpose of such issuance is to provide incentives for performance of
services to the Company, and not as part of a capital raising transaction. A
person receiving Membership Profit Interests or Options shall be admitted as a
Member and become bound by this Agreement on the date on which the Company
receives an executed agreement from such person, in form acceptable to the
Company, containing such terms and conditions as are determined by the Managers.
The execution of such agreement by any such person shall constitute a request by
such person that the Company reflect his or her admission as a Member.
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(c) After the Offering has been completed or terminated, additional persons
may be admitted to the Company as Members and Membership Interests may be
created and issued to those persons and to existing Members with the approval of
a Required Interest on such terms and conditions as the Managers may determine.
The terms of admission or issuance must specify the Membership Interests,
Commitment Ratios and the Commitments applicable thereto and may provide for the
creation of different classes or groups of Members having different rights,
powers, and duties. The Managers shall reflect the creation of any new class or
group in an amendment to this Agreement indicating the different rights, powers,
and duties, and such an amendment need be executed only by the Managers. Any
such admission shall be effective only after the new Member has executed and
delivered to the Managers a document including the new Member's notice address,
its agreement to be bound by this Agreement, and its representation and warranty
that the representations and warranties in Section 3.2 are true and correct with
respect to the new Member. The provisions of this Section 3.4 shall not apply
to Dispositions of Membership Interests.
3.5 Interests in a Member. A Member that is not a natural person may
not cause or permit an interest, direct or indirect, in itself to be Disposed of
such that, after the Disposition, (a) the Company would be considered to have
terminated within the meaning of Section 708(b)(1)(B) of the Code or (b) without
the consent of the Managers, that Member shall cease to be controlled by
substantially the same persons who control it as of the date of its admission to
the Company; provided, however, that the provisions of this Section 3.5(b) shall
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not apply to a transfer of an interest in a Strategic Partner (or Comcast), or
to a transfer of an interest in any direct or indirect subsidiary of a Strategic
Partner (or Comcast) as long as such Member remains a subsidiary of such
Strategic Partner (or Comcast). On any breach of the provisions of clause (b)
of the immediately preceding sentence, the Company shall have the option to buy,
and on exercise of that option the breaching Member shall sell, the breaching
Member's Membership Interest, all in accordance with Section 12.1 as if the
breaching Member were a Bankrupt Member.
3.6 Information. (a) Each Member shall have the right to access all
information to which that Member is entitled to have access pursuant to Section
18-305 of the Act, provided that such Member provides five days prior written
notice to the Company of the materials such Member requests be made available
and the purpose for inspecting such materials. Such materials shall be provided
at the executive headquarters of the Company during its regular business hours.
All expenses of providing the materials requested pursuant to this Section 3.6,
including, without limitation, duplication fees, shall be paid by the Member
requesting the information. Anything in this Section to the contrary
notwithstanding, the Managers shall have the right to keep confidential from the
Members, for such period of time as the Managers deem reasonable, any
information which the Managers reasonably believe to be in the nature of trade
secrets or other information the disclosure of which the Managers in good faith
believe is not in the best interest of the Company or could damage the Company
or its business or the Company is required by law or by agreement with a third
party to keep confidential.
(b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is confidential, the release of which may be damaging to the Company
or persons with which it does business. Each Member shall hold in strict
confidence any information it receives regarding the Company that is
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identified as being confidential (and if that information is provided in
writing, that is so marked) and may not disclose it to any person other than
another Member or a Manager, except for disclosures (i) compelled by law (but
the Member must notify the Managers promptly of any request for that information
before disclosing it, if practicable), (ii) to advisers or representatives of
the Member or persons to which that Member's Membership Interest may be Disposed
as permitted by this Agreement, but only if the recipients have agreed to be
bound by the provisions of this Section 3.6(b), or (iii) of information that
Member also has received from a source independent of the Company that the
Member reasonably believes obtained that information without breach of any
obligation of confidentiality. The Members acknowledge that breach of the
provisions of this Section 3.6(b) may cause irreparable injury to the Company
for which monetary damages are inadequate, difficult to compute, or both.
Accordingly, the Members agree that the provisions of this Section 3.6(b) may be
enforced by specific performance.
3.7 Liability to Third Parties. Except as to any obligation it may have
under the Act to repay funds that may have been wrongfully distributed to it, no
Member or Manager shall be liable for the debts, obligations or liabilities of
the Company, including under a judgment decree or order of a court.
3.8 Lack of Authority. No Member (other than a Member who is, and who
is acting in the capacity of, a Manager) has the authority or power to act for
or on behalf of the Company, to do any act that would be binding on the Company,
or to incur any expenditures on behalf of the Company.
3.9 Withdrawal. A Member does not have the right to withdraw from the
Company as a Member (except in connection with a transfer of its entire
Membership Interest in accordance with this Agreement) and any attempt to
violate the provisions hereof shall be legally ineffective.
3.10 Preemptive Rights. (a) If at any time the Company proposes to
issue any equity securities, other than equity securities described in Section
3.10(d) below, the Company shall first offer in writing to sell to each
Strategic Partner its pro rata share of the proposed issue of such equity
securities, at the same price and on the same terms at which the Company
proposes to sell such issue to others. For purposes hereof, each Strategic
Partner's "pro rata share" of an issue of equity securities shall be that amount
of such equity securities which would result in such Strategic Partner owning
the same percentage of the Company's issued and outstanding Membership Interests
after the issuance of the equity securities as such Strategic Partner owned
immediately prior to the issuance (assuming the issuance of all Membership
Interests, if any, issuable upon conversion of such equity securities). The
term "equity security" when used in this Section 3.10 shall mean any shares of
Membership Interest of the Company, or any security convertible, with or without
consideration, into shares of Membership Interest, or any security carrying any
warrant, option, or right to subscribe to, or to purchase any shares of
Membership Interest, or any such warrant, option, or right.
(b) The Company's offer shall describe the equity securities proposed to be
issued by the Company, specifying the quantity, the price and payment terms.
Each Strategic Partner shall have thirty (30) days from receipt of such offer to
accept the offer in writing, which acceptance may be
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as to all or any part of its pro rata share of such issue. Sale of the portion
of the equity securities subscribed for hereunder shall be held on a date
acceptable to the Company and each Strategic Partner, but in no event more than
sixty (60) days after the date of the Company's offer to the Strategic Partners.
(c) In the event the Strategic Partners do not subscribe for all of the
issue of equity securities offered to them pursuant to this Section 3.10, the
Company may sell the portion of the securities not subscribed for, together with
the portion of such issue of securities, if any, not subject to preemptive
rights under this Section 3.10, at a price no less favorable to the Company than
that specified in such offer and on payment terms no less favorable to the
Company than those specified in such offer; provided, however, that if such sale
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is not consummated within one hundred twenty (120) days after the date the offer
pursuant to this Section 3.10 was made to the Strategic Partners, the Company
shall not sell such securities without again complying with this Section 3.10.
(d) The rights of Strategic Partners under this Section 3.10 shall not
apply to the following securities:
(i) the shares of Membership Interest issued with respect to the
Options;
(ii) the shares of Membership Profit Interest issued in
accordance with this Agreement; and
(iii) any securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination.
(e) Notwithstanding the foregoing provisions of this Section 3.10, the
rights of Strategic Partners and the obligations of the Company under this
Section 3.10 shall be inapplicable to the Public Offering and the provisions of
this Section 3.10 shall terminate upon the consummation of such Public Offering.
3.11 Right of First Refusal. (a) Any Strategic Partner (other than TL
or SSI-Delaware) (each, a "Transferring Member") may at any time offer to sell
to the Company any or all of the shares of Membership Interest then owned by it
upon written notice to the Company (the "Notice") which Notice shall set forth
(i) the number of shares of Membership Interest the Transferring Member desires
to sell (the "Offered Shares") and the price per share, (ii) the proposed date
of the transfer, and (iii) the percentage which the number of Offered Shares
constitutes with respect to the aggregate number of Shares of Membership
Interest then held by the Transferring Member.
(b) Company's Option. The Company shall have the option, but not the
----------------
obligation, to purchase all or any part of the Offered Shares on the same terms
as specified in the Notice. Within thirty (30) days after the giving of the
Notice, the Company shall give written notice to the Transferring Member stating
the number of Offered Shares it desires to purchase and a date and
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time for consummation of the purchase not less than sixty (60) or more than
ninety (90) days after the giving of the Notice. Failure by the Company to give
such notice within such time period shall be deemed an election by it not to
purchase any Offered Shares. The Transferring Member shall not be entitled to
vote as a Manager in connection with the decision of the Company whether to
exercise its option to purchase its Offered Shares, provided that if the
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Transferring Member's vote is required for valid legal action it shall vote in
accordance with the decision of the majority of the other Managers.
(c) If the Company elects not to exercise its option with respect to all of
the Offered Shares (the Offered Shares which the Company elects not to purchase
being referred to as the "Refused Shares"), it may offer such Refused Shares to
one or more Members, or to another person or entity selected by it that is
reasonably acceptable to the Transferring Member (collectively, the "Permitted
Offerees"), by delivering written notice to such Permitted Offerees concurrently
with the delivery of its notice to the Transferring Member under subsection (b)
above. The number of Refused Shares offered to any Permitted Offeree shall be
determined by the Company in its sole discretion. Each such Permitted Offeree
shall thereupon have the option, but not the obligation, to purchase the number
of Refused Shares offered to it or him on the same terms as specified in the
Notice. After the expiration of the thirty (30)-day period described in Section
3.11(b), but within forty-five (45) days after the giving of the Notice, each
such Permitted Offeree shall give written notice to the Transferring Member and
the Company stating whether or not he or it elects to exercise his or its
option, and a date and time for consummation of the purchase not more than
ninety (90) days after the giving of the Notice by the Transferring Member.
Failure by a Permitted Offeree to give such notice within such time period shall
be deemed an election by him or it not to exercise his or its option. If the
Permitted Offerees and the Company do not purchase all of the Offered Shares,
the Transferring Member may sell all of the Offered Shares (and therefore the
rights of the Company and the Permitted Offerees under this Section 3.11 shall
be terminated) at any time within 180 days after the date the Notice was
delivered to the Company, to a person or Entity selected by the Transferring
Member who is reasonably acceptable to the Company (the "Proposed Transferee").
Any such sale shall be to the Proposed Transferee at the price and upon the
other terms and conditions set forth in the Notice, or at least terms no less
favorable to the Transferring Member or more favorable to the Proposed
Transferee, as the terms contained in the Notice. The Transferring Member shall
provide at least 20 days' prior written notice of such sale to the Company. Any
Offered Shares not sold within the 180 day period shall again be subject to the
requirements of a prior offer pursuant to this Section 3.11. If the
Transferring Member at any time proposes to sell the Offered Share at a price,
or on terms and conditions, less favorable to the Transferring Member or more
favorable to the Proposed Transferee than those set forth in the Notice, then
the Offered Shares shall again be subject to the requirements of a prior offer
pursuant to this Section 3.11. Any transfer pursuant to this Section 3.11 shall
be subject to the provisions of Sections 3.3(d), (e) and (f). The preemptive
rights granted under Section 3.10 shall not apply to any offering by the
`Company of Refused Shares under this Section 3.11(c).
(d) The provisions of this Section 3.11 shall terminate upon the
consummation of the Public Offering.
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3.12 Registration Rights. The Company hereby grants to each Strategic
Partner the registration rights described on Exhibit C hereto (which Exhibit is
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hereby incorporated by reference in its entirety) which registration rights will
become effective after completion of the Public Offering. Upon the merger or
consolidation of the Company with or into, or the sale of the Company's assets
to, a Successor Corporation, the Successor Corporation will assume the
obligation to register each Strategic Partner's equity interests as provided in
Exhibit C, and the agreements providing for such merger, consolidation or sale
- ---------
will contain a provision expressly requiring the Successor Corporation to assume
such obligations. The Company hereby grants to each Member who has made (or
makes) and maintains a Capital Contribution equal to or greater than one million
dollars ($1,000,000) the piggyback registration rights set forth in Section 1.1
of the attached Exhibit C. Notwithstanding the definition of "Holder" contained
---------
in Section 1.1, each such Member shall be deemed a "Holder" for purposes of
Exhibit C.
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ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Contributions. (a) The Capital Contributions of the Current Members
is as set forth on Exhibit A attached hereto, which Exhibit A designates the
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Current Members as such and shall be revised from time to time to reflect the
withdrawal of Members and the admission of new Members.
(b) Current Members, including the persons admitted as new Members of the
Company pursuant to their subscription for Membership Interests in the Private
Placement Memorandum, shall make their Capital Contribution, in cash,
representing 50% of the subscription price of the total shares of Membership
Interest being subscribed for pursuant to the Private Placement Memorandum, on
the date of admission as a Member of the Company. Exhibit A shall be amended
---------
from time to time to reflect the Capital Contributions, Commitments, Membership
Interests and Membership Profit Interests, if any, of each Member.
4.2 Subsequent Contributions. Each Member shall contribute to the
Company, in cash, on or before the date specified as hereinafter described, from
time to time that Member's Commitment Ratio of all monies that in the judgment
of the Managers, are necessary to make portfolio investments or to otherwise
conduct the business of the Company; provided, however, that a Member is not
obligated to contribute an amount that exceeds that Member's Commitment. The
Managers shall notify each Member of the need for Capital Contributions pursuant
to this Section 4.2 from time to time as and when appropriate, which notice
shall specify a date (which date may be no earlier than thirty (30) days
following each Member's receipt of its notice) before which the Capital
Contributions must be made. Notices for Capital Contributions must be made to
all Members in accordance with their Commitment Ratios. Member's Commitments
will expire on April 30, 2000 if not fully taken down prior to that time.
4.3 Failure to Contribute. Unless the Managers shall otherwise
determine by agreement with the delinquent Member, if a Member (a "Delinquent
Member") does not contribute by the time required all or any portion of a
Capital Contribution which that member is required to make
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as provided in this Agreement, unless payment of such Capital Contribution would
be unlawful, 100% of such Member's Membership Interest will be forfeited to the
Company, a corresponding reduction will be made to such Member's Capital
Account, such Delinquent Member shall no longer be a Member of the Company, and
its forfeited Membership Interest shall no longer be outstanding.
4.4 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is
not required to contribute or to lend any cash or property to the Company to
enable the Company to return any Member's Capital Contributions.
4.5 Advances by Members. With the Managers' consent, any Member may
advance funds to or on behalf of the Company on terms approved by the Managers.
An advance described in this Section 4.5 constitutes a loan from the Member to
the Company, and is not a Capital Contribution.
4.6 Capital Account. A capital account shall be established and
maintained for each Member. The capital accounts of the Members were revalued
as of May 29, 1998 on the Company's books in accordance with Treas. Reg.
(S)1.704-1(b)(2)(iv)(f), and the property of the Company was adjusted and
reflected on a Schedule 4.6 to this Agreement to reflect the fair market value
------------
of such property as of the date of such revaluation. Such capital accounts
shall be subject to further revaluation in accordance with Treas. Reg. (S)1.704-
1(b)(2)(iv)(f) at such time as the Board of Managers shall determine. Each
Member's capital account (a) shall be increased by (i) the amount of money
contributed by that Member to the Company, (ii) the fair market value of
property contributed by that Member to the Company (net of liabilities secured
by the contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code), and (iii) allocations to that Member
of Company income and gain (or items thereof), including income and gain exempt
from tax and income and gain described in Treas. Reg. (S) 1.704-1(b)(2)(iv)(g),
but excluding income and gain described in Treas. Reg. (S) 1.704-1(b)(4)(i), and
(b) shall be decreased by (i) the amount of money distributed to that Member by
the Company, (ii) the fair market value of property distributed to that Member
by the Company (net of liabilities secured by the distributed property that the
Member is considered to assume or take subject to under Section 752.of the
Code), (iii) allocations to that Member of expenditures of the Company described
in Section 705(a)(2)(B) of the Code, and (iv) allocations of Company loss and
deduction (or items thereof), including loss and deduction described in Treas.
Reg. (S) 1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii)
above and loss or deduction described in Treas. Reg. (S) 1.704-1(b)(4)(i) or (S)
1.704-1(b)(4)(iii). The Members' capital accounts also shall be maintained and
adjusted as permitted by the provisions of Treas. Reg. (S) 1.704-1(b)(2)(iv)(f)
and as required by the other provisions of Treas. Reg. (S)(S) 1.704-1(b)(2)(iv)
and 1.704-1(b)(4), including adjustments to reflect the allocations to the
Members of depreciation, depletion, amortization, and gain or loss as computed
for book purposes rather than the allocation of the corresponding items as
computed for tax purposes, as required by Treas. Reg. (S) 1.704-l(b)(2)(iv)(g).
A Member that has more than one Membership Interest shall have a single capital
account that reflects all its Membership Interests, regardless of the class of
Membership Interests owned by that Member and
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regardless of the time or manner in which those Membership Interests were
acquired. On the transfer of all or part of a Membership Interest, the capital
account of the transferor that is attributable to the transferred Membership
Interest or part thereof shall carry over to the transferee Member in accordance
with the provisions of Treas. Reg. (S) 1.704-1(b)(2)(iv)(1).
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations. (a) All items of income and gain of the Company shall
be allocated:
(i) first, to each Member, if any, with a negative capital
account balance, in proportion to such negative balances, until any
such negative balances have been eliminated;
(ii) second, if any Member's Capital Contributions (less any
amounts previously distributed to such Member) exceed his capital
account balance, to such Members in proportion to such excesses until
any such excesses have been eliminated;
(iii) third, if the excesses, if any, of (x) the sum of (A) the
capital account balance of each Member and (B) the cumulative
distributions made to such Member over (y) such Member's Capital
Contributions are not in proportion to their Membership Interests, to
the Members in such manner as will, as quickly as possible, cause such
excesses to be in such proportion; and
(iv) fourth, to all Members in proportion to their Membership
Interests.
And all items of loss and deduction of the Company shall be allocated:
(v) first, if the excesses, if any, of (x) the sum of (A) the
capital account balances of each Member and (B) the cumulative
distributions made to such Member over (y) such Member's Capital
Contributions are not in proportion to their Membership Interests, to
the Members in such manner as will, as quickly as possible, cause such
excesses to be in such proportion;
(vi) second, if the sum of (A) the capital account balance of any
Member and (B) the cumulative distributions made to such Member
exceeds the Capital Contributions of such Member, to such Member in
proportion to such excesses until such excesses have been eliminated;
and
(vii) third, to the Members in proportion to Capital
Contributions.
(b) All items of income, gain, loss, deduction, and credit allocable to any
Membership Interest that may have been transferred shall be allocated between
the transferor and the transferee based on the portion of the calendar year
during which each was recognized as owning that
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Membership Interest, without regard to the results of Company operations during
any particular portion of that calendar year and without regard to whether cash
distributions were made to the transferor or the transferee during that calendar
year; provided, however, that this allocation must be made in accordance with a
method permissible under section 706 of the Code and the regulations thereunder.
(c) Solely for tax purposes, income, gain, loss and deduction with respect
to any property contributed to the capital of the Company or for which the
adjusted tax basis and book value differ shall be allocated among the Members so
as to take account of any variation between adjusted tax basis and book value.
The allocations provided in this Section 5.1 are intended to comply with the
requirements of section 704 of the Code and Treasury Regulations thereunder and
shall be interpreted (or modified, to the extent necessary) in such manner as is
consistent with such requirements, as determined by the "tax matters partner" of
the Company. For purposes of allocations under section 704(c) of the Code, the
Partnership shall use the remedial allocation method, as described in Treas.
Reg. (S) 1.704-3(d).
5.2 Distributions. (a) The Managers shall have the authority to
reinvest the Company's cash from operations and dispositions of its assets,
including the sale or other disposition of equity interests in a related company
in which the Company invests. Consequently, distributions to Members of the
Company's cash or other assets shall be made only at such times and in such
amounts as authorized by the Managers and the Managers shall have no obligation
or duty to distribute cash or other assets to the Members prior to the
dissolution and liquidation of the Company, except as otherwise provided in
paragraph (b) below. Distributions, if any, shall be made as follows:
(i) first, to all Members in proportion to their Capital
Contributions up to the amount of their Capital Contribution; and
(ii) then, to all Members in proportion to their Membership
Interests, provided that, if any Commitments remain outstanding, a
distribution payable to a Member with an outstanding Commitment shall
be retained by the Company and applied to reduce its outstanding
Commitment up to the amount of its remaining outstanding Commitment.
(b) Notwithstanding anything to the contrary, on or before March 15
following each taxable year of the Company, the Company shall distribute to each
Member, to the extent of available cash, an amount of cash equal to the excess
of (x) 40% of the excess of (A) such Member's cumulative share of income and
gain of the Company as of the end of such taxable year over (B) such Member's
cumulative share of loss and deduction of the Company as of the end of such
taxable year over (y) all prior distributions to such Member. Any amounts
distributed to a Member pursuant to this Section 5.2(b) shall be credited toward
the amounts that would otherwise be required to be distributed to such Member
pursuant to Section 5.1(a).
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(c) From time to time the Managers also may cause property of the Company
other than cash to be distributed to the Members, which distribution must be
made in accordance with Section 5.2(a) and may be made subject to existing
liabilities and obligations.
ARTICLE VI
MANAGERS
6.1 Management by Managers. (a) Except for any matters for which the
approval of the Members is required by this Agreement or by nonwaivable
provisions of applicable law, (i) the powers of the Company shall be exercised
by or under the authority of, and the business and affairs of the Company shall
be managed under the direction of, the Board of Managers; and (ii) the Board of
Managers may make all decisions and take all actions for the Company.
(b) The powers of the Company which may be exercised by the Managers
without the approval of the Members shall include, without limitation, the power
to purchase, hold and sell investments; to borrow and loan funds and provide
guarantees of the obligations of others; to acquire other companies; and to
dissolve and liquidate.
(c) Notwithstanding the provisions of Section 6.1(a) and 6.1(b), the Board
of Managers may not cause the Company to do any of the following without the
consent of a Required Interest:
(i) amend the Certificate (except for amendments described in
Section 18-202(b) of the Act);
(ii) amend this Agreement (except as otherwise provided in
Section 15.5 hereof);
(iii) remove a Manager from the Board of Managers for cause
pursuant to Section 6.4; and
(iv) issue the Membership Interests described in Section 3.4(c).
(d) The Managers shall have the power and authority to approve and
authorize the Company to merge with or into, or transfer its assets to, another
limited liability company or "other business entity," as such term is defined in
Section 18-209 of the Act, with the consent of a Required Interest. No
appraisal rights with respect to Membership Interests in the Company shall be
available for any class or group of Members in connection with any amendment of
this Agreement, any merger or consolidation in which this Company is a
constituent party to the merger or consolidation, or in the sale of all or
substantially all of the Company's assets.
6.2 Actions by Managers; Committees; Delegation and Duties. (a) In
managing the business and affairs of the Company and exercising its powers, the
Board of Managers shall act (i) collectively through meetings and written
consents pursuant to Sections 6.5 and 6.7; and (ii) through committees pursuant
to Section 6.2(b).
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(b) The Board of Managers may, from time to time, designate one or more
committees, each of which shall be comprised of one or more Managers. Any such
committee, to the extent provided in such resolution or in the Certificate or
this Agreement, shall have and may exercise all of the authority of the Board of
Managers, subject to the limitations set forth in the Act. At every meeting of
any such committee, the presence of a majority of all the members thereof shall
constitute a quorum, and the affirmative vote of a majority of the members
present shall be necessary for the adoption of any resolution. The Board of
Managers may dissolve any committee at any time, unless otherwise provided in
the Certificate or this Agreement.
6.3 Number and Term of Office of Managers. The number of Managers on
the Board of Managers of the Company shall be five or such greater number as to
provide each Strategic Partner with a seat on the Board of Managers; provided
that the number of Managers on the Board of Managers shall not exceed nine. For
so long as (i) any of SSI-Delaware, TL, Comcast ICG, Inc. (an indirect wholly
owned subsidiary of Comcast Corporation) and CPQ Holdings, Inc. (a wholly owned
subsidiary of Compaq Computer Corp.) maintains a Capital Contribution equal to
or greater than three million dollars ($3,000,000) in the Company, (ii) GE
Capital maintains a Capital Contribution and Commitment that aggregate equal to
or greater than seven million dollars ($7,000,000) in the Company, and (iii) any
Entity subsequent to the date hereof that makes or has made and maintains a
Capital Contribution and Commitment that aggregate ten million dollars
($10,000,000) or greater, such Entity described in clauses (i), (ii) or (iii)
shall be a Manager of the Company (each, a "Strategic Partner").
Notwithstanding anything to the contrary herein, for purposes of calculating the
amounts set forth in clauses (i), (ii) or (iii) in the immediately preceding
sentence, distributions by the Company to any Manager described in such clauses
shall be disregarded. In addition, the number of Managers may also be amended
by action of the then incumbent Managers. Each Manager shall hold office as
long as he is a Member, or until his earlier death, insanity, Bankruptcy,
retirement, resignation or removal. Managers must be Members but need not be
residents of the State of Delaware. Any Entity that is a Manager shall
designate an officer or other employee of such Entity as a nominee to represent
it as Manager and such Entity will act through its nominee. Such Entity may
change its nominee, or appoint an alternate nominee to attend meetings of the
Managers and vote on its behalf when its primary nominee is unavailable, at any
time upon written notice to the Company. Except as expressly provided in this
Section 6.3 and Section 6.4, the Members shall not have the authority to
increase or decrease the number of Managers and neither the Members nor the
Managers shall have the authority to remove or replace any Managers.
6.4 Vacancies; Removal; Resignation. Any vacancy occurring pursuant to
Sections 6.3 and 6.4 may be filled, at the sole discretion of the Board of
Managers, by the affirmative vote of a majority of the remaining Managers though
less than a quorum. If the Board of Managers determines that there is cause to
remove a Manager, such Manager can be removed by the affirmative vote of a
Required Interest at any meeting of Members called expressly for that purpose
and at which a quorum of Members is present. Any Manager may resign at any
time. Such resignation shall be made in writing and shall take effect at the
time specified therein, or if no time be specified, at the time of its receipt
by the remaining Managers. The acceptance of a
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resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
6.5 Meetings. (a) Unless otherwise required by law or provided in the
Certificate or this Agreement, a majority of the total number of Managers fixed
by, or in the manner provided in, the Certificate or this Agreement shall
constitute a quorum for the transaction of business of the Managers, and the act
of a majority of the Managers present at a meeting at which a quorum is present
shall be the act of the Managers unless otherwise provided herein. A Manager
who is present at a meeting of the Managers at which action on any Company
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall deliver such dissent to the
Company immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a Manager who voted in favor of such action.
(b) Meetings of the Managers may be held at such place or places as shall
be determined from time to time by resolution of the Managers. At all meetings
of the Managers, business shall be transacted in such order as shall from time
to time be determined by resolution of the Managers. Attendance of a Manager at
a meeting shall constitute a waiver of notice of such meeting, except where a
Manager attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
(c) Regular meetings of the Managers shall be held at such times and places
as shall be designated from time to time by resolution of the Managers, provided
that such meetings shall be held no less frequently than quarterly. Notice of
such regular meetings shall not be required.
(d) Special meetings of the Managers may be called by any Manager on at
least 48 hours notice to each other Manager. Such notice need not state the
purpose or purposes of, nor the business to be transacted at, such meeting,
except as may otherwise be required by law or provided for by the Certificate or
this Agreement.
6.6 Approval or Ratification of Acts or Contracts by Members. The
Managers, in their sole discretion, may submit any act or contract for approval
or ratification at any meeting of the Members called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by a Required Interest shall be as valid and as binding
upon the Company and upon all the Members as if it shall have been approved or
ratified by every Member of the Company.
6.7 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the Certificate or this Agreement to be taken
at a meeting of the Managers or of any committee designated by the Managers may
be taken without a meeting if a consent in writing, setting forth the action to
be taken, is signed by all the Managers or members of such committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote at a meeting and may be stated as such in any document or instrument filed
with the Secretary of State of Delaware, and the execution of such consent shall
constitute attendance or presence in
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person at a meeting of the Managers or any such committee, as the case may be.
Subject to the requirements of the Act, the Certificate or this Agreement for
notice of meetings, Managers, or members of any committee designated by the
Managers, may participate in and hold a meeting of the Managers or any committee
of Managers, as the case may be, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such meeting shall constitute
attendance and presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
6.8 Expenses; Compensation. (a) Except as otherwise provided herein,
the Company shall pay or cause to be paid (i) all costs and expenses incurred in
connection with the formation and organization of the Company, and (ii) all
costs and expenses of the Company incurred in pursuing and conducting, or
otherwise related to, the business of the Company. The Managers shall be
entitled to reimbursement of their reasonable expenses incurred on behalf of the
Company as and to the extent provided in paragraph (b) below. Subject to the
Act, no amount so paid to the Manager shall be deemed to be a distribution of
Company assets for purposes of this Agreement. Except for reimbursement of such
expenses as provided for in this Section 6.8 and its right to distributions as
provided in this Agreement, the Manager shall not receive any compensation for
its services as such.
(b) Unless otherwise approved by a Required Interest, the Managers shall
not receive compensation for their services as Managers. However, the Managers
shall be entitled to be reimbursed for reasonable out-of-pocket costs and
expenses incurred in the course of their service as Managers hereunder.
6.9 Co-Investment Opportunities. The Company, Safeguard and TL will
each present to each other and to each other Strategic Partner, in writing, any
Internet-related investment opportunity that it receives, and each of the
Company, TL, Safeguard (or Safeguard 98 L.P.) and such other Strategic Partner
will have the right on all Internet-related investments to invest equally in the
opportunity regardless of the origin of the deal, provided it gives written
notice of its election to invest to the party originating the deal within thirty
(30) days after receipt of the offer. No Strategic Partner (other than TL or
Safeguard) will be required to offer to the Company, TL or Safeguard any
Internet-related investment opportunity received by it. Notwithstanding the
above, Safeguard will not be required to offer to the Company, TL or any other
Strategic Partner any Internet-related investment originated by it in which it
intends to acquire a majority interest, or to offer to the Company or any
Strategic Partner (other than TL) any Internet-related investment to the extent
such offer would cause Safeguard to be in breach of its obligations or
commitments to TL or any future TL funds.
The Company has an understanding and acknowledgment from the other
parties that, for strategic reasons, it will have the right to take majority
ownership in four to six core portfolio companies, and that any such investment
will not be subject to the co-investment rules described above. This right will
be negotiated on a deal by deal basis. Notwithstanding anything in this
Agreement to the contrary, if the exercise by a Strategic Partner of any right
under this Section 6.9
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shall cause the Company, in the written opinion of outside counsel, to be an
investment company subject to registration under the 1940 Act, such Strategic
Partner will not be permitted to exercise any such right. As soon as reasonably
practicable after the date hereof, each of the Strategic Partners and the
Company agree to discuss and negotiate in good faith the modification or
termination of this Section 6.9 in the context of the Company's goal of
effecting a Public Offering in the future.
6.10 Advisory Board. The Managers may, in their sole discretion, form
and appoint persons to an advisory board of the Company (the "Advisory Board")
and pay compensation to persons serving on the Advisory Board. The sole purpose
of the Advisory Board shall be to advise the Board of Managers and the Advisory
Board shall have no other powers.
6.11 Conflicts of Interest. The parties hereto acknowledge that there
may be conflicts of interest that arise from time to time due to existing
investments of the Strategic Partners and prospective investments by the
Company. The Company shall notify each Strategic Partner in writing before
acquiring the securities of any portfolio company, which notice shall identify
the portfolio company and contain a brief description of the terms of the
acquisition and the portfolio company's business. The Company will not invest
in a portfolio company if within ten (10) days after receipt of the Company's
notice, a Strategic Partner notifies the Company in writing that such investment
would cause such Strategic Partner to be in breach of its contractual
obligations, or be subject to penalties, arising from its existing investments,
and the Strategic Partner provides evidence reasonably satisfactory to the
Company of such contractual obligations or penalties. The Company also intends
to use outside independent financial advisors to value investments in companies
where a Member already has an existing investment.
6.12 Related Party Transactions. The Company may transact business with
any Manager or Member or affiliate thereof, provided the terms of those
transactions are no less favorable than those the Company could obtain from
unrelated third parties.
ARTICLE VII
OFFICERS
7.1 Officers. The Managers may designate one or more individuals (who
may or may not be Managers) to serve as officers of the Company. The Company
shall have such officers as the Managers may from time to time determine, which
officers may (but need not) include a Chairman, a President, one or more Vice
Presidents (and in case of each such Vice President, with such descriptive
title, if any, as the Managers shall deem appropriate), a Secretary, an
Assistant Secretary and a Treasurer. Any two or more offices may be held by the
same person.
7.2 Compensation. The Company shall have the authority to pay and
provide compensation and other benefits to its officers and employees. The
compensation and benefits of all officers of the Company shall be fixed from
time to time by the Managers, unless otherwise delegated by the Managers to a
particular officer.
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7.3 Term of Office; Removal; Filling of Vacancies. Each officer of the
Company shall hold office at the pleasure of the Managers until his successor is
chosen and qualified in his stead or until his earlier death, resignation,
retirement, disqualification or removal from office. Any officer designated by
the Managers may be removed at any time by the Managers for any reason, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Designation of an officer shall not of itself create contract
rights. If the office of any officer becomes vacant for any reason, the vacancy
may be filled by the Managers. The Managers may abolish any office at any time.
7.4 Chairman. The Chairman, if one is designated by the Managers, shall
preside at meetings of the Managers and the Members. He shall assist the
Managers in the formulation of policies of the Company, and shall be available
to other officers for consultation and advice.
7.5 President. The President, if one is designated by the Managers,
shall be the chief executive officer of the Company and shall have day-to-day
supervision of the affairs of the Company, subject at all times to the authority
of the Managers.
7.6 Vice Presidents. Each Vice President that is designated by the
Managers shall generally assist the President and shall have such powers and
perform such duties and services as shall from time to time be prescribed or
delegated to him by the President or the Managers.
7.7 Secretary. The Secretary, if one is designated by the Managers,
shall keep and account for the records of the Company.
7.8 Assistant Secretary. The Assistant Secretary, if one is designated
by the Managers, shall generally assist the Secretary.
7.9 Treasurer. The Treasurer, if one is designated by the Managers,
shall be the chief accounting and financial officer of the Company and shall
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Company.
7.10 Additional Powers and Duties. In addition to the foregoing
especially enumerated duties, services and powers, the several officers of the
Company shall perform such other duties and services and exercise such further
powers as may be provided by statute, the Certificate or this Agreement, or as
the Managers may from time to time determine or as may be assigned to them by
any competent superior officer. The Managers may also at any time limit or
circumvent the enumerated duties, services and powers of any officer. In
addition to the designation of officers and the enumeration of their respective
duties, services and powers, the Managers may grant powers of attorneys to
individuals to act as agent for or on behalf of the Company, to do any act which
would be binding on the Company, to incur any expenditures on behalf of or for
the Company, or to execute, deliver and perform any agreements, acts,
transactions or other matters on behalf of the Company. Such powers of attorney
may be revoked or modified as deemed necessary by the Managers.
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ARTICLE VIII
MEETINGS OF MEMBERS
8.1 Meetings. (a) A quorum shall be present at a meeting of Members if
the holders of a Required Interest are represented at the meeting in person or
by proxy. With respect to any matter, the affirmative vote of a Required
Interest at a meeting of Members at which a quorum is present shall be the act
of the Members.
(b) All meetings of the Members shall be held at the principal place of
business of the Company or at such other place within or without the State of
Delaware as shall be specified or fixed in the notices or waivers of notice
thereof; provided that any or all Members may participate in any such meeting by
means of conference telephone or similar communications equipment pursuant to
Section 8.5.
(c) The chairman of the meeting or the holders of a Required Interest shall
have the power to adjourn such meeting from time to time, without any notice
other than announcement at the meeting of the time and place of the holding of
the adjourned meeting. If such meeting is adjourned by the Members, such time
and place shall be determined by a vote of the holders of a Required Interest.
Upon the resumption of such adjourned meeting, any business may be transacted
that might have been transacted at the meeting as originally called.
(d) An annual meeting of the Members, for the purpose of the delivery of an
annual report of the Managers, may be held, but no meeting of Members need be
held. Any meeting of Members shall be held at such place, within or without the
State of Delaware, on such date and at such time as the Managers shall fix and
set forth in the notice of the meeting.
(e) Special meetings of the Members for any proper purpose or purposes may
be called at any time by the Managers. Only business within the purpose or
purposes described in the notice (or waiver thereof) required by this Agreement
may be conducted at a special meeting of the Members. No Member shall have the
power to require that a meeting of the Members be held or that any matter be
voted upon by the Members.
(f) Written or printed notice stating the place, day and hour of the
meeting and the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the Managers or
person calling the meeting, to each Member entitled to vote at such meeting. If
mailed, any such notice shall be deemed to be delivered on the third day after
it is deposited in the United States mail, addressed to the Member at such
Member's address provided for in Section 15.2, with postage thereon prepaid.
(g) The date on which notice of a meeting of Members is mailed or the date
on which the resolution of the Managers declaring a distribution is adopted, as
the case may be, shall be the record date for the determination of the Members
entitled to notice of or vote at such meeting, including any adjournment
thereof, or the Members entitled to receive such distribution.
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8.2 Voting List. At the request of any Member, the Managers shall make
available, at least ten days before a meeting of Members, a complete list of the
Members entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the Membership Interest held by
each, which list, for a period of ten days prior to such meeting, shall be kept
on file at the registered office or principal place of business of the Company
and shall be subject to inspection by any Member at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any Member during
the whole time of the meeting. The original membership records shall be prima-
facie evidence as to who are the Members entitled to examine such list or
transfer records or to vote at any meeting of Members. Failure to comply with
the requirements of this Section shall not affect the validity of any action
taken at the meeting.
8.3 Proxies. A Member may vote either in person or by proxy executed in
writing by the Member. A telegram, telex, cablegram or similar transmission by
the Member, or a photographic, photostatic, facsimile or similar reproduction of
a writing executed by the Member shall be treated as an execution in writing for
purposes of this Section. A proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable.
8.4 Conduct of Meetings. All meetings of the Members shall be presided
over by the chairman of the meeting, who shall be a Manager (or representative
thereof) designated by a majority of the Managers. The chairman of any meeting
of Members shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
8.5 Action by Written Consent or Telephone Conference.
(a) Any action which is submitted by the Managers to the Members and which
could be taken by the Members at a meeting of Members may be taken by the
Members by unanimous written consent.
(b) Subject to Section 8.1(f), Members may participate in and hold a
meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in person
at such meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE IX
INDEMNIFICATION
9.1 Right to Indemnification. Subject to the limitations and conditions
as provided in this Article IX, each person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (hereinafter a "Proceeding"), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a person of whom he or she
is the legal representative, is or was a
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Manager or officer of the Company or while a Manager or officer of the Company
is or was serving at the request of the Company as a Manager, director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar functionary
of another foreign or domestic limited liability company, corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan or
other enterprise shall be indemnified by the Company, against judgments,
penalties (including excise and similar taxes and punitive damages), fines,
settlements and reasonable expenses (including, without limitation, attorneys'
fees) actually incurred by such person in connection with such Proceeding, and
indemnification under this Article IX shall continue as to a person who has
ceased to serve in the capacity which initially entitled such person to
indemnity hereunder. The rights granted pursuant to this Article IX shall be
deemed contract rights, and no amendment, modification or repeal of this Article
IX shall have the effect of limiting or denying any such rights with respect to
actions taken or Proceedings arising prior to any such amendment, modification
or repeal. The indemnification provided in this Article IX could involve
indemnification for negligence or under theories of strict liability but shall
not extend to any matter for which the final disposition of the Proceeding
determines that the conduct of such Manager constituted recklessness, self-
dealing or willful misconduct.
9.2 Advance Payment. The right to indemnification conferred in this
Article IX shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a person of the type entitled to be indemnified
under Section 9.1 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such person in advance of the final disposition of a Proceeding shall be
made only upon delivery to the Company of a written affirmation by such Manager
or officer of his or her good faith belief that he has met the standard of
conduct necessary for indemnification under this Article IX and a written
undertaking, by or on behalf of such person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified person is not entitled
to be indemnified under this Article IX or otherwise.
9.3 Indemnification of Employees and Agents. The Company, by adoption
of a resolution of the Managers, may indemnify and advance expenses to an
employee or agent of the Company to the same extent and subject to the same
conditions under which it may indemnify and advance expenses to Managers and
officers under this Article IX; and, the Company may indemnify and advance
expenses to persons who are not or were not Managers, officers, employees or
agents of the Company but who are or were serving at the request of the Company
as a Manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in such a capacity or arising out of his status
as such a person to the same extent that it may indemnify and advance expenses
to Managers and officers under this Article IX.
9.4 Appearance as a Witness. Notwithstanding any other provision of
this Article IX, the Company shall pay or reimburse expenses incurred by a
Manager or officer in connection with his
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appearance as a witness or other participation in a Proceeding at a time when he
is not a named defendant or respondent in the Proceeding.
9.5 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Article IX shall not be
exclusive of any other right which a Manager, officer or other person
indemnified pursuant to Section 9.3 may have or hereafter acquire under any law
(common or statutory), provision of the Certificate or this Agreement,
agreement, vote of Members or disinterested Managers or otherwise.
9.6 Insurance. The Company shall purchase and maintain insurance, at
its expense, to protect itself and any person who is or was serving as a
Manager, officer, employee or agent of the Company or is or was serving at the
request of the Company as a Manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic limited liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any expense, liability or loss, whether or not the Company would have the power
to indemnify such person against such expense, liability or loss under this
Article IX.
9.7 Savings Clause. If this Article IX or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Manager or officer
or any other person indemnified pursuant to this Article IX as to costs, charges
and expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article IX that shall not have been
invalidated and to the fullest extent permitted by applicable law.
9.8 Limitation on Liability. No Manager or officer shall be personally
liable, as such, for any action taken or omitted from being taken unless: (i)
such Manager or officer breached or failed to perform the duties of his office;
and (ii) the breach or failure to perform constituted recklessness, self-dealing
or willful misconduct. The foregoing shall not apply to any responsibility or
liability under a criminal statute or liability for the payment of taxes under
Federal, state, or local law.
ARTICLE X
TAXES
10.1 Tax Returns. The Managers shall cause to be prepared and filed all
necessary Federal, state and local tax returns for the Company including making
the elections described in Section 10.2. Each Member shall furnish to the
Managers all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's tax returns to be prepared
and filed.
10.2 Tax Elections. To the extent permitted by applicable tax law, the
Company shall make the following elections on the appropriate tax returns:
(a) to adopt the calendar year as the Company's taxable year;
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(b) to adopt the accrual method of accounting and to keep the
Company's books and records on the income-tax method;
(c) if a transfer of a Membership Interest as described in section 743
of the Code occurs, on written request of any transferee Member, or if a
distribution of Company property is made on which gain described in section
734(b)(1)(A) of the Code is recognized or there is an excess of adjusted
basis as described in section 734(b)(1)(B) of the Code, to elect, pursuant
to section 754 of the Code, to adjust the basis of Company properties;
(d) to elect to amortize the organizational expenses of the Company
and the start-up expenditures of the Company ratably over a period of 60
months as permitted by Sections 195 and 709(b) of the Code; and
(e) any other election the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Manager or Member may make an election for the
Company to be excluded from the application of the provisions of subchapter K of
chapter 1 of subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this Agreement (including, without limitation,
Section 2.8) shall be construed to sanction or approve such an election.
10.3 Tax Matters Partner. SSI-Delaware shall be the "tax matters
partner" of the Company pursuant to section 6231(a)(7) of the Code. The tax
matters partner shall take such action as may be necessary to cause each other
Member to become a "notice partner" within the meaning of section 6223 of the
Code. The tax matters partner shall inform each other Member of all significant
matters that may come to its attention in its capacity as tax matters partner by
giving notice thereof on or before the fifth Business Day after becoming aware
thereof and, within that time, shall forward to each other Member copies of all
significant written communications it may receive in that capacity. The tax
matters partner may not take any action contemplated by sections 6222 through
6232 of the Code without the consent of a Required Interest, but this sentence
does not authorize the tax matters partner to take any action left to the
determination of an individual Member under sections 6222 through 6232 of the
Code.
ARTICLE XI
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
11.1 Maintenance of Books. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members, its Managers
and each committee of the Managers. The Company shall also maintain the books
and records on Exhibit B. The books of account for the Company shall be
---------
maintained on the accrual method of accounting in accordance with generally
accepted accounting principles and the terms of this Agreement, except that the
capital accounts, of the Members shall be maintained in accordance with Section
4.6. The accounting year of the Company shall be the same as its taxable year.
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<PAGE>
11.2 Reports. On or before the 90th day following the end of each
fiscal year during the term of the Company, the Managers shall cause each Member
to be furnished with (i) an Internal Revenue Service Form K-1 and similar forms
required for the filing of such Member's state and local income tax returns and
(ii) a balance sheet, a statement of operations and cash flows, a statement of
changes in Members, capital of the Company and a statement of value of the
Company's portfolio securities for, or as of the end of, that year certified by
a recognized firm of certified public accountants. These financial statements
shall be prepared in accordance with generally accepted accounting principles
for accrual-basis records consistently applied (except as therein noted) and be
accompanied by a report of the certified public accountants. In addition, the
Company shall provide each Member with quarterly unaudited financial statements
within forty-five (45) days after the end of each of the first three quarters in
each fiscal year. The Managers also may cause to be prepared or delivered such
other reports as they may deem appropriate. The Company shall bear the costs of
all of these reports.
11.3 Accounts. The Managers shall establish and maintain one or more
separate bank and investment accounts and arrangements for Company funds in the
Company name with financial institutions and firms that the Managers determine.
The Managers may not commingle the Company's funds with the funds of any Member.
The Company's funds may be invested in such manner as the Managers determine.
ARTICLE XII
BANKRUPTCY OF A MEMBER
12.1 Bankrupt Members. Subject to Section 13.1 (c) , if any Member
becomes a Bankrupt Member, the Company shall have the option, exercisable by
notice from the Managers to the Bankrupt Member (or its representative) at any
time prior to the 180th day after receipt of notice of the occurrence of the
event causing it to become a Bankrupt Member, to buy, and on the exercise of
this option the Bankrupt Member or its representative shall sell, its Membership
Interest. The purchase price shall be an amount equal to the fair market value
thereof determined by agreement by the Bankrupt Member (or its representative)
and the Managers; however, if those persons do not agree on the fair market
value on or before the 30th day following the exercise of the option, either
such person, by notice to the other, may require the determination of fair
market value to be made by an independent appraiser. The independent appraiser
shall be selected in good faith by the Managers and reasonably acceptable to the
Bankrupt Member. The determination of the independent appraiser is final and
binding on all parties. The Bankrupt Member and the Company each shall pay one-
half of the costs of the appraisal. The Company shall pay the fair market value
as so determined in four equal cash installments, the first due on closing and
the remainder (together with accumulated interest on the amount unpaid at the
General Interest Rate) due on each of the first three anniversaries thereof.
The payment to be made to the Bankrupt Member or its representative pursuant to
this Section 12.1 is in complete liquidation and satisfaction of all the rights
and interest of the Bankrupt Member and its representative (and of all persons
claiming by, through, or under the Bankrupt Member and its representative) in
and in respect of the Company, including, without limitation, any Membership
Interest, any rights in specific Company property, and any rights against the
Company and (insofar as the affairs of the Company are concerned) against the
Members.
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<PAGE>
ARTICLE XIII
DISSOLUTION, LIQUIDATION, AND TERMINATION
13.1 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the decision of the Managers to dissolve and liquidate the
Company;
(b) the written consent of all the Members;
(c) the expiration of the period fixed for the duration of the Company
in this Agreement;
(d) any Member that is a Manager shall die, become insane, retire,
resign, be expelled, become a Bankrupt Member (with or without the consent
of a Required Interest) or dissolve, or there shall occur any other event
that terminates the continued membership in the Company of any such Member,
unless, in any such case, within 90 days of such event, Members owning a
majority of the remaining Membership Interests elect to continue the
business of the Company; and
(e) entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Act.
The Company shall not be dissolved by the admission of Members in
accordance with the terms of this Agreement. Except as provided in Section
13.1(d), the death, insanity, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of an event that terminates the
continued membership of a Member in the Company, shall not cause the Company to
be dissolved and its affairs wound up so long as the Company at all times has at
least two Members. Upon the occurrence of any such event, the business of the
Company shall be continued without dissolution.
13.2 Liquidation and Termination. (a) On dissolution of the Company,
the Managers who have not wrongfully dissolved the Company shall act as
liquidator or may appoint one or more Members as liquidator. The liquidator
shall wind up the affairs of the Company as provided in the Act and shall have
all the powers set forth in the Act. The costs of liquidation shall be a
Company expense.
(b) Upon the winding up of the Company, the assets of the Company shall
first be distributed to creditors, including Members and Managers who are
creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof) other than liabilities for which reasonable
provision for payment has been made.
(c) Any assets remaining after the Company's liabilities and obligations
have been paid or reasonable provision for the payment thereof has been made,
shall be distributed to the Members in accordance with the positive capital
account balances of the Members, as determined after
-31-
<PAGE>
taking into account all capital account adjustments for the Company's taxable
year during which such liquidation occurs (other than those made as a result of
this Section), by the end of such taxable year or, if later, within 90 days
after the date of such liquidation, except as permitted by Treas. Reg.
(S) 1.704-v1(b)(2)(ii)(b).
(d) If, at the discretion of the Managers, any assets of the Company are
distributed to the Members in-kind, such assets shall be valued on the basis of
the fair market value thereof as determined by the Managers in their reasonable
discretion on the date of distribution. Without limiting the managers,
discretion to make such a valuation or requiring that any such appraisal be
made, the valuation of any asset by the Managers on the basis of the
determination of its fair market value by an independent appraiser shall be
deemed to be a reasonable value for such asset and a reasonable exercise of such
discretion. Upon any such in-kind distribution to a Member, the Capital Account
of the Members shall be adjusted to reflect the manner in which the unrealized
income, gain, loss or deduction inherent in such property (that has not
previously been reflected in the Members' Capital Accounts) would be allocated
among the Members if there had been a taxable disposition of such property at
its fair market value on the date of distribution. The Capital Accounts of the
Members receiving a distribution in-kind shall then be reduced by the fair
market value of the property distribution.
(e) Nothing in this Article 13 shall be construed to extend the time period
prescribed under Section 13.2(c) above and Treas. Reg. (S) 1.704-1(b)(2)(ii)(b)
for making liquidating distributions of the Company's assets. If the Liquidator
deems it impracticable to cause the Company to make distributions of the
liquidating proceeds to the Members within the time period described under
Treas. Reg. (S) 1.704-l(b)(2)(ii)(b), the Liquidator may make any arrangement
that is considered for federal income tax purposes to effectuate liquidating
distributions of all of the Company's assets to the Members within the time
period prescribed in such regulation and that will permit the sale of the non-
cash assets considered so distributed in a manner that gives effect, to the
extent possible, to the intent of the preceding provisions of this Article 13.
(f) Notwithstanding anything contained herein to the contrary, upon the
merger or consolidation of the Company into, or transfer of its assets to, a
Successor Corporation in connection with a public offering of shares of such
Successor Corporation, shares in such Successor Corporation will be allocated
among the Members in the following proportions, based upon the price at which
such shares are initially offered to the public:
(i) first, to all Members in proportion to their Capital
Contributions, up to the amount of the excess, if any, of (x) their
Capital Contributions over (y) prior distributions to them;
(ii) second, to the Members in proportion to their Membership
Profit Interests until the aggregate shares distributed to all Members
are in proportion to their Membership Interests; and
(iii) third, to the Members in proportion to their Membership
Interests.
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<PAGE>
In addition, upon such merger, consolidation or sale of the Company in
connection with a public offering, the Successor Corporation shall acquire the
TL Corporations in exchange for stock of the Successor Corporation in a tax-free
transaction.
13.3 Deficit Capital Accounts. Notwithstanding anything to the contrary
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, to the extent that the deficit, if any, in the Capital Account of
any Member results from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or distributions of
assets pursuant to this Agreement to all Members, upon dissolution of the
Company such deficit shall not be an asset of the Company and such Members shall
not be obligated to contribute such amount to the Company to bring the balance
of such Member's capital account to zero.
13.4 Certificate of Cancellation. On the completion of the winding up
of the Company following its dissolution, the Company is terminated, and the
Managers (or such other person or persons as the Act may require or permit)
shall file a Certificate of Cancellation with the Office of the Secretary of
State of the State of Delaware, and cancel any other filings made pursuant to
Section 2.5.
ARTICLE XIV
1940 ACT
14.1 Expulsion. Anything herein to the contrary notwithstanding, no
Member that is an investment company, or would be an investment company but for
the exception provided by Section 3(c)(1) or Section 3(c)(7) of the 1940 Act,
may at any time own more than nine percent of the aggregate shares of Membership
Interests then outstanding. If, at any time, the Company is informed that any
such Member has acquired more than nine percent of the shares of Membership
Interests (an "Investment Company Violation"), such Member shall be deemed to
have given notice of withdrawal pursuant to this Article 14, effective as of the
last day of the fiscal quarter Preceding such Investment Company Violation (the
"Investment Company Withdrawal Date"), of such portion or all of the Capital
Accounts of such Member as the Manager may determine is necessary or advisable
to cure such Investment Company Violation, and such withdrawal shall be
consummated as provided in this Article 14 to the maximum feasible extent. The
Company may expel such Member's Membership Interest at any time while such
Investment Company Violation continues by notice to such Member and such
expulsion shall be effective as of the Investment Company Withdrawal Date. On
advice of counsel for the Company, the Manager may waive the restrictions in
this Section with respect to a new or existing Member if the number of holders
of such securities would not prevent the Company from relying on the exclusion
from the definition of "investment company" under Section 3(c)(1) of the 1940
Act. Such a waiver may only be granted if such Member makes a written
representation to the Company as to the number of holders of such securities and
such waiver shall only be effective so long as the number of holders of such
securities does not exceed the number so represented to the Member.
14.2 Purchase of Expelled Member's Membership Interest. Upon the
occurrence of an Investment Company Violation, the Managers shall redeem such
portion of such Member's
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<PAGE>
Membership Interest as the Managers determine is necessary or advisable to cure
such violation, all in accordance with Section 12.1 as if the breaching Member
were a Bankrupt Member.
ARTICLE XV
GENERAL PROVISIONS
15.1 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment.
15.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under this Agreement is
effective on receipt by the person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the addresses given
for that Member on Exhibit A or in the instrument described in 3.3(d) or 3.4, or
---------
such other address as that Member may specify by notice to the other Members.
Any notice, request, or consent to the Company or the Managers must be given to
the Managers at the following address: 103 Springer Building, 1st Floor Concord
Plaza, 3411 Silverside Road, Wilmington, DE 19810. Whenever any notice is
required to be given by law, the Certificate or this Agreement, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
15.3 Entire Agreement; Supersedure. This Agreement constitutes the
entire agreement of the Members and their affiliates relating to the Company and
supersedes all prior contracts or agreements with respect to the Company,
whether oral or written.
15.4 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any person in the performance by that
person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that person of the
same or any other obligations of that person with respect to the Company.
Failure on the part of a person to complain of any act of any person or to
declare any person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.
15.5 Amendment or Modification. This Agreement may be amended or
modified from time to time only by a written instrument adopted by the Managers
and executed and agreed to by a Required Interest and each Strategic Partner;
provided, however, that (a) an amendment or modification reducing a Member's
- -------- -------
Membership Interest or increasing its Commitment (other than to reflect changes
otherwise provided by this Agreement) or reducing a Member's distributions under
Section 5.2 is effective only with that Member's consent, (b) an amendment or
modification reducing the required Membership Interest or other measure for any
consent or vote in this Agreement is effective only with the consent or vote of
Members having the Membership Interest or other measure theretofore required,
(c) amendments of the type described in Section 3.4 may be
-34-
<PAGE>
adopted as therein provided, (d) an amendment to Section 6.9 is effective only
with the consent of Members' holding at least 66 2/3% of all Membership
Interests and (e) amendments to this Agreement that (i) the Managers have
reasonably determined do not adversely affect the Members, (ii) are required or
contemplated by this Agreement, (iii) are reasonable and necessary or
appropriate in the sole discretion of the Managers to qualify or continue the
qualification of the Company as a limited liability company under the laws of
any state, (iv) are advisable in the opinion of the Managers to cure any
ambiguity in any provision herein, or (v) are required to effect a change in the
name of the Company, in the registered office or registered agent of the Company
or in the location of the principal place of business of the Company or the
admission, substitution or termination of Members in accordance with this
Agreement, may be made by the Managers without the consent of the Members.
15.6 Binding Act. Subject to the restrictions on Dispositions set forth
in this Agreement, this Agreement is binding on and inures to the benefit of the
Members and their respective heirs, legal representatives, successors, and
assigns.
15.7 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. If
any provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other persons or
circumstances is not affected thereby and that provision shall be enforced to
the greatest extent permitted by law.
15.8 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
15.9 No Third Party Benefit. The provisions hereof are solely for the
benefit of the Company and its Members and Managers and are not intended to, and
shall not be construed to, confer a right or benefit on any creditor of the
Company or any other person.
15.10 Waiver of Certain Rights. Each Member irrevocably waives any right
it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
15.11 Indemnification. To the fullest extent permitted by law, each
Member shall indemnify the Company, each Manager and each other Member and hold
them harmless from and against all losses, costs, liabilities, damages, and
expenses (including, without limitation, costs of suit and attorney's fees) they
may incur on account of any breach by that Member of this Agreement.
-35-
<PAGE>
15.12 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
15.13 Resolutions of Disputes.
(a) If any dispute arises under this Agreement that is not settled promptly
in the ordinary course of business, the parties shall seek to resolve any such
dispute between them, first, by negotiating promptly with each other in good
faith in face-to-face negotiations. These face-to-face negotiations shall be
conducted by the respective designated senior management representative of each
party. If the parties are unable to resolve the dispute between them within 20
business days (or such period as the parties shall otherwise agree) through
these face-to-face negotiations, then any such disputes shall be resolved in the
manner set forth in subsections (b) through (d) below.
(b) Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $1,000,000 Dollars (a
"Summary Proceeding"), arising out of or relating to this Agreement or the
breach, termination or validity thereof, shall be litigated exclusively in the
Superior Court of the State of Delaware (the "Delaware Superior Court") as a
summary proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or
any successor rules (the "Summary Proceeding Rules") for as long as such rules
are in effect. Each of the parties hereto hereby irrevocably and
unconditionally (i) submits to the jurisdiction of the Delaware Superior Court
for any Summary Proceeding, (ii) agrees not to commence any Summary Proceeding
except in the Delaware Superior Court, (iii) waives, and agrees not to plead or
to make, any objection to the venue of any Summary Proceeding in the Delaware
Superior Court, (iv) waives, and agrees not to plead or to make, any claim that
any Summary Proceeding brought in the Delaware Superior Court has been brought
in an improper or otherwise inconvenient forum, (v) waives, and agrees not to
plead or to make, any claim that the Delaware Superior Court lacks personal
jurisdiction over it, (vi) waives its right to remove any Summary Proceeding to
the federal courts except where such courts are vested with sole and exclusive
jurisdiction by statute and (vii) understands and agrees that it shall not seek
a jury trial or punitive damages in any Summary Proceeding based upon or arising
out of or otherwise related to this Agreement or any other agreement executed in
connection herewith or the breach, termination or validity thereof, and waives
any and all rights to any such jury trial or to seek punitive damages.
(c) In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $1,000,000 Dollars (a "Proceeding"), arising out of or relating to this
Agreement or any other agreement executed in connection herewith or the breach,
termination or validity thereof is brought, the parties to such Proceeding agree
to make application to the Delaware Superior Court to proceed under the Summary
Proceeding Rules. Until such time as such application is rejected, such
Proceeding shall be treated as a Summary Proceeding and all of the foregoing
provisions of this Section relating to Summary Proceedings shall apply to such
Proceeding.
(d) If a Summary Proceeding is not available to resolve any dispute
hereunder, the controversy or claim shall be settled by arbitration conducted on
a confidential basis, under the
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<PAGE>
U.S. Arbitration Act, if applicable, and the then current Commercial Arbitration
Rules of the American Arbitration Association (the "Association") strictly in
accordance with the terms of the Agreement and the substantive law of the State
of Delaware. The arbitration shall be conducted at the Association's regional
office located closest to the Company's principal place of business by three
arbitrators, at least one of whom shall be knowledgeable in general business
practices, one of whom shall be an attorney and one of whom shall be a member of
a "Big Five" accounting firm familiar with businesses engaged in asset
management. Judgment upon the arbitrators, award may be entered and enforced in
any court of competent jurisdiction. Neither party shall institute a proceeding
hereunder unless at least 60 days prior thereto such party shall have given
written notice to the other party of its intent to do so.
(e) Neither party shall be precluded hereby from securing equitable
remedies in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but shall not be sought as a means to avoid or stay arbitration or
Summary Proceeding.
15.14 Estoppels. Each Member shall, upon not less than fifteen (15)
days written notice from any Member, execute and deliver to such other Member a
statement certifying that this Agreement is unmodified and in full force and
effect (or, if modified, the nature of the modification) and whether or not
there are, to such Member's knowledge, any uncured defaults on the part of the
other Member, specifying such defaults if any are claimed. Any such statement
may be relied upon by third parties.
15.15 Reliance on Authority of Person Signing Agreement. If a Member is
an Entity, the Company and the Members shall:
(a) not be required to determine the authority of the person signing this
Agreement to make any commitment or undertaking on behalf of such Entity or to
determine any fact or circumstance bearing upon the existence of the authority
of such Entity or to determine any fact or circumstance bearing upon the
existence of the authority of such person;
(b) not be required to see to the application or distribution of proceeds
paid or credited to persons signing this Agreement on behalf of such Entity;
(c) be entitled to rely on the authority of the person signing this
Agreement or the Subscription Agreement with respect to the voting of the
Membership Interest of such Entity and with respect to the giving of consent on
behalf of such Entity in connection with any matter for which consent is
permitted or required under this Agreement; and
(d) be entitled to rely upon the authority of any general partner, joint
venturer, trustee, or president or vice president, as the case may be, of any
such Entity the same as if such person were the person originally signing this
Agreement on behalf of such Entity.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as
of the date first set forth above.
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
/s/ Michael W. Miles
-------------------------------------
By: Michael W. Miles
Title: Vice President
SAFEGUARD 98 CAPITAL, L.P.
/s/ Michael W. Miles
-------------------------------------
By: Michael W. Miles
Title: Vice President
COMCAST ICG, INC.
/s/ Julian Brodsky
-------------------------------------
By: Julian Brodsky
Title: Vice Chairman
CPQ HOLDINGS, INC.
/s/ Linda S. Auwers
-------------------------------------
By: Linda S. Auwers
Title: Secretary
GENERAL ELECTRIC CAPITAL CORPORATION
/s/ Scott Gould
-------------------------------------
By: Scott Gould
Title: Regional Operations Manager
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<PAGE>
TECHNOLOGY LEADERS II, L.P.
/s/ Jordan B. Savitch
-------------------------------------
By: Jordan B. Savitch
Title: Assistant Secretary
TECHNOLOGY LEADERS II OFFSHORE C.V.
/s/ Jordan B. Savitch
-------------------------------------
By: Jordan B. Savitch
Title: Assistant Secretary
INTERNET ASSETS, INC.
/s/ Bader F. Al-Rezaiham
-------------------------------------
By: Bader F. Al-Rezaiham
Title: President / Director
/s/ Julian Brodsky
-------------------------------------
JULIAN BRODSKY, Manager
/s/ Scott Gould
-------------------------------------
SCOTT GOULD, Manager
/s/ Robert E. Keith
-------------------------------------
ROBERT E. KEITH, Manager
/s/ Walter W. Buckley
-------------------------------------
WALTER W. BUCKLEY, III, Manager
/s/ Thomas P. Gerrity
-------------------------------------
THOMAS P. GERRITY, Manager
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<PAGE>
/s/ E. Michael Forgash
-------------------------------------
E. MICHAEL FORGASH, Manager
/s/ Walter W. Buckley
-------------------------------------
WALTER W. BUCKLEY, III, individually
/s/ Kenneth A. Fox
-------------------------------------
KENNETH A. FOX, individually
/s/ Douglas A. Alexander
-------------------------------------
DOUGLAS A. ALEXANDER, individually
-40-
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- -------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Safeguard Scientifics (Delaware), Inc. $ 26,000,000 0 N/A 13,000,000
- -------------------------------------------------------------------------------------------------------------------
Safeguard 98 Capital L.P. $ 8,125,000 $8,125,000 0 8,125,000
- -------------------------------------------------------------------------------------------------------------------
Comcast ICG, Inc. $ 15,600,000 $5,600,000 N/A 10,600,000
- -------------------------------------------------------------------------------------------------------------------
Internet Assets, Inc. $ 5,000,000 $5,000,000 N/A 5,000,000
- -------------------------------------------------------------------------------------------------------------------
CPQ Holdings, Inc. $ 10,000,000 0 N/A 5,000,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Electric Capital Corporation $ 7,000,000 0 N/A 3,500,000
- ------------------------------------------------------------------------------------------------------------------------
BancBoston Investments Inc. $ 6,000,000 0 N/A 3,000,000
- ------------------------------------------------------------------------------------------------------------------------
TL Ventures (Delaware), Inc. $ 3,901,100 $ 557,300 N/A 2,229,200
(TL II LP)
TL Ventures Second Corp. $ 4,098,900 $ 442,700 N/A 1,770,800
(TL II CV)
- ------------------------------------------------------------------------------------------------------------------------
R.A.F. Ventures VII. L.P. $ 5,000,000 $1,000,000 N/A 3,000,000
- ------------------------------------------------------------------------------------------------------------------------
Kenneth A. Fox $4,286,549.69 $1,000,000 1,286,549.69 3,286,549.69
- ------------------------------------------------------------------------------------------------------------------------
Walter W. Buckley, III $4,567,999.67 0 2,567,999.67 3,567,999.67
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Susan R. Buckley $ 142,500 $ 142,500 N/A 142,500
- ------------------------------------------------------------------------------------------------------------------------
J. Christopher Burch $ 2,750,000 $ 750,000 N/A 1,750,000
- ------------------------------------------------------------------------------------------------------------------------
Robert L. Burch $ 2,750,000 $ 750,000 N/A 1,750,000
- ------------------------------------------------------------------------------------------------------------------------
River Light, LLC $ 1,100,000 $1,100,000 N/A 1,100,000
- ------------------------------------------------------------------------------------------------------------------------
Walter W. Buckley, Jr. $ 2,000,000 0 N/A 1,000,000
- ------------------------------------------------------------------------------------------------------------------------
Graham Family Growth Partnership, L.P. $ 1,750,000 $ 250,000 N/A 1,000,000
Steven C. Graham $ 750,000 $ 250,000 500,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Herbert Lotman $ 800,000 0 N/A 400,000
Karen Lotman
F.E.A. Trust F/B/O Shelly Lotman Fisher $ 300,000 0 150,000
John Pelin & George Ginader Trustees
F.E.A. Trust F/B/O Jeffrey Lotman $ 300,000 0
John Pelin & George Ginader Trustees 150,000
Keystone Foods Corporation $ 500,000 $ 500,000
- ------------------------------------------------------------------------------------------------------------------------
Poduska Family Limited Partnership $ 1,250,000 $ 250,000 N/A 750,000
John William Poduska, Sr. $ 250,000 $ 250,000 250,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SMM Internet $ 1,225,000 $ 525,000 N/A 875,000
- ------------------------------------------------------------------------------------------------------------------------
M. Reid & Company $ 1,000,000 $ 350,000 N/A 675,000
- ------------------------------------------------------------------------------------------------------------------------
Austin Hearst $ 500,000 $ 500,000 N/A 500,000
- ------------------------------------------------------------------------------------------------------------------------
Mid-America Capital Resources, Inc. $ 500,000 $ 500,000 N/A 500,000
- ------------------------------------------------------------------------------------------------------------------------
Jean C. Tempel $ 650,000 $ 250,000 N/A 450,000
- ------------------------------------------------------------------------------------------------------------------------
Christopher Greendale $ 416,959.06 $ 300,000 116,959.06 416,959.06
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The HRG Corporation $ 450,000 $ 150,000 N/A 300,000
Robert S. Adelson $ 150,000 $ 50,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------
Douglas A. Alexander $1,416,374.26 0 1,216,374.26 1,316,374.26
- ------------------------------------------------------------------------------------------------------------------------
Warren V. Musser $ 400,000 0 N/A 200,000
- ------------------------------------------------------------------------------------------------------------------------
Robert E. Keith $ 200,000 $ 100,000 N/A 150,000
- ------------------------------------------------------------------------------------------------------------------------
Commercial Electronics, L.L.C. $ 100,000 0 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
Tom Kippola Pension Plan $ 123,333 0 23,333 73,333
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James I. Cash, Jr., Ph.D-PSRP $ 100,000 0 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
Peter Solvik $ 295,035.09 $ 75,000 70,035.09 220,035.09
Patricia Solvik
- ------------------------------------------------------------------------------------------------------------------------
Esther Dyson $ 170,175.44 0 70,175.44 120,175.44
- ------------------------------------------------------------------------------------------------------------------------
Britton H. Murdoch $ 400,000 $ 150,000 150,000 350,000
- ------------------------------------------------------------------------------------------------------------------------
Douglas M. Marzonie $ 200,000 $ 200,000 N/A 200,000
- ------------------------------------------------------------------------------------------------------------------------
Crockett Family, L.P. $ 200,000 $ 200,000 N/A 200,000
- ------------------------------------------------------------------------------------------------------------------------
Silicon Valley Bancshares $ 125,000 $ 125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------
William L. Powar $ 125,000 $ 125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RMDG Investors, L.L.C. $ 125,000 $ 125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------
David Chu $ 125,000 $ 125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------
Ira Lubert $ 125,000 $ 125,000 N/A 125,000
- ------------------------------------------------------------------------------------------------------------------------
Ramsey Beirne Partners, LLC $ 100,000 $ 100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------
John W. Burch $ 100,000 $ 100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------
Robert A. Pollan $ 100,000 $ 100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------
Leslie C. Quick $ 100,000 $ 100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas C. Quick $ 100,000 $ 100,000 N/A 100,000
- ------------------------------------------------------------------------------------------------------------------------
Karl I. Peterson $ 75,000 $ 75,000 N/A 75,000
- ------------------------------------------------------------------------------------------------------------------------
Krishna Rangarajan $ 75,000 $ 75,000 N/A 75,000
- ------------------------------------------------------------------------------------------------------------------------
T. Richard Butera $ 125,000 0 N/A 62,500
- ------------------------------------------------------------------------------------------------------------------------
William F. Mannion, Jr. $ 62,500 $ 62,500 N/A 62,500
- ------------------------------------------------------------------------------------------------------------------------
Churchill Family Partnership, L.P. $ 50,000 $ 50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
Cluny Road Rental, L.P. $ 50,000 $ 50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
Larry Murphy $ 50,000 $ 50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Samuel A. Plum $ 50,000 $ 50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
John S. Scott $ 50,000 $ 50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
Edward Sickles $ 50,000 $ 50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
David Solomont $ 50,000 $ 50,000 N/A 50,000
- ------------------------------------------------------------------------------------------------------------------------
Lou Ryan $ 96,783.25 $ 50,000 46,783.25 96,783.25
- ------------------------------------------------------------------------------------------------------------------------
James R. Patterson $ 40,000 $ 40,000 N/A 40,000
- ------------------------------------------------------------------------------------------------------------------------
Ann B. Alexander $ 50,000 0 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------
Don E. Bonazzo $ 50,000 0 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------
Richard A. Guttendorf $ 25,000 $ 25,000 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Blair La Corte $ 25,000 $ 25,000 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------
Thomas C. Lynch $ 25,000 $ 25,000 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------
Michael W. Miles $ 25,000 $ 25,000 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------
Gerard M. Wilk $ 25,000 $ 25,000 N/A 25,000
- ------------------------------------------------------------------------------------------------------------------------
Jerry L. Johnson $ 20,000 $ 20,000 N/A 20,000
- ------------------------------------------------------------------------------------------------------------------------
Roger S. Penske, Jr. $ 15,000 $ 15,000 N/A 15,000
- ------------------------------------------------------------------------------------------------------------------------
Steven Rosard $ 15,000 $ 15,000 N/A 15,000
- ------------------------------------------------------------------------------------------------------------------------
Rajesh Aduru $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gary Danehower $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
James Lawless $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
John A. Loftus, Jr. $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
William C. Loftus $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
Walter P. Maner, IV $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
Henry N. Nassau $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
James A. Ounsworth $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
Ronald J. Trichon, Jr. $ 12,500 $ 12,500 N/A 12,500
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delbert W. Johnson $ 10,000 $ 10,000 N/A 10,000
- ------------------------------------------------------------------------------------------------------------------------
Christina M. Morgan $ 10,000 $ 10,000 N/A 10,000
- ------------------------------------------------------------------------------------------------------------------------
Paul W. Noglows $ 10,000 $ 10,000 N/A 10,000
- ------------------------------------------------------------------------------------------------------------------------
Thomas P. Gerrity, PhD $ 250,000 $ 250,000 N/A 250,000
- ------------------------------------------------------------------------------------------------------------------------
Donna Lightner $ 47,426.90 0 $ 47,426.90 47,426.90
- ------------------------------------------------------------------------------------------------------------------------
Paul Slaats $ 25,000.00 0 $ 25,000 25,000
- ------------------------------------------------------------------------------------------------------------------------
The Stephen J. Getsy Living Trust $ 467,836.25 0 $ 467,836.25 467,836.25
- ------------------------------------------------------------------------------------------------------------------------
Ivan Inerfeld $ 187,134.50 0 $ 187,134.50 187,134.50
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Don Peppers $ 116,959.06 0 $ 116,959.06 116,959.06
- ------------------------------------------------------------------------------------------------------------------------
Andy Miller $ 95,175.44 0 $ 95,175.44 95,175.44
- ------------------------------------------------------------------------------------------------------------------------
Rowland C. Hanson $ 70,035.09 0 $ 70,035.09 70,035.09
- ------------------------------------------------------------------------------------------------------------------------
Peter Flint $ 46,783.63 0 $ 46,783.63 46,783.63
- ------------------------------------------------------------------------------------------------------------------------
Peggy Ledvina $ 46,783.63 0 $ 46,783.63 46,783.63
- ------------------------------------------------------------------------------------------------------------------------
Geoffrey Moore $ 46,667.00 0 $ 46,667 46,667
- ------------------------------------------------------------------------------------------------------------------------
Charles Stryker $ 20,000.00 0 $ 20,000 20,000
- ------------------------------------------------------------------------------------------------------------------------
Dave Evans $ 20,000.00 0 $ 20,000 20,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
----------------------
MEMBERSHIP INTERESTS
--------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
------- -------------------- ---------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jim Reilly $20,000.00 0 $ 20,000 20,000
- ----------------------------------------------------------------------------------------------------------------------
Bob Yablunsky $10,000.00 0 $ 10,000 10,000
- ----------------------------------------------------------------------------------------------------------------------
Mark Sugarman $10,000.00 0 $ 10,000 10,000
- ----------------------------------------------------------------------------------------------------------------------
Maureen McClure $ 5,614.04 0 $5,614.04 5,614.04
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
EXHIBIT B
REQUIRED INFORMATION
(1) A current and a past list, setting forth the full name and last known
mailing address of each Member and Manager, set forth in alphabetical order;
(2) A copy of the Certificate of Formation and all amendments thereto;
(3) Copies of the Company's Federal, state and local income tax returns and
financial statements for the three most recent years or, if those returns and
statements were not prepared for any reason, copies of the information and
statements provided to, or which should have been provided to, the Members to
enable them to prepare their Federal, state and local tax returns for the
period; and
(4) Copies of the Company's written Amended and Restated Limited Liability
Company Agreement, and all amendments thereto, and copies of any operating
agreements no longer in effect.
-1-
<PAGE>
EXHIBIT C
---------
REGISTRATION RIGHTS
-------------------
1.1 Piggyback Registration.
----------------------
(a) If the Company at any time after the consummation of its initial
public offering proposes for any reason, whether for its own account or the
account of others, to register any of its securities under the Securities Act,
other than pursuant to a Special Registration Statement (as hereinafter
defined), it shall each such time promptly give written notice to the registered
Holders of the Eligible Securities (as defined in Section 1.2(c)) of its
intention to do so, and, upon the written request, given within twenty (20) days
after receipt of any such notice, of a Holder to register any of its Eligible
Securities, the Company shall (subject to Section 1.1(b) hereof) use its best
efforts to cause all Eligible Securities with respect to which Holders shall
have so requested registration to be registered under the Securities Act
promptly upon receipt of the written request of such Holders for such
registration, all to the extent required to permit the sale or other disposition
by the Holders of the Eligible Securities so registered in the manner
contemplated by such registration statement. "Special Registration Statement"
means a registration statement on Forms S-8 or S-4 or any successor form or
other registration statement relating to shares of Common Stock issued in
connection with an acquisition of an entity or business or other business
combination, or shares of Common Stock issued in connection with stock option or
other employee benefit plans.
(b) In connection with any exercise by a Holder of its "piggyback"
registration rights pursuant to this Section 1.1 in connection with any
underwritten offering of securities of the Company, if the Company is advised in
writing (with a copy to the Holders requesting registration) by the lead
underwriter for the offering that, in such firm's opinion, a registration of
Eligible Securities at that time would interfere with the orderly sale and
distribution of the securities being sold by the Company for its own account,
then the number of shares that may be included in the underwriting shall be
allocated, first, to the Company, second, to each of the Holders requesting
inclusion of their Eligible Securities in such registration statement on a pro
rata basis based on the total number of Eligible Securities held by each such
Holder and, third, to any other shareholders requesting registration.
(c) For purposes of this Exhibit C, the following terms shall have the
following meanings: (i) "Common Stock" shall mean the shares of common stock of
any Successor Corporation; (ii) "Company" shall mean and include Internet
Capital and any Successor Corporation; (iii) "Holders" shall mean each Strategic
Partner for so long as (and to the extent that) it owns any Eligible Securities,
and each of their respective successors, assigns, and transferees who become
registered owners of Eligible Securities; and (iv) "Internet Capital" shall mean
Internet Capital Group, L.L.C., a Delaware limited liability company.
Any capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in this Amended and Restated Limited Liability Company
Agreement of Internet Capital, as amended, to which this Exhibit C is attached.
-1-
<PAGE>
1.2 Demand Registration.
-------------------
(a) Any Holder may, at any time after consummation of the Company's
initial public offering of equity securities, request in writing that the
Company cause a registration statement to be filed under the Securities Act (on
any Form then available to the Company) with respect to such of its Eligible
Securities as it shall specify in such request, provided that (i) the gross
proceeds from such offering will be or are reasonably expected to be not less
than $5 million and (ii) such Holder includes at least 25% of its Eligible
Securities in its request. The Company shall promptly give written notice of
such request to the other Holders of Eligible Securities and afford them the
opportunity of including in the requested registration statement such of their
Eligible Securities as they shall specify in a written notice given to the
Company within thirty (30) days after their receipt of the Company's notice of
the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which Holders shall have so requested
registration to be registered under the Securities Act, all to the extent
required to permit the sale or other disposition by the Holders of the Eligible
Securities so registered in the manner specified by such Holders in their
notices and pursuant to this Section.
(b) The Company shall not be required to file and cause to become
effective more than two (2) registration statements at the demand of any Holder
made under this Section 1.2.
(c) The term "Eligible Securities" shall mean, on any date, (i) the
shares of Common Stock issued and issuable in exchange for a Holder's shares of
Memberships Interests upon the merger or consolidation of Internet Capital into
a Successor Corporation (the "Merger Shares"), (ii) plus all shares of Common
Stock or other securities of the Company issued in respect of such Merger Shares
(and such other securities of the Company) by way of a stock split, stock
dividend, recapitalization, merger or consolidation, (iii) but exclusive of any
Merger Shares or other securities described in clause (i) or (ii) which have
been (A) sold in a public offering registered under Securities Act or (B) sold
pursuant to Rule 144 under the Securities Act.
(d) If the Holders of the Eligible Securities making such demand
propose to sell their Eligible Securities in a firm commitment underwriting and
the managing underwriter advises such Holders that not all Eligible Securities
of such Holders can be included in such offering, then the requisite number of
Eligible Securities shall be excluded from registration on a basis pro rata
among the Holders of the Eligible Securities requesting such registration on the
basis of the number of Eligible Securities held by each of them. If by virtue
of this Section 1.2(d), more than 50% of the Eligible Securities which a Holder
has demanded be registered are excluded from the registration statements then
such Holder shall not be deemed to have exercised a demand registration right
under this Section 1.2.
(e) Provided the Company has honored its obligations under Section
1.1, no demand registration right granted in this Section may be exercised by
any Holder during any period of time beginning on the date the Company (i) files
a registration statement with the
-2-
<PAGE>
Securities and Exchange Commission registering any of its securities for sale to
the public or (ii) files a registration statement upon the demand of any other
Holder pursuant to this Section 1.2, and ending on the earlier to occur of (A)
90 days after the date on which such registration statement is declared
effective by the Securities and Exchange Commission or otherwise becomes
effective, and (B) the 180th day after the date of such filing.
(f) The demand registration rights granted in this Section 1.2 shall
expire, if not exercised prior thereto, on the date on which more than 90% of
the Eligible Securities (as of the date of this Agreement) shall have been
publicly sold by the Holders thereof in a public offering registered under the
Securities Act of 1933 or pursuant to Rule 144 thereunder.
1.3 Form S-3 Registrations. In addition to the rights provided the
----------------------
Holders of registrable securities in Sections 1.1 and 1.2 above, if the
registration of Eligible Securities under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), then upon the
written request of one or more Holders of Eligible Securities, the Company will
so notify each Holder of Eligible Securities, including each Holder who has a
right to acquire Eligible Securities, and then will, as expeditiously as
possible, use its best efforts to effect qualification and registration under
the Securities Act on Form S-3 of all or such portion of the Eligible Securities
as the Holder or Holders shall specify pursuant to this Section 1.3, provided
that the Company shall have no obligation to file a registration statement under
this Section 1.3 unless the gross proceeds from the offering will be or are
reasonably expected to be not less than $500,000.
1.4 Registration Procedures. If and whenever the Company is under an
-----------------------
obligation pursuant to the provisions of this Exhibit C to use its best efforts
to effect the registration of any Eligible Securities the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Eligible Securities and use its best
efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective under the Securities Act until the earlier of such time as
all securities covered thereby have been sold or one hundred and eighty (180)
days after such registration statement becomes effective, as such period may be
extended pursuant to Section 1.5, and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Eligible
Securities covered by such registration statement for such period;
(c) furnish to each selling stockholder such numbers of copies of each
prospectus (including each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of such Eligible Securities;
-3-
<PAGE>
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter, if any, or if there
is no managing underwriter, the Holders of at least 25% of the Eligible
Securities, shall request, (provided that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
reasonably necessary or advisable to enable such seller to consummate the public
sale or other disposition in such jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in clause (b) of this Section 1.4, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish on the date that such Eligible Securities are delivered to
the underwriters for sale pursuant to such registration or, if such Eligible
Securities are not being sold through underwriters, on the date that the
registration statement with respect to such Eligible Securities becomes
effective, (i) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and at the request of any Holder or Holders of Eligible
Securities requesting registration pursuant to this Exhibit C, to the Holder or
Holders making such request, stating that such registration statement has become
effective under the Securities Act and that (i) no stop order suspending the
effectiveness thereof has been issued and, to the best knowledge of such
counsel, no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (2) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein); (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no
opinion as to financial statements contained therein); (4) the description in
the registration statement or the prospectus, or any amendment or supplement
thereto, of all legal and governmental matters and all contracts and other legal
documents or instruments are accurate and fairly present the information
required to be shown; (5) such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be described in
the registration
-4-
<PAGE>
statement or prospectus, or any amendment or supplement thereto, which are not
described as required, nor of any contracts or documents or instruments of a
character required to be described in the registration statement or prospectus,
or any amendment or supplement thereto, or to be filed as exhibits to the
registration statement which are not described and filed as required, and (6)
such other legal matters with respect to such registration as the underwriters,
if any, and any such Holder or Holders requesting such opinion may reasonably
request; and (ii) in the case of an underwritten offering a comfort letter,
dated such date, from the independent certified public accountants of the
Company, addressed to the underwriters and the Company's Board of Directors in
the customary form.
1.5 Delay in Registration. Notwithstanding anything contained in
---------------------
this Agreement to the contrary, the Company reserves the right to delay any such
registration pursuant to this Exhibit C for a period of not more than one
hundred and twenty (120) days, or to withhold efforts to cause such registration
statement to become effective for a period of not more than one hundred twenty
(120) days, if the Board of Directors of the Company determines in good faith
that such registration might (A) interfere with or affect the negotiation or
completion of any material transaction that is being contemplated by the
Company, or (B) involve initial or continuing disclosure obligations materially
adverse to the best interests of the Company's shareholders. If, after a
registration statement becomes effective, the Company advises the Holders of the
registrable securities covered by such registration statement that the Company
considers it appropriate for the registration statement to be amended, the
Holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The time periods referred to this Exhibit C shall be extended for an
additional number of business days during which the rights to sell shares was
suspended.
1.6 Information to be Furnished by Holders of Eligible Securities.
-------------------------------------------------------------
Each prospective seller of Eligible Securities, registered or to be registered
under any registration statement shall furnish to the Company such information
and execute such documents regarding the Eligible Securities held by such seller
and the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company.
1.7 Expenses of Registration.
------------------------
(a) All expenses incurred by the Company in complying with this
Exhibit C (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (iv) printing expenses; (v) fees and
disbursements of Company counsel and of one counsel for the participating
Holders together, which counsel is reasonably acceptable to the Holders; and
(vi) the fees and expenses of the independent public accountants (including the
expense of any special audits in connection with any such registration), are
hereinafter called "Registration Expenses." All underwriting discounts and
commissions applicable to the Eligible Securities covered by any such
registration, are herein called "Selling Expenses."
-5-
<PAGE>
(b) The Company shall pay all Registration Expenses in connection with
all piggyback registrations under Section 1.1 and all demand registrations under
Section 1.2 plus up to one (1) S-3 registration per year pursuant to Section
1.3. All Selling Expenses in connection with each registration pursuant to this
Exhibit C and any legal fees and expenses of additional special counsel for the
sellers shall be borne by the seller or sellers therein in proportion to the
number of Eligible Securities included by each in such registration, or in such
other proportions as they may agree upon.
1.8 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each Holder of
Eligible Securities, its executive officers, directors and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to this
Exhibit C against any loss, claims, damages or liabilities to which any of them
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in a
registration statement including Eligible Securities owned by such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any of them for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable hereunder to a
particular Holder in any such case if any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company for such purpose by such Holder or by its representative or by any
underwriter on behalf of such Holder or if the untrue statement or omission is
corrected in a supplement or amendment to the prospectus provided by the Company
to such Holder in a timely fashion in accordance with this Exhibit C which was
not used by such Holder.
(b) Each Holder of Eligible Securities joining in any registration
statement of the Company pursuant to Exhibit C of this Agreement shall indemnify
and hold harmless the Company, its executive officers, directors, and
controlling persons (within the meaning of the Securities Act) and each person
who participates as an underwriter or controlling person of an underwriter
(within the meaning of the Securities Act) with respect to a registration
statement pursuant to Exhibit C against any losses, claims, damages, or
liabilities to which any of them may become subject under the Securities Act or
otherwise insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of any
material fact contained in such registration statement,, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, made in reliance upon and in conformity with written
information furnished to the Company by such Holder or by its representative or
by
-6-
<PAGE>
any underwriter on behalf of such Holder for such purpose, and will reimburse
any of them for any legal or other expenses reasonably incurred by them in
connection with investigating or defending, any such loss, claim, damage,
liability or action provided, however, that the total amount payable by a Holder
-------- -------
under this Section 1.8(b) shall not exceed the net proceeds received by such
Holder in such registered offering.
(c) Promptly after receipt by an indemnified party under this Section
1.8 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying party, notify
the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
unavailable to or insufficient to hold harmless an amount in excess of the
proceeds received by such Holder in the offering.
1.9 Underwriting Agreement. If Eligible Securities are sold pursuant
----------------------
to a registration statement in an underwritten offering pursuant to this Exhibit
C, the Company and the Holders participating therein agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of, or, as the case may be,
the seller of the securities being registered and customary covenants and
agreements to be performed by such issuer or seller, including, without limiting
the generality of the foregoing, customary provisions with respect to
indemnification by the Company of the underwriter(s) of such offering.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
----------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any Eligible
Securities for up to that period of time following the effective date of a
registration statement of the Company filed under the Securities Act as is
requested by the managing underwriters of such offering, not to exceed one
hundred and eighty (180) days.
1.11 Subsequent Registration Rights. The Company shall not grant any
------------------------------
registration rights to any other person that are more favorable to such person
than the registration rights granted to the Holders hereunder without the
consent of the Holders.
1.12 Assignment. The registration rights granted hereunder may be
----------
assigned by a Holder to any person who acquires such Holder's Eligible
Securities in accordance with the Company's Amended and Restated Limited
Liability Company Agreement.
-7-
<PAGE>
Exhibit 10.6
SECURITIES HOLDERS AGREEMENT
Dated as of
February 2, 1999
among
ICG CAPITAL GROUP, INC.,
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
SAFEGUARD 98 CAPITAL, L.P.
COMCAST ICG, INC.
CPQ HOLDINGS, INC.
INTERNET ASSETS, INC.
GENERAL ELECTRIC CAPITAL CORPORATION
TECHNOLOGY LEADERS II, L.P.
and
TL VENTURES SECOND CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I DEFINITIONS.......................................... 1
1.1 Definitions.......................................... 1
ARTICLE II COVENANTS AND REPRESENTATIONS........................ 5
2.1 Legend............................................... 5
2.2 Certain Preemptive Rights............................ 5
2.3 Right of First Refusal............................... 6
2.4 Co-Investment Opportunities.......................... 7
2.5 Conflicts of Interest................................ 8
2.6 Related Party Transaction............................ 8
2.7 Approval of Merger and Merger Agreement.............. 8
---------------------------------------
2.8 Registration Rights.................................. 8
-------------------
2.9 Indemnification...................................... 8
---------------
2.10 Merger of TL Corporations............................ 8
------------------
ARTICLE III CORPORATE ACTIONS.................................... 9
3.1 Certificate of Incorporation and Bylaws.............. 9
3.2 Directors and Voting Agreements...................... 9
3.3 Vacancies; Resignation............................... 9
3.4 Right to Remove Certain of the Company's Directors... 9
3.5 Right to Fill Certain Vacancies in Company's Board... 9
3.6 Management Company................................... 10
------------------
3.7 Amendment of Articles and Bylaws..................... 10
3.8 Termination of Voting Agreements..................... 10
ARTICLE IV MISCELLANEOUS........................................ 11
4.1 Amendment and Modification........................... 11
4.2 Successors and Assigns; Entire Agreement............. 11
4.3 Severability......................................... 11
4.4 Notices.............................................. 11
4.5 Indemnification...................................... 12
4.6 Governing Law........................................ 12
4.7 Resolution of Disputes............................... 12
4.8 Headings............................................. 14
4.9 Counterparts......................................... 14
4.10 Further Assurances................................... 14
------------------
4.11 Remedies............................................. 14
--------
4.12 Effect of Waiver or Consent.......................... 14
---------------------------
4.13 Party No Longer Owning Securities.................... 14
---------------------------------
4.14 No Effect on Employment.............................. 14
-----------------------
4.15 Pronouns............................................. 15
--------
4.16 Termination.......................................... 15
-----------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C> <C>
4.17 Reliance on Authority of Person Signing Agreement.... 15
-------------------------------------------------
</TABLE>
ii
<PAGE>
SECURITIES HOLDERS AGREEMENT
THIS IS A SECURITIES HOLDERS AGREEMENT, dated as of February 2, 1999
(the "Agreement"), by and among ICG Capital Group, Inc. (the "Company"),
Safeguard Scientifics (Delaware), Inc. ("SSI-Delaware"), Safeguard 98 Capital,
L.P. ("Safeguard 98 L.P."), Comcast ICG, Inc. ("Comcast ICG"), CPQ Holdings,
Inc. ("CPQ"), Internet Assets, Inc. ("Internet Assets"), General Electric
Capital Corporation ("GE Capital"), Technology Leaders II, L.P. ("TL-Delaware"),
and TL Ventures Second Corporation ("TL-Offshore"). SSI-Delaware, Safeguard 98
L.P., TL-Delaware, TL-Offshore, Comcast ICG, CPQ, GE Capital and Internet Assets
are sometimes referred to hereinafter individually as an "Investor" and
collectively as the "Investors."
Background
----------
A. The Company has entered into an Agreement of Merger, dated as of
February 2, 1999 (the "Merger Agreement"), pursuant to which Internet Capital
Group, L.L.C., a Delaware limited liability company ("Internet L.L.C.") has,
among other things, merged with and into the Company (the "Merger"), and the
Company has, among other things, issued shares of its Common Stock, par value
$.001 per share, to certain previous members of Internet L.L.C.
B. The Investors and the Company wish to set forth certain agreements
regarding their future relationships and their rights and obligations with
respect to the Securities (as hereinafter defined).
Terms
-----
In consideration of the mutual covenants contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
-----------
the following meanings:
"Affiliate" shall mean, with respect to any specified Person, any
other Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control
with, such specified Person (for the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise).
"Agreement" shall have the meaning set forth in the Preamble.
<PAGE>
"Board of Directors" shall mean the Board of Directors of the
Company.
"Comcast" shall mean Comcast Corporation.
"Comcast ICG" shall have the meaning set forth in the Preamble.
"Common Stock" shall mean the Company's Common Stock, par value,
$.001 per share.
"Company" shall have the meaning set forth in the Preamble.
"CPQ" shall have the meaning set forth in the Preamble.
"Directors" shall mean the members of the Board of Directors.
"Entity" shall mean any general partnership, limited partnership,
corporation, joint venture, trust, business trust, limited liability
company, limited liability partnership, cooperative or association.
"GE Capital" shall have the meaning set forth in the Preamble.
"Internet Assets" shall have the meaning set forth in the Preamble.
"Internet L.L.C." shall have the meaning set forth in the Recitals.
"Investors" shall have the meaning set forth in the Preamble.
"LLC Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of Internet L.L.C. dated January 4, 1999.
"Management Agreement" shall have the meaning set forth in Section
3.6.
"Management Company" shall have the meaning set forth in Section
3.6.
"Merger" shall have the meaning set forth in the Recitals.
"Merger Agreement" shall have the meaning set forth in the Recitals.
"Notice" shall have the meaning set forth in Section 2.3(a).
"Offered Shares" shall have the meaning set forth in Section 2.3(a).
"Options" shall mean (1) the non-qualified options to purchase four
thousand seven hundred (4,700) shares of Common Stock that may be granted
to non-employees of
-2-
<PAGE>
the Company pursuant to the Company's Option Plan For Non-Employees, and
(2) the non-qualified options to purchase up to one hundred thousand
(100,000) shares of Common Stock that may be granted to employees,
officers, consultants and advisors to the Company pursuant to the Company's
Option Plan For Employees and Consultants.
"Permitted Offerees" shall have the meaning set forth in Section
2.3(c).
"Permitted Transferee" shall mean (i) in the case of any Investor or
Permitted Transferee who is a natural person, the heirs, executors,
administrators or personal representatives upon the death of such Investor
or Permitted Transferee or upon the incompetency or disability of such
Investor or Permitted Transferee for purposes of the protection and
management of such Investor's assets; (ii) in the case of any Strategic
Partner (or Comcast) and (iii) in the case of any Investor or Permitted
Transferee, any person provided the Securities are Transferred to such
Person in compliance with the provisions of the Certificate of
Incorporation of the Company.
"Person" shall mean any individual person or Entity.
"Proposed Transferee" shall have the meaning set forth in Section
2.3(c).
"Public Offering" shall mean a successfully completed firm
commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act (other than (i) a Special
Registration Statement or (ii) a registration statement relating to a Unit
Offering) in respect of the offer and sale of shares of Common Stock for
the account of the Company.
"Refused Shares" shall have the meaning set forth in Section 2.3(c).
"Safeguard" shall mean Safeguard Scientifics, Inc., which owns all
of the outstanding equity interests of SSI-Delaware and Safeguard 98 L.P.
"Safeguard 98 L.P." shall have the meaning set forth in the
Preamble.
"Securities" shall mean the Common Stock or any other shares of
capital stock of the Company, or any securities convertible into or exchangeable
for such capital stock, or any options, warrants or other rights to acquire such
capitals stock or securities, now or hereafter held by any party hereto,
including all other securities of the Company (or a successor to the Company)
received on account of ownership of the Common Stock, including all securities
issued in connection with any merger, consolidation, stock dividend, stock
distribution, stock split, reverse stock split, stock combination,
recapitalization, reclassification, subdivision, conversion or similar
transaction in respect thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
-3-
<PAGE>
"Special Registration Statement" means (i) a registration statement
on Forms S-8 or S-4 or any similar or successor form or any other
registration statement relating to an exchange offer or an offering of
securities solely to the Company's employees or security holders or used
in connection with the acquisition of the business of another person or
entity or (ii) a registration statement registering a Unit Offering.
"SSI-Delaware" shall have the meaning set forth in the Preamble.
"Strategic Partners" shall mean the Entities described in the
following clauses (i), (ii), or (iii). For so long as (i) any of SSI-
Delaware, Safeguard 98 L.P., TL, Comcast ICG, Inc. (an indirect wholly
owned subsidiary of Comcast) and CPQ Holdings, Inc. (a wholly owned
subsidiary of Compaq Computer Corporation) are the beneficial owner of at
least fifteen thousand (15,000) shares of Common Stock, (ii) GE Capital is
the beneficial owner of at least thirty-five thousand (35,000) shares of
Corporation, (iii) Internet Assets is the beneficial owner of at least
fifty thousand (50,000) shares of Common Stock, and (iv) any Entity
subsequent to the date hereof that acquires beneficial ownership of at
least fifty thousand (50,000) shares of Common Stock.
"Subsidiary" shall mean any Entity that is an Affiliate of the
Company.
"TL" shall mean collectively TL-Delaware, TL-Offshore, and the TL
Corporations.
"TL Corporations" shall mean any corporations wholly owned by either
TL-Delaware or TL-Offshore which acquire Securities of the Company.
"TL-Delaware" has the meaning set forth in the Preamble.
"TL-Offshore" has the meaning set forth in the Preamble.
"Transfer" shall mean the making of any sale, exchange, assignment,
hypothecation, gift, security interest, pledge or other encumbrance, or any
contract therefor, any voting trust or other agreement or arrangement with
respect to the transfer of voting rights or any other beneficial interest
in any of the Securities, the creation of any other claim thereto or any
other transfer or disposition whatsoever, whether voluntary or involuntary,
affecting the right, title, interest or possession in or to such
Securities.
"Transferring Partner" shall have the meaning set forth in Section
2.3(a).
"Unit Offering" shall mean a Public Offering of a combination of
debt and equity securities of the Company in which (i) not more than 10% of
the gross proceeds received from the sale of such securities is attributed
to such equity securities, and (ii) after giving effect to such offering,
the Company does not have a class of equity securities required to be
registered under the Securities Exchange Act of 1934, as
-4-
<PAGE>
amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
ARTICLE II
COVENANTS AND REPRESENTATIONS
2.1 Legend. The certificates representing the Securities shall bear
the following legend in addition to any other legend required under applicable
law:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE
TERMS AND CONDITIONS OF A SECURITIES HOLDERS AGREEMENT BY AND AMONG
THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE
SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IS SUBJECT TO
THE TERMS OF SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY
UPON PROOF OF COMPLIANCE THEREWITH.
2.2 Certain Preemptive Rights.
-------------------------
(a) If at any time the Company proposes to issue any type of
Securities, other than the Securities described in Section 2.2(d) below, the
Company shall first offer in writing to sell to each Strategic Partner its pro
rata share of the proposed issue of such type of Securities, at the same price
and on the same terms at which the Company proposes to sell such issue to
others. For purposes hereof, each Strategic Partner's "pro rata share" of an
issue of any type of Securities shall be that amount of such Securities which
would result in such Strategic Partner owning the same percentage of the
Company's issued and outstanding shares of that certain type of Security after
the issuance of the Securities as such Strategic Partner owned immediately prior
to the issuance. For purposes hereof, a Strategic Partner's "pro rata share" of
an issue of Securities shall be that number which is equal to the product of (i)
the number of shares proposed to be issued times (ii) a fraction, the numerator
of which is the number of outstanding shares of Securities held by such
Strategic Partner, and the denominator of which is the aggregate number of
outstanding shares of Securities calculated on a fully diluted basis.
(b) The Company's offer shall describe the Securities proposed to
be issued by the Company, specifying the quantity, the price and payment terms.
Each Strategic Partner shall have thirty (30) days from receipt of such offer to
accept the offer in writing, which acceptance may be as to all or any part of
its pro rata share of such issue. Sale of the portion of the Securities
subscribed for hereunder shall be held on a date acceptable to the Company and
each Strategic Partner, but in no event more than sixty (60) days after the date
of the Company's offer to the Strategic Partners.
-5-
<PAGE>
(c) In the event the Strategic Partners do not subscribe for all
of the issue of Securities offered to them pursuant to this Section 2.2, the
Company may sell the portion of the Securities not subscribed for, together with
the portion of such issue of Securities, if any, not subject to preemptive
rights under this Section 2.2, at a price no less favorable to the Company than
that specified in such offer and on payment terms no less favorable to the
Company than those specified in such offer; provided, however, that if such sale
-------- -------
is not consummated within one hundred twenty (120) days after the date the offer
pursuant to this Section 2.2 was made to the Strategic Partners, the Company
shall not sell such Securities without again complying with this Section 2.2.
(d) The rights of Strategic Partners under this Section 2.2 shall
not apply to the following Securities:
(i) Securities issued with respect to the Options;
(ii) Securities issued in accordance with this Agreement;
and
(iii) Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination.
2.3 Right of First Refusal
----------------------
(a) Any Strategic Partner (other than TL or SSI-Delaware) (each,
a "Transferring Partner") may at any time offer to sell to the Company any or
all of the Securities then owned by it upon written notice to the Company (the
"Notice") which Notice shall set forth (i) a description of the type and number
of shares of Securities the Transferring Partner desires to sell (the "Offered
Shares") and the price per share, (ii) the proposed date of the transfer, and
(iii) the percentage which the number of Offered Shares constitutes with respect
to the aggregate number of shares of Securities then held by the Transferring
Partner.
(b) The Company shall have the option, but not the obligation, to
purchase all or any part of the Offered Shares on the same terms as specified in
the Notice. Within thirty (30) days after receipt by the Company of the Notice,
the Company shall give written notice to the Transferring Partner stating the
number of Offered Shares it desires to purchase and a date and time for
consummation of the purchase which shall be not less than sixty (60) or more
than ninety (90) days after receipt by the Company of the Notice. Failure by
the Company to give such notice within such time period shall be deemed an
election by it not to purchase any Offered Shares. The Director (as hereinafter
defined) designated by the Transferring Partner shall not be entitled to vote as
a Director in connection with the decision of the Company whether to exercise
its option to purchase such Transferring Partner's Offered Shares, provided,
--------
that if such Director's vote is required for valid legal action he or she shall
vote in accordance with the decision of the majority of the Board of Directors.
(c) If the Company elects not to exercise its option with respect to
all of the Offered Shares (the Offered Shares which the Company elects not to
purchase being
-6-
<PAGE>
referred to as the "Refused Shares"), it may offer such Refused Shares to one or
more Investors, or to another Person selected by it that is reasonably
acceptable to the Transferring Partner (collectively, the "Permitted Offerees"),
by delivering written notice to such Permitted Offerees concurrently with the
delivery of its notice to the Transferring Partner under subsection (b) above.
The number of Refused Shares offered to any Permitted Offeree shall be
determined by the Company in its sole discretion. Each such Permitted Offeree
shall thereupon have the option, but not the obligation, to purchase the number
of Refused Shares offered to it or him on the same terms as specified in the
Notice. After the expiration of the thirty (30)-day period described in Section
2.3(b) above, but within forty-five (45) days after receipt by the Company of
the Notice, each such Permitted Offeree shall give written notice to the
Transferring Partner and the Company stating whether or not he or it elects to
exercise his or its option, and a date and time for consummation of the purchase
which shall be not more than ninety (90) days after receipt by the Company of
the Notice. Failure by a Permitted Offeree to give such notice within such time
period shall be deemed an election by him or it not to exercise his or its
option. If the Permitted Offerees and the Company do not purchase all of the
Offered Shares, the Transferring Partner may sell all of the Offered Shares (and
therefore the rights of the Company and the Permitted Offerees under this
Section 2.3 shall be terminated) at any time within 180 days after the date the
Notice was received by the Company, to a Person selected by the Transferring
Partner who is reasonably acceptable to the Company (the "Proposed Transferee").
Any such sale shall be to the Proposed Transferee at the price and upon the
other terms and conditions set forth in the Notice, or at least terms no less
favorable to the Transferring Partner or more favorable to the Proposed
Transferee, as the terms contained in the Notice. The Transferring Partner shall
provide at least 20 days' prior written notice of such sale to the Company. Any
Offered Shares not sold within the 180 day period shall again be subject to the
requirements of a prior offer pursuant to this Section 2.3. If the Transferring
Partner at any time proposes to sell the Offered Shares at a price, or on terms
and conditions, less favorable to the Transferring Partner or more favorable to
the Proposed Transferee than those set forth in the Notice, then the Offered
Shares shall again be subject to the requirements of a prior offer pursuant to
this Section 2.3. Any Transfer pursuant to this Section 2.3 shall be subject to
the provisions effecting the Transfer of Securities as set forth in the
Certificate of Incorporation. The preemptive rights granted under Section 2.2
shall not apply to any offering by the Company of Refused Shares under this
Section 2.3(c).
2.4 Co-Investment Opportunities
---------------------------
(a) The Company, Safeguard and TL will each present to each other
and to each other Strategic Partner, in writing, any Internet-related investment
opportunity that it receives, and each of the Company, TL, Safeguard (or
Safeguard 98 L.P.) and such other Strategic Partner will have the right on all
Internet-related investments to invest equally in the opportunity regardless of
the origin of the deal, provided it gives written notice of its election to
invest to the party originating the deal within thirty (30) days after receipt
of the offer. No Strategic Partner (other than TL or Safeguard) will be required
to offer to the Company, TL or Safeguard any Internet-related investment
opportunity received by it. Notwithstanding the above, Safeguard will not be
required to offer to the Company, TL or any other Strategic Partner
-7-
<PAGE>
any Internet-related investment originated by it in which it intends to acquire
a majority interest, or to offer to the Company or any Strategic Partner (other
then TL) any Internet-related investment to the extent such offer would cause
Safeguard to be in breach of its obligations or commitments to TL or any future
TL funds.
(b) The Company has an understanding and acknowledgment from the
other parties that, for strategic reasons, it will have the right to take
majority ownership in four to six core portfolio companies, and that any such
investment will be not subject to the co-investment rules described above. This
right will be negotiated on a deal by deal basis. Notwithstanding anything in
this Agreement to the contrary, if the exercise by a Strategic Partner of any
right under this Section 2.4 shall cause the Company, in the written opinion of
outside counsel, to be an investment company subject to registration under the
1940 Act, such Strategic Partner will not be permitted to exercise any such
right. As soon as reasonably practicable after the date hereof, each of the
Strategic Partners and the Company agree to discuss and negotiate in good faith
the modification or termination of this Section 2.4 in the context of the
Company's goal of effecting a Public Offering in the future.
2.5 Conflicts of Interest. The parties hereto acknowledge that
---------------------
there may be conflicts of interest that arise from time to time due to existing
investments of the Strategic Partners and prospective investments by the
Company. The Company shall notify each Strategic Partner in writing before
acquiring the securities of any portfolio company, which notice shall identify
the portfolio company and contain a brief description of the terms of the
acquisition and the portfolio company's business. The Company will not invest in
a portfolio company if within ten (10) days after receipt of the Company's
notice, a Strategic Partner notifies the Company in writing that such investment
would cause such Strategic Partner to be in breach of its contractual
obligations, or be subject to penalties, arising from its existing investments,
and the Strategic Partner provides evidence reasonably satisfactory to the
Company of such contractual obligations or penalties. The Company also intends
to use outside independent financial advisors to value investments in companies
where an Investor already has an existing investment.
2.6 Related Party Transaction. The Company may transact business
-------------------------
with any Investor or Permitted Transferee or their Affiliates, provided the
terms of those transactions are no less favorable than those the Company could
obtain from unrelated third parties.
2.7 Approval of Merger and Merger Agreement. Each of the Strategic
---------------------------------------
Partners hereby ratifies, confirms and approves in all respects the Merger in
accordance with the terms of the Merger Agreement.
2.8 Registration Rights. The Company hereby assumes the
-------------------
registration rights and obligations set forth in Section 3.12 and Exhibit C of
the LLC Agreement.
2.9 Indemnification. The Company hereby assumes the indemnification
---------------
obligations set forth in Article IX of the LLC Agreement.
2.10 Merger of TL Corporations. [to be discussed]
-------------------------
-8-
<PAGE>
ARTICLE III
CORPORATE ACTIONS
3.1 Certificate of Incorporation and Bylaws. Each Investor has
---------------------------------------
reviewed the Certificate of Incorporation and Bylaws of the Company in the forms
attached hereto as Exhibits B-1 and B-2, and hereby approves and ratifies the
same.
3.2 Directors and Voting Agreements. Each Investor and Permitted
-------------------------------
Transferee agrees that it shall take, at any time and from time to time, all
action necessary (including voting the Common Stock owned by him, her or it,
calling special meetings of stockholders and executing and delivering written
consents) to ensure that the Board of Directors is composed at all times of at
least five persons or such greater number as to allow each Strategic Partner to
designate a person for a seat on the Board of Directors and to elect as a
Director any such person nominated by a Strategic Partner; provided that the
number of Directors shall not exceed nine. Directors need not be residents of
the state of Delaware. Subject to the provisions set forth herein, the number of
Directors may be amended by action of the then incumbent Directors. Each
Strategic Partner's designee shall hold office as long as his or her designator
remains a Strategic Partner of the Company, or until his earlier death,
insanity, retirement, resignation or removal or as provided in the Bylaws.
3.3 Vacancies; Resignation. Any vacancy occurring pursuant to
----------------------
Sections 3.2 (other than vacancies also subject to Section 3.5) may be filled,
at the sole discretion of the Board of Directors, by the affirmative vote of a
majority of the remaining Directors though less than a quorum. If the Board of
Directors determines that there is cause to remove a director, such director can
be removed by the affirmative vote of a majority of all of the shares of Common
Stock issued and outstanding on a fully-diluted basis at any meeting of the
Investors and Permitted Transferees that hold shares of Common Stock called
expressly for that purpose and at which a quorum of such Investors and Permitted
Transferees is present. Any Director may resign at any time. Such resignation
shall be made in writing and shall take effect at the time specified therein, or
if no time be specified, at the time of its receipt by the remaining Directors.
The acceptance of a resignation shall not be necessary to make it effective,
unless expressly so provided in the resignation.
3.4 Right to Remove Certain of the Company's Directors. Each
--------------------------------------------------
Strategic Partner may request that any Director designated by it be removed
(with or without cause) by written notice to the other Investors and Permitted
Transferee holding shares of Common Stock, and, in any such event, each such
Investor and Permitted Transferee shall promptly consent in writing or vote or
cause to be voted all shares of Common Stock now or hereafter owned or
controlled by them or it for the removal of such person as a Director. In the
event any person ceases to be a Director, such person shall also cease to be a
member of any committee of the Board of Directors.
3.5 Right to Fill Certain Vacancies in Company's Board. In the
--------------------------------------------------
event that a vacancy is created on the Board of Directors at any time by the
death, disability, retirement, resignation or removal (with or without cause) of
a Director designated by a Strategic Partner, or
-9-
<PAGE>
if otherwise there shall exist or occur any vacancy on the Board of Directors in
a directorship subject to designation by a Strategic Partner, such vacancy shall
not be filled by the remaining Directors but each Investor and Permitted
Transferee holding shares of Common Stock hereby agrees promptly to consent in
writing or vote or cause to be voted all shares of Common Stock now or hereafter
owned or controlled by them or it to elect that individual designated to fill
such vacancy and serve as a Director, as shall be designated by the Strategic
Partner then entitled to designate such Director pursuant to Section 3.2.
3.6 Management Company. (a) The Company is authorized to enter into
------------------
an agreement with a management company selected by the Board of Directors (such
company, the "Management Company"), in a form acceptable to the Board of
Directors (such agreement, the "Management Agreement") pursuant to which the
Management Company may provide certain management and administrative services to
the Company.
(b) The Board of Directors shall be responsible for supervising
the activities of the Management Company and for enforcing the rights of the
Company under the Management Agreement. The Board of Directors shall have final
authority with respect to the management, operations and policies of the Company
and shall be solely responsible for making all decisions with respect to the
investment of the Company's assets.
(c) In exchange for its services, the Management Company may be
entitled to receive from the Company a fee in such amount and payable at such
times as provided in the Management Agreement.
3.7 Amendment of Articles and Bylaws. Each Investor and Permitted
--------------------------------
Transferee holding shares of Common Stock agrees that it shall not consent in
writing or vote or cause to be voted any shares of Common Stock now or hereafter
owned or controlled by it in favor of any amendment, repeal, modification,
alteration or rescission of, or the adoption of any provision in the Company's
Certificate of Incorporation or Bylaws inconsistent with this Agreement unless
the Board of Directors and each Strategic Partner consent in writing to such
action; provided that the Board of Directors shall not consent to any amendment
--------
which would adversely affect the Strategic Partners' right to designate a
Director or remove, or fill any vacancy created with respect to, any Director
entitled to be designated by a Strategic Partner as set forth in Sections 3.2,
3.3, 3.4 and 3.5 of this Agreement.
3.8 Termination of Voting Agreements. The voting agreements in
--------------------------------
Sections 3.2, 3.3, 3.4, 3.5 and 3.7 shall terminate with respect to each
Strategic Partner, the date when such Strategic Partner and its Permitted
Transferees and their respective Affiliates no longer own in the aggregate the
number of shares of the issued and outstanding Common Stock required to maintain
the status of a Strategic Partner.
-10-
<PAGE>
ARTICLE IV
MISCELLANEOUS
-------------
4.1 Amendment and Modification. This Agreement may be amended or
--------------------------
modified, provided that such amendment is set forth in a writing executed and
agreed to by each Strategic Partner; provided, however, that (a) an amendment to
-------- -------
Section 2.4 is effective only with the consent of the holders of 66 2/3% of the
shares outstanding of Common Stock on a fully diluted basis (including
Securities owned by the Strategic Partners and their Affiliates) and (b)
amendments to this Agreement that (i) the Board of Directors have reasonably
determined do not adversely affect the Investors, (ii) are required or
contemplated by this Agreement, (iii) are reasonable and necessary or
appropriate in the sole discretion of the Board of Directors to continue the
qualification of the Company as a corporation under the laws of any state, (iv)
are advisable in the opinion of the Board of Directors to cure any ambiguity in
any provision herein, or (v) are required to effect a change in the name of the
Company, in the registered office or registered agent of the Company or in the
location of the principal place of business of the Company, may be made by the
Board of Directors without consent of the Investors. No course of dealing
between or among any persons having any interest in this Agreement will be
deemed effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any person under or by reason of this Agreement.
Notwithstanding the foregoing, any Strategic Partner may forfeit the right to
designate a Director pursuant to this Agreement, the Certificate of
Incorporation or Bylaws by so indicating in writing.
4.2 Successors and Assigns; Entire Agreement. Subject to the
----------------------------------------
restrictions on Transfers set forth in this Agreement, this Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors,
and assigns. This Agreement constitutes the entire agreement and understanding
among the parties and their affiliates as to the subject matter hereof and
merges and supersedes all prior contracts, agreements, discussions and
understandings of any and every nature among them, whether oral or written.
4.3 Severability. In the event that any provision of this Agreement
------------
or the application of any provision hereof to any person or circumstance is
declared to be illegal, invalid or otherwise unenforceable to any extent, the
remainder of this Agreement and the application of that provision to other
persons or circumstances shall not be affected thereby and that provision shall
be enforced to the greatest extent permitted by law.
4.4 Notices. Except as expressly set forth to the contrary in this
-------
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under this Agreement is
effective on receipt by the person to receive it. All notices, requests, and
consents to be sent to an Investor or Permitted Transferee
-11-
<PAGE>
must be sent to or made at the addresses given for that Investor or Permitted
Transferee in the stock record book of the Company. Any notice, request, or
consent to the Company or the Board of Directors must be given to the directors
at the following address:
ICG Capital Group, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Fax No.: 610-989-0112
Attn: Walter W. Buckley
With copies to:
Dechert Price & Rhoads
1717 Arch Street
4000 Bell Atlantic Tower
Philadelphia, PA 19103
Fax No.: 215-994-2222
Attn: Henry N. Nassau, Esq.
Whenever any notice is required to be given by law or this Agreement,
a written waiver thereof, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.
4.5 Indemnification. To the fullest extent permitted by law, each
---------------
Investor and Permitted Transferee shall indemnify the Company, each Director and
each other Investor and Permitted Transferee and hold them harmless from and
against all losses, costs, liabilities, damages, and expenses (including,
without limitation, costs of suit and attorney's fees) they may incur on account
of any breach by that Investor or Permitted Transferee of this Agreement.
4.6 Governing Law. The validity, performance, construction and
-------------
effect of this Agreement is governed by and shall be construed in accordance
with the laws of the state of Delaware, excluding any conflict-of-laws rule or
principle that might refer the governance or the construction of this agreement
to the law of another jurisdiction.
4.7 Resolution of Disputes.
----------------------
(a) If any dispute arises under this Agreement that is not
settled promptly in the ordinary course of business, the parties shall seek to
resolve any such dispute between them, first, by negotiating promptly with each
other in good faith in face-to-face negotiations. These face-to-face
negotiations shall be conducted by the respective designated senior management
representative of each party. If the parties are unable to resolve the dispute
between them within 20 business days (or such period as the parties shall
otherwise agree) through these face-to-face negotiations, then any such disputes
shall be resolved in the manner
-12-
<PAGE>
set forth in subsections (b) through (d) below.
(b) Any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, exceeds
$1,000,000 Dollars (a "Summary Proceeding"), arising out of or relating to this
Agreement or the breach, termination or validity thereof, shall be litigated
exclusively in the Superior Court of the State of Delaware (the "Delaware
Superior Court") as a summary proceeding pursuant to Rules 124-131 of the
Delaware Superior Court, or any successor rules (the "Summary Proceeding Rules")
for as long as such rules are in effect. Each of the parties hereto hereby
irrevocably and unconditionally (i) submits to the jurisdiction of the Delaware
Superior Court for any Summary Proceeding, (ii) agrees not to commence any
Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to plead
or to make, any claim that any Summary Proceeding brought in the Delaware
Superior Court has been brought in an improper or otherwise inconvenient forum,
(v) waives, and agrees not to plead or to make, any claim that the Delaware
Superior Court lacks personal jurisdiction over it, (vi) waives its right to
remove any Summary Proceeding to the federal courts except where such courts are
vested with sole and exclusive jurisdiction by statute and (vii) understands and
agrees that it shall not seek a jury trial or punitive damages in any Summary
Proceeding based upon or arising out of or otherwise related to this Agreement
or any other agreement executed in connection herewith or the breach,
termination or validity thereof, and waives any and all rights to any such jury
trial or to seek punitive damages.
(c) In the event any action, suit or proceeding where the amount
in controversy as to at least one party, exclusive of interest and costs, does
not exceed $1,000,000 Dollars (a "Proceeding"), arising out of or relating to
this Agreement or any other agreement executed in connection herewith or the
breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.
(d) If a Summary Proceeding is not available to resolve any
dispute hereunder, the controversy or claim shall be settled by arbitration
conducted on a confidential basis, under the U.S. Arbitration Act, if
applicable, and the then current Commercial Arbitration Rules of the American
Arbitration Association (the "Association") strictly in accordance with the
terms of the Agreement and the substantive law of the State of Delaware. The
arbitration shall be conducted at the Association's regional office located
closest to the Company's principal place of business by three arbitrators, at
least one of whom shall be knowledgeable in general business practices, one of
whom shall be an attorney and one of whom shall be a member of a "Big Five"
accounting firm familiar with businesses engaged in asset management. Judgment
upon the arbitrators, award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.
-13-
<PAGE>
(e) Neither party shall be precluded hereby from securing
equitable remedies in courts of any jurisdiction, including, but not limited to,
temporary restraining orders and preliminary injunctions to protect its rights
and interests but shall not be sought as a means to avoid or stay arbitration or
Summary Proceeding.
4.8 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect. Unless otherwise specified, section
references herein refer to sections of this Agreement and exhibits refer to
exhibits attached hereto.
4.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original as if all signing parties had
signed the same document, and all of which taken together shall constitute one
and the same instrument.
4.10 Further Assurances. In connection with this Agreement and the
------------------
transactions contemplated hereby, each party shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
4.11 Remedies. In the event of a breach or a threatened breach by
--------
any party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for any
loss and that any defense in any action for specific performance that a remedy
at law would be adequate is waived.
4.12 Effect of Waiver or Consent. A waiver or consent, express or
---------------------------
implied, to or of any breach or default by any person in the performance by that
person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that person of the
same or any other obligations of that person with respect to the Company.
Failure on the part of a person to complain of any act of any person or to
declare any person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.
4.13 Party No Longer Owning Securities. If a party hereto ceases to
---------------------------------
own any Securities, such party will no longer be deemed to be an Investor or
Permitted Transferee for purposes of this Agreement.
4.14 No Effect on Employment. Nothing herein contained shall
-----------------------
confer on any Investor the right to enter into or remain in the employ of the
Company or any of its Affiliates.
-14-
<PAGE>
4.15 Pronouns. Whenever the context may require, any pronouns used
--------
herein shall be deemed also to include the corresponding neuter, masculine or
feminine forms.
4.16 Termination. This Agreement will terminate (a) upon the
-----------
written agreement of all of the Investors or Permitted Transferees who are still
parties hereto or (b) when all of the Investors and Permitted Transferees except
any one Investor or Permitted Transferee no longer hold any Securities of the
Company or (c) upon consummation of a Public Offering.
4.17 Reliance on Authority of Person Signing Agreement. If an
-------------------------------------------------
Investor or Permitted Transferee is an Entity, the other Investors and Permitted
Transferees shall:
(a) not be required to determine the authority of the person
signing this Agreement to make any commitment or undertaking on behalf of such
Entity or to determine any fact or circumstance bearing upon the existence of
the authority of such Entity or to determine any fact or circumstance bearing
upon the existence of the authority of such person;
(b) be entitled to rely on the authority of the person signing
this Agreement with respect to the voting of the Securities of such Entity and
with respect to the giving of consent on behalf of such Entity in connection
with any matter for which consent is permitted or required under this Agreement;
and
(c) be entitled to rely upon the authority of any general
partner, joint venturer, trustee, or president or vice president, as the case
may be, of any such Entity the same as if such person were the person originally
signing this Agreement on behalf of such Entity.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ICG CAPITAL GROUP, INC.
By: /s/ Walter W. Buckley
-----------------------------------
Name: Walter W. Buckley
Title: President & CEO
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
By: /s/ Michael W. Miles
-----------------------------------
Title: Vice President
SAFEGUARD 98 CAPITAL, L.P.
By: Safeguard Delaware, Inc., General Partner
By: /s/ Michael W. Miles
-----------------------------------
Title: Vice President
COMCAST ICG, INC.
By: /s/ Julian A. Brodsky
-----------------------------------
Title: Vice Chairman
CPQ HOLDINGS, INC.
By: /s/ Linda S. Auwers
-----------------------------------
Title: Secretary
-16-
<PAGE>
INTERNET ASSETS, INC.
By: /s/ Bader F. Al-Rezaiham
-----------------------------------
Title: President/Director
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Scott Gould
-----------------------------------
Title: Regional Operations Manager
TECHNOLOGY LEADERS II, L.P.
By: /s/ Jordan B. Savitch
-----------------------------------
Title: Assistant Secretary
TL VENTURES SECOND CORPORATION
By: /s/ Jordan B. Savitch
-----------------------------------
Title: Assistant Secretary
-17-
<PAGE>
Exhibit 10.21
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE (TOGETHER, THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT OR IN A TRANSACTION WHICH QUALIFIES AS AN EXEMPT
TRANSACTION UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
IN ADDITION, THE SECURITIES ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS UNDER
THE CERTIFICATE OF INCORPORATION AND BYLAWS OF THE COMPANY.
Date: May __, 1999
Internet Capital Group, Inc.
Common Stock Purchase Warrant
Internet Capital Group, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, _________________ (the "holder"), or
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company, at any time and from time to time during the period beginning on the
earlier of (a) the effective date of the registration statement for an
underwritten public offering (a "Public Offering") of the Company's common
stock, par value $.001 per share, and (b) the closing date of the next round of
equity financing in the Company raising not less than $50,000,000 from private
investors (the "Next Round Financing") and ending on May , 2002, an
aggregate number of fully paid and non-assessable shares of the common stock,
par value $.001 per share, of the Company at the "Purchase Price" (as
hereinafter defined), subject to the provisions of Paragraph 3 hereof,
determined by a fraction, the numerator of which is two-tenths (.2) multiplied
by _______ [the principal balance of the Convertible Note], and the denominator
of which is the Purchase Price. "Purchase Price" shall mean the price per share
paid for shares of common stock, par value $.001 per share, of the Company in
either of the transactions specified in clauses (a) and (b) above (before
underwriting discounts and commissions). "Common Stock" shall mean, unless the
context otherwise requires, the stock or other securities or property at the
time deliverable upon the exercise of this Warrant. Notwithstanding the
foregoing, the Purchase Price and the number and character of shares issuable
under this Warrant are subject to adjustment as set forth in Paragraph 3. This
Warrant is herein called the "Warrant."
1. EXERCISE OF WARRANT. The purchase rights evidenced by this Warrant
shall be exercised by the holder hereof by surrendering this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its office at 800 The Safeguard Building, 435 Devon Park Drive,
Wayne, Pennsylvania 19087, or such other address as the Company may specify by
written notice to the registered holder hereof, accompanied by payment, in cash,
by certified or official bank check or by wire transfer of an amount equal to
the Purchase Price multiplied by the number of shares being purchased pursuant
to such exercise of the Warrant.
<PAGE>
1.1. Partial Exercise. This Warrant may be exercised for less than
----------------
the full number of shares of Common Stock, in which case the number of shares
receivable upon the exercise of this Warrant as a whole, and the sum payable
upon the exercise of this Warrant as a whole, shall be proportionately reduced.
Upon any such partial exercise, the Company at its expense will forthwith issue
to the holder hereof a new Warrant or Warrants of like tenor calling for the
number of shares of Common Stock as to which rights have not been exercised,
such Warrant or Warrants to be issued in the name of the holder hereof or his
nominee (upon payment by such holder of any applicable transfer taxes).
1.2. Net Issue Exercise.
-----------------
(1) In lieu of exercising this Warrant, holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
holder that number of shares of the Company's Common Stock computed using the
following formula:
Y(A-B)
X=------
A
Where
X. the number of shares of Common Stock to be issued to Holder.
Y. the number of shares of Common Stock purchasable under this
Warrant
A the fair market value of one share of the Company's Common
Stock.
B the Purchase Price (as adjusted to the date of such
calculations).
(2) For purposes of this Section, the fair market value of one
share of the Company's Common Stock shall be based on the average of the closing
bid and asked prices of the Over-the-Counter Market Summary or the closing price
quoted in the Over-The-Counter Market Summary or the closing price quoted on any
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Eastern Edition of The Wall Street Journal for the ten trading
days prior to the date of determination of fair market value. If the Common
Stock is not traded Over-The-Counter or on an exchange, the fair market value of
the Company's Common Stock shall be the price per share which the Company could
obtain from a willing buyer for shares sold by the Company from authorized but
unissued shares, as such price shall be agreed by the Company and the holder.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable
after the exercise of this Warrant and payment of the Purchase Price, and in any
event within ten (10) days thereafter, the Company, at its expense, will cause
to be issued in the name
-2-
<PAGE>
of and delivered to the holder hereof a certificate or certificates for the
number of fully paid and non-assessable shares or other securities or property
to which such holder shall be entitled upon such exercise, plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash in an
amount determined in accordance with Paragraph 3.9 hereof. The Company agrees
that the shares so purchased shall be deemed to be issued to the holder hereof
as the record owner of such shares as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares
as aforesaid.
3. ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to prevent
dilution of the right granted hereunder, the Purchase Price shall be subject to
adjustment from time to time in accordance with this Paragraph 3. Upon each
adjustment of the Purchase Price pursuant to this Paragraph 3, the registered
Holder of this Warrant shall thereafter be entitled to acquire upon exercise, at
the Purchase Price resulting from such adjustment, the number of shares of the
Company's Common Stock obtainable by multiplying the Purchase Price in effect
immediately prior to such adjustment by the number of shares of the Company's
Common Stock acquirable immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such adjustment.
3.1. Adjustment for Issue or Sale of Common Stock at Less than
---------------------------------------------------------
Purchase Price. Except as provided in Paragraph 3.2 or 3.5 below, if and
- --------------
whenever on or after the date of issuance hereof the Company shall issue or
sell, or shall in accordance with subparagraphs 3.1(1) to (9), inclusive, be
deemed to have issued or sold, any shares of its Common Stock for a
consideration per share less than the Purchase Price in effect immediately prior
to the time of such issue or sale, then forthwith upon such issue or sale (the
"Triggering Transaction"), the Purchase Price shall, subject to subparagraphs
(1) to (9) of this Paragraph 3.1, be reduced to the Purchase Price (calculated
to the nearest tenth of a cent) determined by dividing:
(i) an amount equal to the sum of (x) the product derived by
multiplying the Number of Common Shares Deemed Outstanding immediately
prior to such Triggering Transaction by the Purchase Price then in effect,
plus (y) the consideration, if any, received by the Company upon
consummation of such Triggering Transaction, by
(ii) an amount equal to the sum of (x) the Number of Common
Shares Deemed Outstanding immediately prior to such Triggering Transaction
plus (y) the number of shares of Common Stock issued (or deemed to be
issued in accordance with subparagraphs 3.1(1) to (9)) in connection with
the Triggering Transaction.
For purposes of this Paragraph 3, the term "Number of Common Shares
Deemed Outstanding" at any given time shall mean the sum of (i) the number of
shares of the Company's Common Stock outstanding at such time, and (ii) the
number of shares of the Company's Common Stock deemed to be outstanding under
subparagraphs 3.1(1) to (9), inclusive, at such time.
For purposes of determining the adjusted Purchase Price under this
Paragraph 3.1,
-3-
<PAGE>
the following subsections (1) to (9), inclusive, shall be applicable:
(1) In case the Company at any time shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable and
the price per share for which the Common Stock is issuable upon exercise,
conversion or exchange (determined by dividing (x) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities) shall be less than
the Purchase Price in effect immediately prior to the time of the granting
of such Option, then the total maximum amount of Common Stock issuable upon
the exercise of such Options, or, in the case of Options for Convertible
Securities, upon the conversion or exchange of such Convertible Securities,
shall (as of the date of granting of such Options) be deemed to be
outstanding and to have been issued and sold by the Company for such price
per share. No adjustment of the Purchase Price shall be made upon the
actual issue of such shares of Common Stock or such Convertible Securities
upon the exercise of such Options, except as otherwise provided in
subparagraph (3) below.
(2) In case the Company at any time shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (x) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. No adjustment
of the Purchase Price shall be made upon the actual issue of such Common
Stock upon exercise of the rights to exchange or convert under such
Convertible Securities, except as
-4-
<PAGE>
otherwise provided in subparagraph (3) below.
(3) If the purchase price provided for in any Options referred to in
subparagraph (1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
subparagraphs (1) or (2), or the rate at which any Convertible Securities
referred to in subparagraph (1) or (2) are convertible into or exchangeable
for Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution of the type set forth in
Paragraph 3.1 or 3.3), the Purchase Price in effect at the time of such
change shall forthwith be readjusted to the Purchase Price which would have
been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. If the purchase price provided for in any Option
referred to in subparagraph (1) or the rate at which any Convertible
Securities referred to in subparagraphs (1) or (2) are convertible into or
exchangeable for Common Stock, shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then in case of the delivery of Common Stock upon the exercise of
any such Option or upon conversion or exchange of any such Convertible
Security, the Purchase Price then in effect hereunder shall forthwith be
adjusted to such respective amount as would have been obtained had such
Option or Convertible Security never been issued as to such Common Stock
and had adjustments been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such adjustment
the Purchase Price then in effect hereunder is hereby reduced.
(4) On the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, the Purchase Price then in
effect hereunder shall forthwith be increased to the Purchase Price which
would have been in effect at the time of such expiration or termination had
such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(5) In case any Options shall be issued in connection with the issue
or sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have
been issued without consideration.
(6) In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration
as determined in good faith by the Board of Directors of the Company. In
case any shares of Common Stock, Options or Convertible Securities shall be
issued in connection with any merger in which the Company is the surviving
corporation, the amount of consideration therefor
-5-
<PAGE>
shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving corporation as shall be attributed by the
Board of Directors of the Company in good faith to such Common Stock,
Options or Convertible Securities, as the case may be.
(7) The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the
Company, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock for the purpose of this
Paragraph 3.1.
(8) In case the Company shall declare a dividend or make any other
distribution upon the stock of the Company payable in Common Stock,
Options, or Convertible Securities, then in such case any Common Stock,
Options or Convertible Securities, as the case may be, issuable in payment
of such dividend or distribution shall be deemed to have been issued or
sold without consideration.
(9) For purposes of this Paragraph 3.1, in case the Company shall take
a record of the holders of its Common Stock for the purpose of entitling
them (x) to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities, or (y) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the case may be.
3.2. Dividends Not Paid Out of Earnings or Earned Surplus. In the
----------------------------------------------------
event the Company shall declare a dividend upon the Common Stock (other than a
dividend payable in Common Stock covered by subparagraph 3.1(8)) payable
otherwise than out of earnings or earned surplus, determined in accordance with
generally accepted accounting principles, including the making of appropriate
deductions for minority interests, if any, in subsidiaries (herein referred to
as "Liquidating Dividends"), then, as soon as possible after the exercise of
this Warrant, the Company shall pay to the person exercising such Warrant an
amount equal to the aggregate value at the time of such exercise of all
Liquidating Dividends (including but not limited to the Common Stock which would
have been issued at the time of such earlier exercise and all other securities
which would have been issued with respect to such Common Stock by reason of
stock splits, stock dividends, mergers or reorganizations, or for any other
reason). For the purposes of this Paragraph 3.2, a dividend other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend as determined in good faith by the Board of Directors of
the Company.
3.3. Subdivisions and Combinations. In case the Company shall at any
---- -----------------------------
time subdivide (other than by means of a dividend payable in Common Stock
covered by subparagraph 3.1(8)) its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately
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<PAGE>
reduced, and, conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Purchase Price in
effect immediately prior to such combination shall be proportionately increased.
3.4. Reorganization, Reclassification, Consolidation, Merger or Sale
---------------------------------------------------------------
of Assets. If any capital reorganization or reclassification of the capital
- ---------
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, cash or other property with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder of this Warrant shall have the right to acquire
and receive upon exercise of this Warrant such shares of stock, securities, cash
or other property issuable or payable (as part of the reorganization,
reclassification, consolidation, merger or sale) with respect to or in exchange
for such number of outstanding shares of the Company's Common Stock as would
have been received upon exercise of this Warrant at the Purchase Price then in
effect. The Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument mailed or delivered to
the holder of this Warrant at the last address of such holder appearing on the
books of the Company, the obligation to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase. If a purchase, tender or exchange
offer is made to and accepted by the holders of more than 50% of the outstanding
shares of Common Stock of the Company, the Company shall not effect any
consolidation, merger or sale with the person having made such offer or with any
Affiliate of such person, unless prior to the consummation of such
consolidation, merger or sale the holder of this Warrant shall have been given a
reasonable opportunity to then elect to receive upon the exercise of this
Warrant either the stock, securities or assets then issuable with respect to the
Common Stock of the Company or the stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer. For purposes hereof the term "Affiliate" with respect to any given
person shall mean any person controlling, controlled by or under common control
with the given person.
3.5. No Adjustment for Exercise of Certain Options, Warrants, Etc.
------------------------------------------------------------
The provisions of this Section 3 shall not apply to any Common Stock issued,
issuable or deemed outstanding under subparagraphs 3.1(1) to (9) inclusive: (i)
to any person pursuant to any stock option, stock purchase or similar plan or
arrangement for the benefit of employees, consultants or directors of the
Company or its subsidiaries or (ii) pursuant to options, warrants and conversion
rights in existence on the date of issuance hereof.
3.6. Notices of Record Date, Etc. In the event that following a
---------------------------
Public Offering or Next Round Financing:
-7-
<PAGE>
(1) the Company shall declare any cash dividend upon its Common
Stock, or
(2) the Company shall declare any dividend upon its Common Stock
payable in stock or make any special dividend or other distribution to the
holders of its Common Stock, or
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights, or
(4) there shall be any capital reorganization or reclassification
of the capital stock of the Company, including any subdivision or combination of
its outstanding shares of Common Stock, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation, or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in connection with such event, the Company shall give to the holder of
this Warrant:
(i) at least ten (10) days prior written notice of the date on which
the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up; and
(ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least ten (10) days prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (i) shall
also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with this clause (ii) shall
also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holder of this Warrant at the address of such
holder as shown on the books of the Company.
3.7. Grant, Issue or Sale of Options, Convertible Securities, or
-----------------------------------------------------------
Rights. If at any time or from time to time on or after the date of issuance
- ------
hereof, the Company shall grant, issue or sell any Options, Convertible
Securities or rights to purchase property (the "Purchase Rights") pro rata to
the record holders of any class of Common Stock of the Company and such grants,
issuances or sales do not result in an adjustment of the Purchase Price under
Paragraph 3.1 hereof, then the holder of this Warrant shall be entitled to
acquire (within thirty (30) days after the later to occur of the initial
exercise date of such Purchase Rights or receipt by such
-8-
<PAGE>
holder of the notice concerning Purchase Rights to which such holder shall be
entitled under Paragraph 3.6) and upon the terms applicable to such Purchase
Rights either:
(i) the aggregate Purchase Rights which such holder could have
acquired if it had held the number of shares of Common Stock acquirable
upon exercise of this Warrant immediately before the grant, issuance or
sale of such Purchase Rights; provided that if any Purchase Rights were
distributed to holders of Common Stock without the payment of additional
consideration by such holders, corresponding Purchase Rights shall be
distributed to the exercising holder of this Warrant as soon as possible
after such exercise and it shall not be necessary for the exercising holder
of this Warrant specifically to request delivery of such rights; or
(ii) in the event that any such Purchase Rights shall have
expired or shall expire prior to the end of said thirty (30) day period,
the number of shares of Common Stock or the amount of property which such
holder could have acquired upon such exercise at the time or times at which
the Company granted, issued or sold such expired Purchase Rights.
3.8. Adjustment by Board of Directors. If any event occurs as to
--------------------------------
which, in the opinion of the Board of Directors of the Company, the provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holder of this Warrant in accordance with
the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
rights as aforesaid, but in no event shall any adjustment have the effect of
increasing the Purchase Price as otherwise determined pursuant to any of the
provisions of this Section 3 except in the case of a combination of shares of a
type contemplated in Paragraph 3.3 and then in no event to an amount larger than
the Purchase Price as adjusted pursuant to Paragraph 3.3.
3.9. Fractional Shares. The Company shall not issue fractions of
-----------------
shares of Common Stock upon exercise, partial exercise pursuant to Section 1.1,
or net issue exercise pursuant to Section 1.2 of this Warrant. If any fraction
of a share of Common Stock would, except for the provisions of this Paragraph
3.9, be issuable upon such exercise of this Warrant, the Company shall in lieu
thereof pay to the person entitled thereto an amount in cash equal to the
current value of such fraction, calculated to the nearest one-hundredth (1/100)
of a share, to be computed (i) if the Common Stock is listed on any national
securities exchange on the basis of the last sales price of the Common Stock on
such exchange (or the quoted closing bid price if there shall have been no
sales) on the date of conversion, or (ii) if the Common Stock shall not be
listed, on the basis of the mean between the closing bid and asked prices for
the Common Stock on the date of conversion as reported by Nasdaq, or its
successor, and if there are not such closing bid and asked prices, on the basis
of the fair market value per share as determined by the Board of Directors of
the Company.
3.10. Officers' Statement as to Adjustments. Whenever the Purchase
-------------------------------------
Price shall be adjusted as provided in Section 3 hereof, the Company shall
forthwith file at each office
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<PAGE>
designated for the exercise of this Warrant a statement, signed by the Chairman
of the Board, the President, or any Vice President or Treasurer of the Company,
showing in reasonable detail the facts requiring such adjustment and the
Purchase Price that will be effective after such adjustment. The Company shall
also cause a notice setting forth any such adjustments to be sent by mail, first
class, postage prepaid, to the record holder of this Warrant at its address
appearing on the stock register. If such notice relates to an adjustment
resulting from an event referred to in Paragraph 3.6, such notice shall be
included as part of the notice required to be mailed and published under the
provisions of Paragraph 3.6 hereof.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
charter or through reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder hereof against dilution or other impairment. Without limiting the
generality of the foregoing, the Company will not increase the par value of any
shares of stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise, and at all times will take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable stock upon the exercise of this
Warrant.
5. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANTS. The Company
shall at all times reserve and keep available out of its authorized but unissued
stock, solely for the issuance and delivery upon the exercise of this Warrant
and other similar Warrants, such number of its duly authorized shares of Common
Stock as from time to time shall be issuable upon the exercise of this Warrant
and all other similar Warrants at the time outstanding. All of the shares of
Common Stock issuable upon exercise of this Warrant, when issued and delivered
in accordance with the terms hereof, will be duly authorized, validly issued,
fully-paid and non-assessable.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to it, or (in the case of mutilation) upon surrender and
cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of
like tenor.
7. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that the same may be specifically enforced.
8. REGISTRATION RIGHTS. The shares of Common Stock issuable upon
exercise of this Warrant are subject to the registration rights set forth in
Exhibit A attached hereto.
- ---------
-10-
<PAGE>
9. NEGOTIABILITY. This Warrant is issued upon the following terms, to
all of which each taker or owner hereof consents and agrees:
(a) Except as provided in the Subscription Agreement dated April __,
1999 by and between the Company and the holder hereof, the Certificate of
Incorporation and Bylaws of the Company, to the extent the holder hereof is a
party to the Securities Holders Agreement dated as of February 2, 1999, among
the Company and the investors named therein (the "SHA"), the SHA, and subject to
the legend appearing on the first page hereof, title to this Warrant may be
transferred by endorsement (by the holder hereof executing the form of
assignment at the end hereof including guaranty of signature) and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery. Absent an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), covering the disposition of this
Warrant or the shares of Common Stock issued or issuable upon exercise hereof,
the holder will not sell or transfer any or all of such Warrant or shares, as
the case may be, without first providing the Company with an opinion of counsel
(which may be counsel for the Company) to the effect that such sale or transfer
will be exempt from the registration and prospectus delivery requirements of the
Act. Each certificate representing shares of Common Stock issued pursuant to
this Warrant, unless at the same time of exercise such Warrant shares are
registered under the Act, shall bear a legend in substantially the following
form on the face thereof:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY BE TRANSFERRED OR
RESOLD ONLY IN COMPLIANCE WITH SUCH SECURITIES LAWS.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a certificate issued upon completion of
a distribution under a registration statement covering the securities
represented) shall also bear such legend unless, in the opinion of counsel to
the Company, the securities represented thereby may be transferred as
contemplated by such holder without violation of the registration requirements
of the Act.
(b) Any person in possession of this Warrant properly endorsed is
authorized to represent itself as absolute owner hereof and is granted power to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of its equities or rights in this Warrant in favor of every such bona fide
purchaser, and every such bona fide purchaser shall acquire title hereto and to
all rights represented hereby.
(c) Until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder of this Warrant as the absolute owner
hereof for all purposes without being affected by any notice to the contrary.
(d) Prior to the exercise of this Warrant, the holder hereof shall not
be entitled to any rights of a shareholder of the Company with respect to shares
for which this Warrant shall
-11-
<PAGE>
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
(e) The Company shall not be required to pay any Federal or state
transfer tax or charge that may be payable in respect of any transfer involved
in the transfer or delivery of this Warrant or the issuance or conversion or
delivery of certificates for Common Stock in a name other than that of the
registered holder of this Warrant or to issue or deliver any certificates for
Common Stock upon the exercise of this Warrant until any and all such taxes and
charges shall have been paid by the holder of this Warrant or until it has been
established to the Company's satisfaction that no such tax or charge is due.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. This Warrant is issued
and delivered by the Company on the basis of the following:
(a) Authorization and Delivery. This Warrant has been duly authorized
--------------------------
and executed by the Company and when delivered will be the valid and binding
obligation of the Company enforceable in accordance with its terms;
(b) Warrant Shares. The shares of Common Stock to be issued pursuant
--------------
to this Warrant have been duly authorized and reserved for issuance by the
Company and, when issued and paid for in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable;
(c) Rights and Privileges. The rights, preferences, privileges and
---------------------
restrictions granted to or imposed upon such shares of Common Stock and the
holders thereof are as set forth herein and in the Company's Articles of
Incorporation, and in the Common Stock and Warrant Purchase Agreement, true and
complete copies of which have been delivered to the original warrant holder; and
(d) No Inconsistency. The execution and delivery of this Warrant are
----------------
not, and the issuance of the shares of Common Stock upon exercise of this
Warrant in accordance with the terms hereof will not be, inconsistent with the
Company's Certificate of Incorporation or by-laws, do not and will not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration with the
taking of any action in respect of or by, any Federal, state or local government
authority or agency or other person.
11. REPRESENTATIONS AND WARRANTIES OF HOLDER.
(a) The holder hereby represents and warrants to the Company that it
has substantial knowledge, skill and experience in making investment decisions
of the type represented by this Warrant and the shares issuable upon exercise of
this Warrant, that it is
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<PAGE>
capable of evaluating the risk of its investment in this Warrant and the shares
issuable upon exercise of this Warrant and is able to bear the economic risk of
such investment, including the risk of losing the entire investment, that it is
acquiring this Warrant and the shares issuable upon exercise of this Warrant for
its own account, and that this Warrant and the shares issuable upon exercise of
this Warrant are being acquired by it for investment and not with a present view
to any distribution thereof in violation of applicable securities law. If the
holder should in the future decide to dispose of any of this Warrant and the
shares issuable upon exercise of this Warrant, it is understood that it may so
do only in compliance with the Act and applicable state securities laws. The
holder represents and warrants that it is an "Accredited Investor" as defined in
Rule 501(a) under the Act.
(b) The holder understands that (i) this Warrant and the shares
issuable upon exercise of this Warrant have not been registered under the Act by
reason of their issuance in a transaction exempt from the registration
requirements of the Act, (ii) this Warrant and the shares issuable upon exercise
of this Warrant must be held indefinitely unless a subsequent disposition
thereof is registered under the Act and applicable state securities laws or is
exempt from such registration (and, upon request, evidence satisfactory to the
Company is provided by such holder of the availability of such exemptions,
including, upon request, the delivery to the Company of opinions of counsel to
such holder, which opinions and counsel are satisfactory to the Company), and
(iii) this Warrant and the shares issuable upon exercise of this Warrant may
bear a legend to such effect.
12. SUBDIVISION OF RIGHTS. This Warrant (as well as any new warrants
issued pursuant to the provisions of this paragraph) is exchangeable, upon the
surrender hereof by the holder hereof, at the principal office of the Company
for any number of new warrants of like tenor and date representing in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock of the Company that may be subscribed for and purchased hereunder.
13. MAILING OF NOTICES. All notices and other communications from the
Company to the holder of this Warrant shall be mailed by first-class certified
mail, postage prepaid, to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in writing.
14. HEADINGS. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect the meaning hereof.
15. CHANGE, WAIVER. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
16. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with the laws of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the Company, by the undersigned thereunto duly
authorized, has duly executed this Warrant as of the date first written above.
INTERNET CAPITAL GROUP, INC.
By:________________________________
Name:
Title:
Dated: May , 1999
Attest:
_________________________
ACCEPTED AS OF THE DATE HEREOF:
By:________________________________
Name:
Title:
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<PAGE>
[To be signed only upon exercise of Warrant]
To ___________________:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ______ shares of Common Stock of _____________ and herewith
makes payment of $_____ therefor, and requests that the certificates for such
shares be issued in the name of, and be delivered to ____________, whose address
is _____________.
Dated: _____________
____________________________________
By_____________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant)
Address:
____________________________________
____________________________________
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<PAGE>
[To be signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________ the right represented by the within Warrant to purchase the
______ shares of the Common Stock of ____________________ to which the within
Warrant relates, and appoints _____________ attorney to transfer said right on
the books of _____________________ with full power of substitution in the
premises.
Dated:_____________
_______________________________________
By_____________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant)
Address:
_______________________________________
_______________________________________
In the presence of
________________________
Signature Guarantee
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<PAGE>
EXHIBIT A
---------
REGISTRATION RIGHTS
-------------------
1.1 Piggyback Registration.
----------------------
(a) If the Company at any time after the consummation of its
initial public offering proposes for any reason, whether for its own account or
the account of others, to register any of its securities under the Securities
Act, other than pursuant to a Special Registration Statement (as hereinafter
defined), it shall each such time promptly give written notice to the registered
Holders of the Eligible Securities (as defined in Section 1.2(c)) of its
intention to do so, and, upon the written request, given within twenty (20) days
after receipt of any such notice, of a Holder to register any of its Eligible
Securities, the Company shall (subject to Section 1.1(b) hereof) use its best
efforts to cause all Eligible Securities with respect to which Holders shall
have so requested registration to be registered under the Securities Act
promptly upon receipt of the written request of such Holders for such
registration, all to the extent required to permit the sale or other disposition
by the Holders of the Eligible Securities so registered in the manner
contemplated by such registration statement. "Special Registration Statement"
means a registration statement on Forms S-8 or S-4 or any successor form or
other registration statement relating to shares of Common Stock issued in
connection with an acquisition of an entity or business or other business
combination, or shares of Common Stock issued in connection with stock option or
other employee benefit plans.
(b) In connection with any exercise by a Holder of its "piggyback"
registration rights pursuant to this Section 1.1 in connection with any
underwritten offering of securities of the Company, if the Company is advised in
writing (with a copy to the Holders requesting registration) by the lead
underwriter for the offering that, in such firm's opinion, a registration of
Eligible Securities at that time would interfere with the orderly sale and
distribution of the securities being sold by the Company for its own account,
then the number of shares that may be included in the underwriting shall be
allocated, first, to the Company, second, to each of the Holders requesting
inclusion of their Eligible Securities in such registration statement on a pro
rata basis based on the total number of Eligible Securities held by each such
Holder and, third, to any other shareholders requesting registration.
(c) For purposes of this Exhibit A, the following terms shall
have the following meanings: (i) "Common Stock" shall mean the shares of common
stock of Internet Capital or any successor corporation; (ii) "Company" shall
mean and include Internet Capital and any successor corporation; (iii) "Holders"
shall mean each Strategic Partner, as such term is defined in the Securities
Holders Agreement (the "SHA"), dated February 2, 1999 among Internet Capital and
the investors named therein, for so long as (and to the extent that) it owns any
Eligible Securities, each of their respective successors, assigns, and
transferees who become registered owners of Eligible Securities, and the holders
of Eligible Securities pursuant to the Convertible Note (the "Note") dated April
, 1999 and the Common Stock Purchase Warrant (the "Warrant"), dated April _____,
1999 to which this Exhibit A is attached; and (iv) "Internet
---------
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<PAGE>
Capital" shall mean Internet Capital Group, Inc., a Delaware corporation.
1.2 Demand Registration.
-------------------
(a) Any Strategic Partner may, at any time after consummation of
the Company's initial public offering of equity securities, request in writing
that the Company cause a registration statement to be filed under the Securities
Act (on any Form then available to the Company) with respect to such of its
Eligible Securities as it shall specify in such request, provided that (i) the
gross proceeds from such offering will be or are reasonably expected to be not
less than $5 million and (ii) such Strategic Partner includes at least 25% of
its Eligible Securities in its request. The Company shall promptly give written
notice of such request to the other Holders of Eligible Securities and afford
them the opportunity of including in the requested registration statement such
of their Eligible Securities as they shall specify in a written notice given to
the Company within thirty (30) days after their receipt of the Company's notice
of the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which Holders shall have so requested
registration to be registered under the Securities Act, all to the extent
required to permit the sale or other disposition by the Holders of the Eligible
Securities so registered in the manner specified by such Holders in their
notices and pursuant to this Section.
(b) The Company shall not be required to file and cause to become
effective more than two (2) registration statements at the demand of any
Strategic Partner made under this Section 1.2.
(c) The term "Eligible Securities" shall mean, on any date, (i)
all shares of Common Stock or other securities of the Company issued by way of a
stock split, stock dividend, recapitalization, merger or consolidation, (ii)
plus all shares of Common Stock or other securities of the Company issued in
respect of the Note and Warrant, (iii) but exclusive of any securities described
in clauses (i) or (ii) which have been (A) sold in a public offering registered
under Securities Act or (B) subsequently sold pursuant to Rule 144 under the
Securities Act.
(d) If the Holders of the Eligible Securities making such demand
propose to sell their Eligible Securities in a firm commitment underwriting and
the managing underwriter advises such Holders that not all Eligible Securities
of such Holders can be included in such offering, then the requisite number of
Eligible Securities shall be excluded from registration on a basis pro rata
among the Holders of the Eligible Securities requesting such registration on the
basis of the number of Eligible Securities held by each of them. If by virtue
of this Section 1.2(d), more than 50% of the Eligible Securities which a
Strategic Partner has demanded be registered are excluded from the registration
statements then such Strategic Partner shall not be deemed to have exercised a
demand registration right under this Section 1.2.
(e) Provided the Company has honored its obligations under Section
1.1, no demand registration right granted in this Section may be exercised by
any Strategic Partner during any period of time beginning on the date the
Company (i) files a registration statement with
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<PAGE>
the Securities and Exchange Commission registering any of its securities for
sale to the public or (ii) files a registration statement upon the demand of any
other Strategic Partner pursuant to this Section 1.2, and ending on the earlier
to occur of (A) 90 days after the date on which such registration statement is
declared effective by the Securities and Exchange Commission or otherwise
becomes effective, and (B) the 180th day after the date of such filing.
(f) The demand registration rights granted in this Section 1.2
shall expire, if not exercised prior thereto, on the date on which more than 90%
of the Eligible Securities (as of the date of this Agreement) shall have been
publicly sold by the Holders thereof in a public offering registered under the
Securities Act of 1933 or pursuant to Rule 144 thereunder.
1.3 Form S-3 Registrations. In addition to the rights provided the
----------------------
Holders of registrable securities in Sections 1.1 and 1.2 above, if the
registration of Eligible Securities under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), then upon the
written request of one or more Holders of Eligible Securities, the Company will
so notify each Holder of Eligible Securities, including each Holder who has a
right to acquire Eligible Securities, and then will, as expeditiously as
possible, use its best efforts to effect qualification and registration under
the Securities Act on Form S-3 of all or such portion of the Eligible Securities
as the Holder or Holders shall specify pursuant to this Section 1.3, provided
that the Company shall have no obligation to file a registration statement under
this Section 1.3 unless the gross proceeds from the offering will be or are
reasonably expected to be not less than $500,000.
1.4 Registration Procedures. If and whenever the Company is under an
-----------------------
obligation pursuant to the provisions of this Exhibit A to use its best efforts
to effect the registration of any Eligible Securities the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Eligible Securities and use its best
efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective under the Securities Act until the earlier of
such time as all securities covered thereby have been sold or one hundred and
eighty (180) days after such registration statement becomes effective, as such
period may be extended pursuant to Section 1.5, and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Eligible Securities covered by such registration statement for such
period;
(c) furnish to each selling stockholder such numbers of copies of
each prospectus (including each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of such Eligible Securities;
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<PAGE>
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter, if any, or if there
is no managing underwriter, the Holders of at least 25% of the Eligible
Securities, shall request, (provided that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
reasonably necessary or advisable to enable such seller to consummate the public
sale or other disposition in such jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in clause (b) of this Section 1.4, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish on the date that such Eligible Securities are
delivered to the underwriters for sale pursuant to such registration or, if such
Eligible Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Eligible Securities becomes
effective, (i) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and at the request of any Holder or Holders of Eligible
Securities requesting registration pursuant to this Exhibit A, to the Holder or
Holders making such request, stating that such registration statement has become
effective under the Securities Act and that (1) no stop order suspending the
effectiveness thereof has been issued and, to the best knowledge of such
counsel, no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (2) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein); (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no
opinion as to financial statements contained therein); (4) the description in
the registration statement or the prospectus, or any amendment or supplement
thereto, of all legal and governmental matters and all contracts and other legal
documents or instruments are accurate and fairly present the information
required to be shown; (5) such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be described in
the registration
-4-
<PAGE>
statement or prospectus, or any amendment or supplement thereto, which are not
described as required, nor of any contracts or documents or instruments of a
character required to be described in the registration statement or prospectus,
or any amendment or supplement thereto, or to be filed as exhibits to the
registration statement which are not described and filed as required, and (6)
such other legal matters with respect to such registration as the underwriters,
if any, and any such Holder or Holders requesting such opinion may reasonably
request; and (ii) in the case of an underwritten offering, a comfort letter,
dated such date, from the independent certified public accountants of the
Company, addressed to the underwriters and the Company's Board of Directors in
the customary form.
1.5 Delay in Registration. Notwithstanding anything contained in
---------------------
this Agreement to the contrary, the Company reserves the right to delay any such
registration pursuant to this Exhibit A for a period of not more than one
hundred and twenty (120) days, or to withhold efforts to cause such registration
statement to become effective for a period of not more than one hundred twenty
(120) days, if the Board of Directors of the Company determines in good faith
that such registration might (A) interfere with or affect the negotiation or
completion of any material transaction that is being contemplated by the
Company, or (B) involve initial or continuing disclosure obligations materially
adverse to the best interests of the Company's shareholders. If, after a
registration statement becomes effective, the Company advises the Holders of the
registrable securities covered by such registration statement that the Company
considers it appropriate for the registration statement to be amended, the
Holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The time periods referred to this Exhibit A shall be extended for an
additional number of business days during which the rights to sell shares was
suspended.
1.6 Information to be Furnished by Holders of Eligible Securities.
-------------------------------------------------------------
Each prospective seller of Eligible Securities, registered or to be registered
under any registration statement shall furnish to the Company such information
and execute such documents regarding the Eligible Securities held by such seller
and the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company.
1.7 Expenses of Registration.
------------------------
(a) All expenses incurred by the Company in complying with this
Exhibit A (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (iv) printing expenses; (v) fees and
disbursements of Company counsel and of one counsel for the participating
Holders together, which counsel is reasonably acceptable to the Holders; and
(vi) the fees and expenses of the independent public accountants (including the
expense of any special audits in connection with any such registration), are
hereinafter called "Registration Expenses." All underwriting discounts and
commissions applicable to the Eligible Securities covered by any such
registration, are herein called "Selling Expenses."
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<PAGE>
(b) The Company shall pay all Registration Expenses in connection
with all piggyback registrations under Section 1.1 and all demand registrations
under Section 1.2 plus up to one (1) S-3 registration per year pursuant to
Section 1.3. All Selling Expenses in connection with each registration pursuant
to this Exhibit A and any legal fees and expenses of additional special counsel
for the sellers shall be borne by the seller or sellers therein in proportion to
the number of Eligible Securities included by each in such registration, or in
such other proportions as they may agree upon.
1.8 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each Holder of
Eligible Securities, its executive officers, directors and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to this
Exhibit A against any loss, claims, damages or liabilities to which any of them
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in a
registration statement including Eligible Securities owned by such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any of them for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable hereunder to a
particular Holder in any such case if any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company for such purpose by such Holder or by its representative or by any
underwriter on behalf of such Holder or if the untrue statement or omission is
corrected in a supplement or amendment to the prospectus provided by the Company
to such Holder in a timely fashion in accordance with this Exhibit A which was
not used by such Holder.
(b) Each Holder of Eligible Securities joining in any registration
statement of the Company pursuant to this Exhibit A shall indemnify and hold
harmless the Company, its executive officers, directors, and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to Exhibit
A against any losses, claims, damages, or liabilities to which any of them may
become subject under the Securities Act or otherwise insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, made in reliance
upon and in conformity with written information furnished to the Company by such
Holder or by its representative or by any
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<PAGE>
underwriter on behalf of such Holder for such purpose, and will reimburse any of
them for any legal or other expenses reasonably incurred by them in connection
with investigating or defending, any such loss, claim, damage, liability or
action provided, however, that the total amount payable by a Holder under this
-------- -------
Section 1.8(b) shall not exceed the net proceeds received by such Holder in such
registered offering.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
unavailable to or insufficient to hold harmless an amount in excess of the
proceeds received by such Holder in the offering.
1.9 Underwriting Agreement. If Eligible Securities are sold pursuant
----------------------
to a registration statement in an underwritten offering pursuant to this Exhibit
A, the Company and the Holders participating therein agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of, or, as the case may be,
the seller of the securities being registered and customary covenants and
agreements to be performed by such issuer or seller, including, without limiting
the generality of the foregoing, customary provisions with respect to
indemnification by the Company of the underwriter(s) of such offering.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
----------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any Eligible
Securities for up to that period of time following the effective date of a
registration statement of the Company filed under the Securities Act as is
requested by the managing underwriters of such offering, not to exceed one
hundred and eighty (180) days.
1.11 Subsequent Registration Rights. The Company shall not grant any
------------------------------
registration rights to any other person that are more favorable to such person
than the registration rights granted to the Holders hereunder without the prior
written consent of the Holders of at least a majority of the Eligible
Securities.
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<PAGE>
1.12 Assignment. The registration rights granted hereunder may be
----------
assigned by a Holder to any person who acquires such Holder's Eligible
Securities in accordance with the SHA and the Amended and Restated Certificate
of Incorporation and Bylaws of the Company..
-8-
<PAGE>
EXHIBIT 10.22
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES
REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE
BORROWER, TO THE EFFECT THAT THE PROPOSED SALE, ASSIGNMENT, TRANSFER, OR
DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT. IN
ADDITION, THIS CONVERTIBLE NOTE AND THE SECURITIES ISSUABLE UPON ITS
CONVERSION ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS UNDER THE
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE COMPANY.
PAYMENT UNDER THIS CONVERTIBLE NOTE IS SUBJECT TO THE PRIOR PAYMENT IN FULL
OF THE BORROWER'S OBLIGATIONS UNDER THE CREDIT AGREEMENT AS MORE FULLY
DESCRIBED IN THE SUBORDINATION PROVISIONS OF SECTION 5 HEREIN.
CONVERTIBLE NOTE (Internet Capital Group, Inc.)
$_____ May , 1999
In consideration of the loan (hereinafter referred to as a "Loan") ______,
[an individual/corporation/partnership] (the "Lender"), has made to Internet
Capital Group, Inc., a Delaware corporation (the "Borrower"), and for value
received, the Borrower hereby promises to pay to the order of the Lender, at the
Lender's office located at ___________________________________________________,
or at such other place in the continental United States as the Lender may
designate in writing, in lawful money of the United States, and in immediately
available funds, the principal sum of $_________.
1. Maturity Date. The unpaid principal balance of this Convertible Note
-------------
(this "Note") shall be paid on the earlier of (i) May , 2002 (the "Due Date"),
(ii) the closing of the next round of equity financing in the Borrower raising
not less than $50,000,000 from private investors (the "Next Round Financing")
and (iii) the effective date of the registration statement for an underwritten
public offering of Borrower's Common Stock (as defined below)(the "IPO").
2. Interest. The Borrower hereby further promises to pay to the order of
--------
the Lender interest on the outstanding principal amount from May , 1999, at
an annual rate equal to (i) the Applicable Federal Rate as of the date hereof
(4.99%) for the period from the date hereof until May , 2000 (the "Initial
Term") and (ii) the announced prime rate of pnc Bank, N.A. (the "Prime Rate")
for the period following the Initial Term (the "Second Term"). The interest
rate
<PAGE>
for the Second Term shall be changed when and as the Prime Rate changes. In
addition, the Borrower shall pay on demand interest on any overdue payment of
principal and interest (to the extent legally enforceable) at the fluctuating
Prime Rate plus three percent (3%).
Interest shall be payable when the unpaid principal balance of the Note is
paid. If this Note is converted as provided in Section 3 hereof, no interest
will be paid.
All payments made on this Note shall be applied, at the option of the
Lender, first to late charges and collection costs, if any, then to accrued
interest and then to principal. Interest payable hereunder shall be calculated
for actual days elapsed on the basis of a 360-day year. Accrued and unpaid
interest shall be due and payable upon maturity of this Note. After maturity or
in the event of default, interest shall continue to accrue on the Note at the
rate set forth above and shall be payable on demand of the Lender.
Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.
3. Conversion. (a) Subject to and in compliance with the provisions of
----------
this Section 3, if during the Initial Term the Borrower completes an IPO or Next
Round Financing, the outstanding principal amount of this Note shall
automatically convert into fully paid nonassessable shares of the Borrower's
Common Stock, par value $.001 per share (the "Common Stock"), at the Conversion
Price in effect on the date of conversion. Such conversion shall become
effective immediately prior to (i) the effectiveness of the registration
statement for the IPO or (ii) the closing of the Next Round Financing, as
applicable.
(b) Subject to and in compliance with the provisions of this Section
3, during the Second Term and prior to the payment of the outstanding principal
amount of this Note, the Lender may convert the outstanding principal amount of
this Note, in whole or in part, into fully paid nonassessable shares of the
Common Stock at the Conversion Price in effect on the date of conversion. The
Lender shall only be entitled to convert this Note into Common Stock one time,
upon the earliest of the following events to occur.
(i) If, prior to the Due Date, the Borrower files a registration
statement for an IPO, the Borrower shall, within five business days of the
initial filing of such registration statement, send written notice to the Lender
of such filing (the "Filing Notice"). The Lender shall, within 30 days from the
date of receipt of the Filing Notice (but in any event no later than the
printing of the red herring prospectus for the IPO), determine whether or not it
will convert the outstanding principal amount of this Note, in whole or in part,
into Common Stock in accordance with this Section 3 and send written notice to
the Borrower of such election. If, upon
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<PAGE>
the expiration of such 30-day period, the Lender has not elected to convert this
Note into Common Stock or has not notified the Borrower of its election, the
Lender shall forfeit its right to convert this Note into Common Stock. If the
Lender has elected to convert this Note into Common Stock pursuant to this
paragraph (b)(i), the conversion shall become effective immediately prior to the
effectiveness of the registration statement for the IPO.
(ii) If, prior to the Due Date, the Borrower has scheduled the
closing of the Next Round Financing, then at least 20 days prior to the closing
of the Next Round Financing the Borrower shall send written notice to the Lender
of such closing (the "Closing Notice"). The Lender shall, within 20 days from
the date of receipt of the Closing Notice, determine whether or not it will
convert the outstanding principal amount of this Note, in whole or in part, into
Common Stock in accordance with this Section 3 and send written notice to the
Borrower of such election. If, upon the expiration of such 20-day period, the
Lender has not elected to convert this Note into Common Stock or has not
notified the Borrower of its election, the Lender shall forfeit its right to
convert this Note into Common Stock. If the Lender has elected to convert this
Note into Common Stock pursuant to this paragraph (b)(ii), the conversion shall
become effective immediately prior to the closing of the Next Round Financing.
4. The "Conversion Price" at which Common Stock shall be issuable upon
conversion of this Note shall equal either (i) the price per share of the Common
Stock in the IPO or (ii) the price per share of Common Stock in the Next Round
Financing.
To exercise the conversion privilege or effect the automatic conversion,
the Lender shall surrender this Note to the Borrower at its principal office.
In the case of exercising the conversion privilege, the Lender shall surrender
the Note together with a written conversion notice to the Borrower. This Note
or portion thereof shall be deemed to have been converted immediately prior to
the close of business on the date of receipt of such Note, even if the
Borrower's stock transfer books are on that date closed, and the Lender, or the
nominee or nominees of such Lender, shall be treated for all purposes as the
record holder of the shares of Common Stock deliverable upon such conversion as
of the close of business on such date. Promptly after receipt by the Borrower
of this Note and written conversion notice, the Borrower shall issue and
deliver, at its expense, to the Lender, or to the nominee or nominees of such
Lender, a certificate or certificates for the number of shares of its Common
Stock due on such conversion. In the case of a conversion of only a portion of
the outstanding principal amount of this Note, the Borrower shall execute and
deliver to the Holder (or its nominee or nominees), at the expense of the
Borrower, a replacement note in a principal amount equal to the unconverted
portion of such Note and dated and bearing interest from the date of such Note.
No fractional shares of Common Stock shall be issued upon conversion of
this Note. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of this Note, the Borrower shall pay a
cash adjustment in respect of such fractional interest. The Lender, by its
acceptance thereof, expressly waives any right to receive any
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<PAGE>
fractional share upon conversion of the Note.
5. Subordination. The Note is subordinated in right of payment, in the
-------------
manner and to the extent set forth in the Credit Agreement dated as of April 30,
1999 (as amended, supplemented or modified from time to time, the "Credit
Agreement") among the Borrower, Internet Capital Group Operations, Inc., the
Banks (as defined in the Credit Agreement), and PNC Bank, National Association,
in its capacity as Agent for the Banks, to the prior payment in full of all
Obligations (as defined in the Credit Agreement) of the Loan Parties (as defined
in the Credit Agreement) whether outstanding on the date of the Credit Agreement
or thereafter created, incurred, assumed or guaranteed. The terms of
subordination evidenced by Exhibit 1.1(D) to the Credit Agreement and attached
hereto as Exhibit B are hereby incorporated herein by reference thereto. The
Lender by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Agent, on his behalf, to take such action
as may be necessary or appropriate to effectuate the subordination provided for
in the Credit Agreement and appoints the Agent his attorney-in-fact for such
purpose.
6. Events of Default. An event of default hereunder shall consist of:
-----------------
(a) a default in the payment by the Borrower to the Lender of
principal or interest under this Note as and when the same shall become due and
payable, and such default continues for a period of 15 days;
(b) an event of default by the Borrower under any other obligation,
instrument, note or agreement for borrowed money ("Indebtedness"), beyond any
applicable notice and/or grace period (a "Cross-Default"), provided the
--------
aggregate principal amount of such Indebtedness to which such Cross-Default
relates, together with any such other Indebtedness in which there is a Cross-
Default, exceeds $1,000,000;
(c) institution of any proceeding by or against the Borrower under any
present or future bankruptcy or insolvency statute or similar law and, if
involuntary, if the same are not stayed or dismissed within ninety (90) days, or
the Borrower's assignment for the benefit of creditors or the appointment of a
receiver, trustee, conservator or other judicial representative for the Borrower
or the Borrower's property, or the Borrower's being adjudicated a bankrupt or
insolvent.
Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), and
the entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available at law or in
equity.
7. Summary Proceedings. Any action, suit or proceeding where the amount
-------------------
in controversy as to at least one party, exclusive of interest and costs,
exceeds $1,000,000
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<PAGE>
("Summary Proceeding"), arising out of or relating to this Note, or the breach,
termination or validity thereof, shall be litigated exclusively in the Superior
Court of the State of Delaware (the "Delaware Superior Court") as a summary
proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or any
successor rules (the "Summary Proceeding Rules"). Each of the parties hereto
hereby irrevocably and unconditionally (i) submits to the jurisdiction of the
Delaware Superior Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to plead
or to make, any claim that any Summary Proceeding brought in the Delaware
Superior Court has been brought in an improper or otherwise inconvenient forum,
(v) waives, and agrees not to plead or to make, any claim that the Delaware
Superior Court lacks personal jurisdiction over it, (vi) waives its right to
remove any Summary Proceeding to the federal courts except where such courts are
vested with sole and exclusive jurisdiction by statute and (vii) understands and
agrees that it shall not seek a jury trial or punitive damages in any Summary
Proceeding based upon or arising out of or otherwise related to this Note and
waives any and all rights to any such jury trial or to seek punitive damages.
In the event any action, suit or proceeding where the amount in controversy
as to at least one party, exclusive of interest and costs, does not exceed
$1,000,000 (a "Proceeding"), arising out of or relating to this Note or the
breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.
If a Summary Proceeding is not available to resolve any dispute hereunder,
the controversy or claim shall be settled by arbitration conducted on a
confidential basis, under the U.S. Arbitration Act, if applicable, and the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "Association") strictly in accordance with the terms of this Note and the
substantive law of the State of Delaware. The arbitration shall be conducted at
the Association's regional office located closest to the Lender's principal
place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators' award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.
Neither party shall be precluded hereby from securing equitable remedies in
courts of any jurisdiction, including, but not limited to, temporary restraining
orders and preliminary injunctions to protect its rights and interests but such
remedies shall not be sought as a means to avoid or stay arbitration or a
Summary Proceeding.
-5-
<PAGE>
8. Waivers. The Borrower hereby waives presentment, demand, protest and
-------
notice of dishonor and protest, and also waives all other exemptions; and agrees
that extension or extensions of the time of payment of this Note or any
installment or part thereof may be made before, at or after maturity by
agreement by the Lender. Upon default hereunder the Lender shall have the right
to offset the amount owed by the Borrower against any amounts owed by the Lender
in any capacity to the Borrower, whether or not due, and the Lender shall be
deemed to have exercised such right of offset and to have made a charge against
any such account or amounts immediately upon the occurrence of an event of
default hereunder even though such charge is made or entered on the books of the
Lender subsequent thereto. The Borrower shall pay to the Lender, upon demand,
all costs and expenses, including, without limitation, attorneys' fees and legal
expenses, that may be incurred by the Lender in connection with the enforcement
of this Note.
9. Registration Rights. The shares of Common Stock issuable upon
-------------------
conversion of this Note are subject to the registration rights set forth in
Exhibit A attached hereto.
- ---------
10. Notices. Notices required to be given hereunder shall be deemed
-------
validly given (i) three business days after sent, postage prepaid, by certified
mail, return receipt requested, (ii) one business day after sent, charges paid
by the sender, by Federal Express Next Day Delivery or other guaranteed delivery
service, (iii) when sent by confirmed facsimile transmission, or (iv) when
delivered by hand:
If to the Lender: At the address of its office listed in the first
paragraph of this Note
If to the Borrower: Internet Capital Group, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.
11. Failure or Indulgence Not Waiver. Any failure by the Lender to
--------------------------------
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any time. No amendment to or
modification of this Note shall be binding upon the Lender unless in writing and
signed by it. Any provision hereof found to be illegal, invalid or
unenforceable for any reason whatsoever shall not affect the validity, legality
or enforceability of the remainder hereof. This Note shall apply to and bind
the successors of the Borrower and shall inure to the benefit of the Lender, its
successors and assigns.
12. Governing Law. The Note shall be governed by and interpreted in
-------------
accordance with the laws of the State of Delaware.
-6-
<PAGE>
IN WITNESS WHEREOF, the Borrower, by its duly authorized officer
intending to be legally bound hereby, has duly executed this Convertible Note as
of the date first written above.
INTERNET CAPITAL GROUP, INC.
By:______________________________
Name:
Title:
-7-
<PAGE>
EXHIBIT A
---------
REGISTRATION RIGHTS
-------------------
1.1 Piggyback Registration.
----------------------
(a) If the Company at any time after the consummation of its
initial public offering proposes for any reason, whether for its own account or
the account of others, to register any of its securities under the Securities
Act, other than pursuant to a Special Registration Statement (as hereinafter
defined), it shall each such time promptly give written notice to the registered
Holders of the Eligible Securities (as defined in Section 1.2(c)) of its
intention to do so, and, upon the written request, given within twenty (20) days
after receipt of any such notice, of a Holder to register any of its Eligible
Securities, the Company shall (subject to Section 1.1(b) hereof) use its best
efforts to cause all Eligible Securities with respect to which Holders shall
have so requested registration to be registered under the Securities Act
promptly upon receipt of the written request of such Holders for such
registration, all to the extent required to permit the sale or other disposition
by the Holders of the Eligible Securities so registered in the manner
contemplated by such registration statement. "Special Registration Statement"
means a registration statement on Forms S-8 or S-4 or any successor form or
other registration statement relating to shares of Common Stock issued in
connection with an acquisition of an entity or business or other business
combination, or shares of Common Stock issued in connection with stock option or
other employee benefit plans.
(b) In connection with any exercise by a Holder of its "piggyback"
registration rights pursuant to this Section 1.1 in connection with any
underwritten offering of securities of the Company, if the Company is advised in
writing (with a copy to the Holders requesting registration) by the lead
underwriter for the offering that, in such firm's opinion, a registration of
Eligible Securities at that time would interfere with the orderly sale and
distribution of the securities being sold by the Company for its own account,
then the number of shares that may be included in the underwriting shall be
allocated, first, to the Company, second, to each of the Holders requesting
inclusion of their Eligible Securities in such registration statement on a pro
rata basis based on the total number of Eligible Securities held by each such
Holder and, third, to any other shareholders requesting registration.
(c) For purposes of this Exhibit A, the following terms shall
have the following meanings: (i) "Common Stock" shall mean the shares of common
stock of Internet Capital or any successor corporation; (ii) "Company" shall
mean and include Internet Capital and any successor corporation; (iii) "Holders"
shall mean each Strategic Partner, as such term is defined in the Securities
Holders Agreement (the "SHA"), dated February 2, 1999 among Internet Capital and
the investors named therein, for so long as (and to the extent that) it owns any
Eligible Securities, each of their respective successors, assigns, and
transferees who become registered owners of Eligible Securities, and the holders
of Eligible Securities pursuant to the Convertible Note (the "Note") dated April
, 1999 and the Common Stock Purchase Warrant (the "Warrant"), dated April _____,
1999 to which this Exhibit A is attached; and (iv) "Internet
---------
-1-
<PAGE>
Capital" shall mean Internet Capital Group, Inc., a Delaware corporation.
1.2 Demand Registration.
-------------------
(a) Any Strategic Partner may, at any time after consummation of
the Company's initial public offering of equity securities, request in writing
that the Company cause a registration statement to be filed under the Securities
Act (on any Form then available to the Company) with respect to such of its
Eligible Securities as it shall specify in such request, provided that (i) the
gross proceeds from such offering will be or are reasonably expected to be not
less than $5 million and (ii) such Strategic Partner includes at least 25% of
its Eligible Securities in its request. The Company shall promptly give written
notice of such request to the other Holders of Eligible Securities and afford
them the opportunity of including in the requested registration statement such
of their Eligible Securities as they shall specify in a written notice given to
the Company within thirty (30) days after their receipt of the Company's notice
of the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which Holders shall have so requested
registration to be registered under the Securities Act, all to the extent
required to permit the sale or other disposition by the Holders of the Eligible
Securities so registered in the manner specified by such Holders in their
notices and pursuant to this Section.
(b) The Company shall not be required to file and cause to become
effective more than two (2) registration statements at the demand of any
Strategic Partner made under this Section 1.2.
(c) The term "Eligible Securities" shall mean, on any date, (i)
all shares of Common Stock or other securities of the Company issued by way of a
stock split, stock dividend, recapitalization, merger or consolidation, (ii)
plus all shares of Common Stock or other securities of the Company issued in
respect of the Note and Warrant, (iii) but exclusive of any securities described
in clauses (i) or (ii) which have been (A) sold in a public offering registered
under Securities Act or (B) subsequently sold pursuant to Rule 144 under the
Securities Act.
(d) If the Holders of the Eligible Securities making such demand
propose to sell their Eligible Securities in a firm commitment underwriting and
the managing underwriter advises such Holders that not all Eligible Securities
of such Holders can be included in such offering, then the requisite number of
Eligible Securities shall be excluded from registration on a basis pro rata
among the Holders of the Eligible Securities requesting such registration on the
basis of the number of Eligible Securities held by each of them. If by virtue
of this Section 1.2(d), more than 50% of the Eligible Securities which a
Strategic Partner has demanded be registered are excluded from the registration
statements then such Strategic Partner shall not be deemed to have exercised a
demand registration right under this Section 1.2.
(e) Provided the Company has honored its obligations under Section
1.1, no demand registration right granted in this Section may be exercised by
any Strategic Partner during any period of time beginning on the date the
Company (i) files a registration statement with
-2-
<PAGE>
the Securities and Exchange Commission registering any of its securities for
sale to the public or (ii) files a registration statement upon the demand of any
other Strategic Partner pursuant to this Section 1.2, and ending on the earlier
to occur of (A) 90 days after the date on which such registration statement is
declared effective by the Securities and Exchange Commission or otherwise
becomes effective, and (B) the 180th day after the date of such filing.
(f) The demand registration rights granted in this Section 1.2
shall expire, if not exercised prior thereto, on the date on which more than 90%
of the Eligible Securities (as of the date of this Agreement) shall have been
publicly sold by the Holders thereof in a public offering registered under the
Securities Act of 1933 or pursuant to Rule 144 thereunder.
1.3 Form S-3 Registrations. In addition to the rights provided the
----------------------
Holders of registrable securities in Sections 1.1 and 1.2 above, if the
registration of Eligible Securities under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), then upon the
written request of one or more Holders of Eligible Securities, the Company will
so notify each Holder of Eligible Securities, including each Holder who has a
right to acquire Eligible Securities, and then will, as expeditiously as
possible, use its best efforts to effect qualification and registration under
the Securities Act on Form S-3 of all or such portion of the Eligible Securities
as the Holder or Holders shall specify pursuant to this Section 1.3, provided
that the Company shall have no obligation to file a registration statement under
this Section 1.3 unless the gross proceeds from the offering will be or are
reasonably expected to be not less than $500,000.
1.4 Registration Procedures. If and whenever the Company is under an
-----------------------
obligation pursuant to the provisions of this Exhibit A to use its best efforts
to effect the registration of any Eligible Securities the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Eligible Securities and use its best
efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective under the Securities Act until the earlier of
such time as all securities covered thereby have been sold or one hundred and
eighty (180) days after such registration statement becomes effective, as such
period may be extended pursuant to Section 1.5, and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Eligible Securities covered by such registration statement for such
period;
(c) furnish to each selling stockholder such numbers of copies of
each prospectus (including each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of such Eligible Securities;
-3-
<PAGE>
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter, if any, or if there
is no managing underwriter, the Holders of at least 25% of the Eligible
Securities, shall request, (provided that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
reasonably necessary or advisable to enable such seller to consummate the public
sale or other disposition in such jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in clause (b) of this Section 1.4, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish on the date that such Eligible Securities are
delivered to the underwriters for sale pursuant to such registration or, if such
Eligible Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Eligible Securities becomes
effective, (i) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and at the request of any Holder or Holders of Eligible
Securities requesting registration pursuant to this Exhibit A, to the Holder or
Holders making such request, stating that such registration statement has become
effective under the Securities Act and that (1) no stop order suspending the
effectiveness thereof has been issued and, to the best knowledge of such
counsel, no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (2) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein); (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no
opinion as to financial statements contained therein); (4) the description in
the registration statement or the prospectus, or any amendment or supplement
thereto, of all legal and governmental matters and all contracts and other legal
documents or instruments are accurate and fairly present the information
required to be shown; (5) such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be described in
the registration
-4-
<PAGE>
statement or prospectus, or any amendment or supplement thereto, which are not
described as required, nor of any contracts or documents or instruments of a
character required to be described in the registration statement or prospectus,
or any amendment or supplement thereto, or to be filed as exhibits to the
registration statement which are not described and filed as required, and (6)
such other legal matters with respect to such registration as the underwriters,
if any, and any such Holder or Holders requesting such opinion may reasonably
request; and (ii) in the case of an underwritten offering, a comfort letter,
dated such date, from the independent certified public accountants of the
Company, addressed to the underwriters and the Company's Board of Directors in
the customary form.
1.5 Delay in Registration. Notwithstanding anything contained in
---------------------
this Agreement to the contrary, the Company reserves the right to delay any such
registration pursuant to this Exhibit A for a period of not more than one
hundred and twenty (120) days, or to withhold efforts to cause such registration
statement to become effective for a period of not more than one hundred twenty
(120) days, if the Board of Directors of the Company determines in good faith
that such registration might (A) interfere with or affect the negotiation or
completion of any material transaction that is being contemplated by the
Company, or (B) involve initial or continuing disclosure obligations materially
adverse to the best interests of the Company's shareholders. If, after a
registration statement becomes effective, the Company advises the Holders of the
registrable securities covered by such registration statement that the Company
considers it appropriate for the registration statement to be amended, the
Holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The time periods referred to this Exhibit A shall be extended for an
additional number of business days during which the rights to sell shares was
suspended.
1.6 Information to be Furnished by Holders of Eligible Securities.
-------------------------------------------------------------
Each prospective seller of Eligible Securities, registered or to be registered
under any registration statement shall furnish to the Company such information
and execute such documents regarding the Eligible Securities held by such seller
and the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company.
1.7 Expenses of Registration.
------------------------
(a) All expenses incurred by the Company in complying with this
Exhibit A (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (iv) printing expenses; (v) fees and
disbursements of Company counsel and of one counsel for the participating
Holders together, which counsel is reasonably acceptable to the Holders; and
(vi) the fees and expenses of the independent public accountants (including the
expense of any special audits in connection with any such registration), are
hereinafter called "Registration Expenses." All underwriting discounts and
commissions applicable to the Eligible Securities covered by any such
registration, are herein called "Selling Expenses."
-5-
<PAGE>
(b) The Company shall pay all Registration Expenses in connection
with all piggyback registrations under Section 1.1 and all demand registrations
under Section 1.2 plus up to one (1) S-3 registration per year pursuant to
Section 1.3. All Selling Expenses in connection with each registration pursuant
to this Exhibit A and any legal fees and expenses of additional special counsel
for the sellers shall be borne by the seller or sellers therein in proportion to
the number of Eligible Securities included by each in such registration, or in
such other proportions as they may agree upon.
1.8 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each Holder of
Eligible Securities, its executive officers, directors and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to this
Exhibit A against any loss, claims, damages or liabilities to which any of them
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in a
registration statement including Eligible Securities owned by such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any of them for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable hereunder to a
particular Holder in any such case if any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company for such purpose by such Holder or by its representative or by any
underwriter on behalf of such Holder or if the untrue statement or omission is
corrected in a supplement or amendment to the prospectus provided by the Company
to such Holder in a timely fashion in accordance with this Exhibit A which was
not used by such Holder.
(b) Each Holder of Eligible Securities joining in any registration
statement of the Company pursuant to this Exhibit A shall indemnify and hold
harmless the Company, its executive officers, directors, and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to Exhibit
A against any losses, claims, damages, or liabilities to which any of them may
become subject under the Securities Act or otherwise insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, made in reliance
upon and in conformity with written information furnished to the Company by such
Holder or by its representative or by any
-6-
<PAGE>
underwriter on behalf of such Holder for such purpose, and will reimburse any of
them for any legal or other expenses reasonably incurred by them in connection
with investigating or defending, any such loss, claim, damage, liability or
action provided, however, that the total amount payable by a Holder under this
-------- -------
Section 1.8(b) shall not exceed the net proceeds received by such Holder in such
registered offering.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
unavailable to or insufficient to hold harmless an amount in excess of the
proceeds received by such Holder in the offering.
1.9 Underwriting Agreement. If Eligible Securities are sold pursuant
----------------------
to a registration statement in an underwritten offering pursuant to this Exhibit
A, the Company and the Holders participating therein agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of, or, as the case may be,
the seller of the securities being registered and customary covenants and
agreements to be performed by such issuer or seller, including, without limiting
the generality of the foregoing, customary provisions with respect to
indemnification by the Company of the underwriter(s) of such offering.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
----------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any Eligible
Securities for up to that period of time following the effective date of a
registration statement of the Company filed under the Securities Act as is
requested by the managing underwriters of such offering, not to exceed one
hundred and eighty (180) days.
1.11 Subsequent Registration Rights. The Company shall not grant any
------------------------------
registration rights to any other person that are more favorable to such person
than the registration rights granted to the Holders hereunder without the prior
written consent of the Holders of at least a majority of the Eligible
Securities.
-7-
<PAGE>
1.12 Assignment. The registration rights granted hereunder may be
----------
assigned by a Holder to any person who acquires such Holder's Eligible
Securities in accordance with the SHA and the Amended and Restated Certificate
of Incorporation and Bylaws of the Company..
-8-
<PAGE>
EXHIBIT 10.25
OFFICE LEASE
between
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
NOT INDIVIDUALLY, BUT AS ANCILLARY TRUSTEE FOR
STATE STREET BANK AND TRUST COMPANY, A MASSACHUSETTS
BANKING CORPORATION, NOT PERSONALLY BUT SOLELY AS TRUSTEE FOR
TELEPHONE REAL ESTATE EQUITY TRUST
(Landlord)
and
INTERNET CAPITAL GROUP, L.L.C., THE ACCESS FUND, HAROLD S. ZLOT
HAMILTON LANE ADVISORS, AND MARTIN S. GANS, JOINT AND SEVERAL
(Tenant)
<PAGE>
TABLE OF CONTENTS
-----------------
OFFICE LEASE
------------
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
1 Definitions
2 Premises
3 Term
4 Rental
5 Security Deposit
6 Use of Premises
7 Utilities and Services
8 Maintenance and Repairs
9 Alterations, Additions and Improvements
10 Indemnification and Insurance
11 Damage or Destruction
12 Condemnation
13 Relocation
14 Assignment and Subletting
15 Default and Remedies
16 Attorney's Fees; Costs of Suit
17 Subordination and Attornment
18 Quiet Enjoyment
19 Rules and Regulations
20 Estoppel Certificates
21 Entry by Landlord
22 Landlord's Lease Undertakings-Exculpation from
Personal Liability; Transfer of Landlord's Interest
23 Holdover Tenancy
24 Notices
25 Brokers
26 Communications and Computer Lines
27 Miscellaneous
</TABLE>
EXHIBITS
--------
Exhibit A Floor Plan
Exhibit B Work Letter Agreement
Exhibit C Rules and Regulations
Exhibit D Guaranty
Exhibit E Suite Acceptance Letter
<PAGE>
OFFICE LEASE
------------
THIS OFFICE LEASE ("Lease"), dated September 20, 1996, is made and entered
into by and between STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., not
individually, but as Ancillary Trustee for State Street Bank and Trust Company,
a Massachusetts banking corporation, not personally but solely as Trustee for
Telephone Real Estate Equity Trust ("Landlord") and INTERNET CAPITAL GROUP,
L.L.C., ACCESS FUND, HAMILTON LANE ADVISORS, AND MARTIN S. GANS, joint and
several ("Tenant") upon the following terms and conditions:
ARTICLE I - DEFINITIONS
-----------------------
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein;
1.1. BUILDING. The term "Building" shall mean that certain office
--------
building located at 44 Montgomery Street in San Francisco, California, commonly
known as 44 MONTGOMERY STREET together with any related land, improvements,
parking facilities, common areas, driveways, sidewalks and landscaping.
1.2. PREMISES. The term "Premises" shall mean Suite 3705 in the
--------
Building, as more particularly outlined on the drawing attached hereto as
Exhibit A and incorporated herein by reference. As used herein, "Premises"
shall not include any storage area in the Building, which shall be leased or
rented pursuant to separate agreement.
1.3. RENTABLE AREA OF THE PREMISES. The term "Rentable Area of the
-----------------------------
Premises" shall mean 3,607 square feet, which Landlord and Tenant have
stipulated as the Rentable Area of the Premises. Tenant acknowledges that the
Rentable Area of the Premises includes the usable area, without deduction for
columns or projections, multipled by a load factor to reflect a share of certain
areas, which may include lobbies, corridors, mechanical, utility, janitorial,
boiler and service rooms and closets, restrooms and other public, common and
service areas of the Building.
1.4. LEASE TERM. The term "Lease Term" shall mean the period between
----------
the Commencement Date and the Expiration Date (as such terms are hereinafter
defined), unless sooner terminated as otherwise provided in this Lease.
1.5. COMMENCEMENT DATE. Subject to adjustment as provided in Article 3,
-----------------
the term "Commencement Date" shall mean December 1, 1996. See attached Rider
for added material.
1.6. EXPIRATION DATE. Subject to adjustment as provided in Article 3,
---------------
the term "Expiration Date" shall mean November 30, 2001.
<PAGE>
1.7. BASE RENT. Subject to adjustment as provided in Article 4, the
---------
term "Base Rent" shall mean: See attached Rider Dollars ($_______________) per
month for the period _________________________ and ___________________________
Dollars ($___________) for the period _________________________.
1.8. TENANT'S PERCENTAGE SHARE. The term "Tenant's Percentage Share"
-------------------------
shall mean Five Hundred Eighty-two hundredths of one percent (0.582%) with
respect to increases in Property Taxes and Operating Expenses (as such terms are
hereinafter defined). Landlord may reasonably redetermine Tenant's Percentage
Share from time to time to reflect reconfiguration, additions or modifications
to the Building.
1.9. SECURITY DEPOSIT. The term "Security Deposit" shall mean Ten
----------------
Thousand Five Hundred Twenty and 42/100ths Dollars ($10,520.42).
1.10. TENANT'S PERMITTED USE. The term "Tenant's Permitted Use" shall
----------------------
mean general office and executive administration and no other use.
1.11. BUSINESS HOURS. The term "Business Hours" shall mean the hours of
--------------
8:00 A.M. to 6:00 P.M., Monday through Friday, and 8:00 A.M. to 1:00 P.M.,
Saturdays (federal and state holidays excepted). Holidays are defined as the
following: New Years Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and to the extent of utilities or services
provided by union members engaged at the Building, such other holidays as
observed by such unions.
1.12. LANDLORD'S ADDRESS FOR NOTICES. The term "Landlord's Address for
------------------------------
Notices" shall mean Heitman Properties Ltd., 44 Montgomery Street, San
Francisco, California 94104, Attn: Property Manager, with a copy to Heitman
Properties Ltd., 180 North LaSalle Street, Suite 3600, Chicago, Illinois
60601, Attn: Property Management.
1.13. TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
----------------------------
Notices" shall mean 44 Montgomery Street, Suite 3705, San Francisco, California
94104
1.14. BROKER. The term "Broker" shall mean Heitman Properties Ltd. and
------
Steve Lico of Cooper/Brady.
1.15. GUARANTOR. The term "Guarantor" shall mean Harold S. Zlot.
---------
ARTICLE II - PREMISES
---------------------
2.1. LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant,
-----------------
and Tenant hereby leases the Premises from Landlord, upon all of the terms,
covenants and conditions contained in this Lease. On the Commencement Date
described herein, Landlord shall deliver the Premises to Tenant in substantial
conformance with the Work Letter Agreement attached hereto as Exhibit B.
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2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that Landlord has not
----------------------
made any representation or warranty with respect to the condition of the
Premises or the Building or with respect to the suitability or fitness of either
for the conduct of Tenant's Permitted Use or for any other purpose. Prior to
Tenant's taking possession of the Premises, Landlord or its designee and Tenant
will walk the Premises for the purpose of reviewing the condition of the
Premises (and the condition of completion and workmanship of any tenant
improvements which Landlord is required to construct in the Premises pursuant to
this Lease); after such review, Tenant shall execute a Suite Acceptance Letter,
in the form of Exhibit E attached hereto, accepting the Premises. Except as is
expressly set forth in this Section 2.2 or the Work Letter Agreement attached
hereto, if any, or as may be expressly set forth in Suite Acceptance Letter,
Tenant agrees to accept the Premises in its "as is" said physical condition
without any agreements, representations, understandings or obligations on the
part of Landlord to perform any alterations, repairs or improvements (or to
provide any allowance for same).
ARTICLE III - TERM
------------------
3.1. Except as otherwise provided in this Lease, the Lease Term shall be
for the period described in Section 1.4 of this Lease, commencing on the
Commencement Date described in Section 1.5 of this Lease and ending on the
Expiration Date described in Section 1.6 of this Lease; provided, however, that,
if, for any reason, Landlord is unable to deliver possession of the Premises on
the date described in Section 1.5 of this Lease, Landlord shall not be liable
for any damage caused thereby, nor shall the Lease be void or voidable, but,
rather, the Lease Term shall commence upon, and the Commencement Date shall be
the date that possession of the Premises is so tendered to Tenant (except for
Tenant-caused delays which shall not be deemed to delay commencement of the
Lease Term), and, unless Landlord elects otherwise, the Expiration Date
described in Section 1.6 of this Lease shall be extended by an equal number of
days.
ARTICLE IV - RENTAL
-------------------
4.1. DEFINITIONS. As used herein,
-----------
(A) "Base Year" shall mean calendar year 1997.
(B) "Property Taxes" shall mean the aggregate amount of all real
estate taxes, assessments (whether they be general or special), sewer rents and
charges, transit taxes, taxes based upon the receipt of rent and any other
federal, state or local governmental charge, general, special, ordinary or
extraordinary (but not including income or franchise taxes, capital stock,
inheritance, estate, gift, or any other taxes imposed upon or measured by
landlord's gross income or profits, unless the same shall be imposed in lieu of
real estate taxes or other ad valorem taxes), which Landlord shall pay or become
obligated to pay in connection with the Building, or any part thereof. Property
Taxes shall also include all fees and costs, including attorneys' fees,
appraisals and consultant's fees, incurred by Landlord in seeking to obtain a
reassessment, reduction of, or a limit on the increase in, any property taxes,
regardless of whether
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any reduction or limitation is obtained. Property Taxes for any calendar year
shall be Property Taxes which are due for payment or paid in such year, rather
than Property Taxes which are assessed or become a lien during such year.
Property Taxes shall include any tax, assessment, levy, imposition or charge
imposed upon Landlord and measured by or based in whole or in part upon the
Building or the rents or other income from the Building, to the extent that such
items would be payable if the Building was the only property of Landlord subject
to same and the income received by landlord from the Building was the only
income of Landlord. Property Taxes shall also include any personal property
taxes imposed upon the furniture, fixtures, machinery, equipment, apparatus,
systems and appurtenances of Landlord used in connection with the Building.
(C) "Operating Expenses" shall mean all costs, fees, disbursements
and expenses paid or incurred by or on behalf of Landlord in the operation,
ownership, maintenance, insurance, management, replacement and repair of the
Building (excluding Property Taxes) including without limitation:
(i) Premiums for property, casualty, liability, rent
interruption or other types of insurance carried by Landlord.
(ii) Salaries, wages and other amounts paid or payable for
personnel including the Building manager, superintendent, operation and
maintenance staff, and other employees of Landlord involved in the maintenance
and operation of the Building, including contributions and premiums towards
fringe benefits, unemployment, disability and worker's compensation insurance,
pension plan contributions and similar premiums and contributions and the total
charges of any independent contractors or property managers engaged in the
operation, repair, care, maintenance and cleaning of any portion of the
Building.
(iii) Cleaning expenses, including without limitation janitorial
services, window cleaning, and garbage and refuse removal.
(iv) Landscaping expenses, including without limitation
irrigating, trimming, mowing, fertilizing, seeding, and replacing plants.
(v) Heating, ventilating, air conditioning and steam/utilities
expenses, including fuel, gas, electricity, water, sewer, telephone, and other
services.
(vi) Subject to the provisions of Section 4.1 (C)(xii) below,
the cost of maintaining, operating, repairing and replacing components of
equipment or machinery, including without limitation heating, refrigeration,
ventilation, electrical, plumbing, mechanical, elevator, escalator, sprinklers,
fire/life safety, security and energy management systems, including service
contracts, maintenance contracts, supplies and parts.
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(vii) Other items of repair or maintenance of elements of the
Building.
(viii) The costs of policing, security and supervision of the
Building.
(ix) Fair market rental and other costs with respect to the
management office for the Building.
(x) The cost of the rental of any machinery or equipment and
the cost of supplies used in the maintenance and operation of the Building.
(xi) Audit fees and the cost of accounting services incurred in
the preparation of statements referred to in this Lease and financial
statements, and in the computation of the rents and charges payable by tenants
of the Building.
(xii) Capital expenditures (a) made primarily to reduce
Operating Expenses, or to comply with any laws or other governmental
requirements, or, (b) for replacements (as opposed to additions or new
improvements) of non-structural items located in the common areas of the
property required to keep such areas in good condition; provided, all such
permitted capital expenditures (together with reasonable financing charges)
shall be amortized for purposes of this Lease over the shorter of (i) their
useful lives, (ii) the period during which the reasonably estimated savings in
Operating Expenses equals the expenditures, or (iii) three (3) years.
(xiii) Legal fees and expenses.
(xiv) Payments under any easement, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs in any planned development.
(xv) A fee for the administration and management of the
Building as reasonably determined by Landlord from time to time.
Operating Expenses shall not include costs of alteration of the premises of
tenants of the Building, depreciation charges, interest and principal payments
on mortgages, ground rental payments, real estate brokerage and leasing
commissions, expenses incurred in enforcing obligations of tenants of the
Building, salaries and other compensation of executive officers of the managing
agent of the Building senior to the Building manager, costs of any special
service provided to any one tenant of the Building but not to tenants of the
Building generally, and costs of marketing or advertising the Building.
(D) If the Building does not have one hundred percent (100%)
occupancy during an entire calendar year, including the Base Year, then the
variable cost component of
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"Property Taxes" and "Operating Expenses" shall be equitably adjusted so that
the total amount of Property Taxes and Operating Expenses equals the total
amount which would have been paid or incurred by Landlord had the Building been
one hundred percent (100%) occupied for the entire calendar year. In no event
shall Landlord be entitled to receive from Tenant and any other tenants in the
Building an aggregate amount in excess of actual Operating Expenses as a result
of the foregoing provision.
4.2. BASE RENT.
---------
(A) During the Lease Term, Tenant shall pay to Landlord as rental for
the Premises the Base Rent described in Section 1.7 above, subject to the
following adjustments (herein called the "Rent Adjustments"):
(B) During each calendar year subsequent to the Base Year, the Base
Rent payable by Tenant to Landlord, as adjusted pursuant to (A) above, shall be
increased by (collectively, the "Tax and Operating Expense Adjustment"): (i)
Tenant's Percentage Share of the total dollar increase, if any, in Property
Taxes for such year over Property Taxes for the Base Year; and (ii) Tenant's
Percentage Share of the total dollar increase, if any, in Operating Expenses
paid or incurred by Landlord during such year over Operating Expenses paid or
incurred by Landlord during the Base Year. A decrease in Property Taxes or
Operating Expenses below the Base Year amounts shall not decrease the amount of
the Base Rent due hereunder or give rise to a credit in favor of Tenant.
4.3. ADJUSTMENT PROCEDURE; ESTIMATES. The Tax and Operating Expense
-------------------------------
Adjustment specified in Section 4.2(B) shall be determined and paid as follows:
(A) During each calendar year subsequent to the Base Year, Landlord
shall give Tenant written notice of its estimate of any increased amounts
payable under Section 4.2(B) for that calendar year. On or before the first day
of each calendar month during the calendar year, Tenant shall pay to Landlord
one-twelfth (1/12th) of such estimated amounts; provided, however, that, not
more often than quarterly, Landlord may, by written notice to Tenant, revise its
estimate for such year, and subsequent payments by Tenant for such year shall be
based upon such revised estimate.
(B) Within one hundred twenty (120) days after the close of each
calendar year or as soon thereafter as is practicable, Landlord shall deliver to
Tenant a statement of that year's Property Taxes and Operating Expenses, and the
actual Tax and Operating Expense Adjustment to be made pursuant to Section
4.2(B) for such calendar year, as determined by Landlord (the "Landlord's
Statement") and such Landlord's Statement shall be binding upon Tenant, except
as provided in Section 4.4 below, if the amount of the actual Tax and Operating
Expense Adjustment is more than the estimated payments
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<PAGE>
for such calendar year made by Tenant, Tenant shall pay the deficiency to
Landlord upon receipt of Landlord's Statement. If the amount of the actual Tax
and Operating Expense Adjustment is less than the estimated payments for such
calendar year made by Tenant, any excess shall be credited against Rent (as
hereinafter defined) next payable by Tenant under this Lease or, if the Lease
Term has expired, any excess shall be paid to Tenant. No delay in providing the
statement described in this subparagraph (B) shall act as a waiver of Landlord's
right to payment under Section 4.2(B) above.
(C) If this Lease shall terminate on a day other than the end of a
calendar year, the amount of the Tax and Operating Expense Adjustment to be paid
pursuant to Section 4.2(B) that is applicable to the calendar year in which such
termination occurs shall be prorated on the basis of the number of days from
January 1 of the calendar year to the termination date bears to 365. The
termination of this Lease shall not affect the obligations of Landlord and
Tenant pursuant to Section 4.3(B) to be performed after such termination.
4.4. REVIEW OF LANDLORD'S STATEMENT. Provided that Tenant is not then
------------------------------
in default beyond any applicable cure period of its obligations to pay Base
Rent, additional rent described in Section 4.2(B), or any other payments
required to be made by it under this Lease and provided further that Tenant
strictly complies with the provisions of this Section 4.4, Tenant shall have the
right, once each calendar year, to reasonably review supporting data for any
portion of a Landlord's Statement (provided, however, Tenant may not have an
audit right to all documentation relating to Building operations as this would
far exceed the relevant information necessary to properly document a pass-
through billing statement, but real estate tax statements, I and information on
utilities, repairs, maintenance and insurance will be available), in accordance
with the following procedure:
(A) Tenant shall, within ten (10) business days after any such
Landlord's Statement is delivered, deliver a written notice to Landlord
specifying the portions of the Landlord's Statement that are claimed to be
incorrect, and Tenant shall simultaneously pay to Landlord all amounts due from
Tenant to Landlord as specified in the Landlord's Statement. Except as expressly
set forth in subsection (C) below, in no event shall Tenant be entitled to
withhold, deduct, or offset any monetary obligation of Tenant to Landlord under
the Lease (including, without limitation, Tenant's obligation to make all
payments of Base Rent and all payments of Tenant's Tax and operating Expense
Adjustment) pending the completion of and regardless of the results of any
review of records under this Section 4.4. The right of Tenant under this Section
4.4 may only be exercised once for any Landlord's Statement, and if Tenant fails
to meet any of the above conditions as a prerequisite to the exercise of such
right, the right of Tenant under this Section 4.4 for a particular Landlord's
Statement shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its records for the
Building at Landlord's manager's corporate offices presently located at the
address set forth in Section 1.12 and Tenant agrees that any review of records
under this Section 4.4 shall be at the sole expense of Tenant and shall be
conducted by an independent firm of certified public accountants of national
standing. Tenant acknowledges and agrees that any records reviewed under this
Section 4.4 constitute confidential information of Landlord, which shall not be
disclosed to anyone other than the accountants performing the review and the
principals of
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<PAGE>
Tenant who receive the results of the review. The disclosure of such information
to any other person, whether or not caused by the conduct of Tenant, shall
constitute a material breach of this Lease.
(C) Any errors disclosed by the review shall be promptly corrected by
Landlord, provided, however, that if Landlord disagrees with any such claimed
errors, Landlord shall have the right to cause another review to be made by an
independent firm of certified public accountants of national standing. In the
event of a disagreement between the two accounting firms, the review that
discloses the least amount of deviation from the Landlord's Statement shall be
deemed to be correct. In the event that the results of the review of records
(taking into account, if applicable, the results of any additional review caused
by Landlord) reveal that Tenant has overpaid obligations for a preceding period,
the amount of such overpayment shall be credited against Tenant's subsequent
installment obligations to pay the Estimated Tax and Operating Expense
Adjustment. In the event that such results show that Tenant has underpaid its
obligations for a preceding period, tenant shall be liable for Landlord's actual
accounting fees, and the amount of such underpayment shall be paid by Tenant to
Landlord with the next succeeding installment obligation of estimated Tax and
Operating Expense Adjustment.
4.5. PAYMENT. Concurrently with the execution hereof, Tenant shall pay
-------
Landlord Base Rent for the first calendar month of the Lease Term. Thereafter
the Base Rent described in Section 1.7, as adjusted in accordance with Section
4.2, shall be payable in advance on the first day of each calendar month. If
the Commencement Date is other than the first day of a calendar month, the
prepaid Base Rent for such partial month shall be prorated in the proportion
that the number of days this Lease is in effect during such partial month bears
to the total number of days in the calendar month. All Rent, and all other
amounts payable to Landlord by Tenant pursuant to the provisions of this Lease
shall be paid to Landlord, without notice, demand, abatement, deduction or
offset, in lawful money of the United States at Landlord's office in the
Building or to such other person or at such other place as Landlord may
designate from time to time by written notice given to Tenant. No payment by
Tenant or receipt by Landlord of a lesser amount than the correct Rent due
hereunder shall be deemed to be other than a payment on account; nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed to effect or evidence an accord and satisfaction; and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance or pursue any other remedy in this Lease or at law or in
equity provided.
4.6. LATE CHARGE, INTEREST. Tenant acknowledges that the late payment of
---------------------
Base Rent or any other amounts payable by Tenant to Landlord hereunder (all of
which shall constitute additional rental to the same extent as Base Rent) will
cause Landlord to incur administrative costs and other damages, the exact amount
of which would be impracticable or extremely difficult to ascertain. Landlord
and Tenant agree that if Landlord does not receive any, such payment on or
before five (5) days after the date the payment is due, Tenant shall pay to
Landlord as additional rent (a) a late charge equal to five percent (5%) of the
overdue amount to cover such additional administrative costs; and (b) interest
on the delinquent amounts at the
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lesser of the maximum rate permitted by law if any or twelve percent (12%) per
annum from the date due to the date paid.
4.7. ADDITIONAL RENT. For purposes of this Lease, all amounts payable
---------------
by Tenant to Landlord pursuant to this Lease, whether or not denominated as
such, shall constitute additional rental hereunder. Such additional rental,
together with the Base Rent and Rent Adjustments, shall sometimes be referred to
in this Lease as "Rent".
4.8. ADDITIONAL TAXES. Notwithstanding anything in Section 4.1(B) to
----------------
the contrary, Tenant shall reimburse Landlord upon demand for any and all taxes
payable by or imposed upon Landlord upon or with respect to: any fixtures or
personal property located in the Premises; any leasehold improvements made in or
to the Premises by or for Tenant; the Rent payable hereunder, including without
limitation, any gross receipts tax, license fee or excise tax levied by any
governmental authority, the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of any portion of the Premises
(including without limitation any applicable possessory interest taxes); or this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.
ARTICLE V - SECURITY DEPOSIT
----------------------------
5.1. Upon the execution of this Lease, Tenant shall deposit with Landlord
the Security Deposit described in Section 1.9 above. The Security Deposit is
made by Tenant to secure the faithful performance of all the terms, covenants
and conditions of this Lease to be performed by Tenant. If Tenant shall default
with respect to any covenant or provision hereof, Landlord may use, apply or
retain all or any portion of the Security Deposit to cure such default or to
compensate Landlord for any loss or damage which Landlord may suffer thereby.
If Landlord so uses or applies all or any portion of the Security Deposit,
Tenant shall immediately upon written demand deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to the full amount hereinabove
stated. Landlord shall not be required to keep the Security Deposit separate
from its general accounts and Tenant shall not be entitled to interest on the
Security Deposit. Within thirty (30) days after the expiration of the Lease
Term and the vacation of the Premises by Tenant, the Security Deposit, or such
part as has not been applied to cure the default, shall be returned to Tenant.
ARTICLE VI - USE OF PREMISES
----------------------------
6.1. TENANT'S PERMITTED USE. Tenant shall use the Premises only for
----------------------
Tenant's Permitted Use as set forth in section 1.10 above and shall not use or
permit the Premises to be used for any other purpose. Tenant shall, at its sole
cost and expense, obtain all governmental licenses and permits required to allow
Tenant to conduct Tenant's Permitted Use. Landlord disclaims any warranty that
the Premises are suitable for Tenant's use and Tenant acknowledges that it has
had a full opportunity to make its own determination in this regard,
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6.2. COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
-------------------------------------------
(A) Tenant shall cause the Premises to comply in all material
respects with all laws, ordinances, regulations and directives of any
governmental authority having jurisdiction including, without limitation, any
certificate of occupancy and any law, ordinance, regulation, covenant, condition
or restriction affecting the Building or the Premises which in the future may
become applicable to the Premises (collectively "Applicable Laws").
(B) Tenant shall not use the Premises, or permit the Premises to be
used, in any manner which: (a) violates any Applicable Law; (b) causes or is
reasonably likely to cause damage to the Building or the Premises; (c) violates
a requirement or condition of any fire and extended insurance policy covering
the Building and/or the Premises, or increases the cost of such policy; (d)
constitutes or is reasonably likely to constitute a nuisance, annoyance or
inconvenience to other tenants or occupants of the Building or its equipment,
facilities or systems; (e) interferes with, or is reasonably likely to interfere
with, the transmission or reception of microwave, television, radio, telephone
or other communication signals by antennae or other facilities located in the
Building; or (f) violates the Rules and Regulations described in Article XIX.
6.3. HAZARDOUS MATERIALS.
-------------------
(A) No Hazardous Materials, as defined herein, shall be Handled, as
also defined herein, upon, about, above or beneath the Premises or any portion
of the Building by or on behalf of Tenant, its subtenants or its assignees, or
their respective contractors, clients, officers, directors, employees, agents,
or invitees. Any such Hazardous Materials so Handled shall be known as Tenant's
Hazardous Materials. Notwithstanding the foregoing, normal quantities of
Tenant's Hazardous Materials customarily used in the conduct of general
administrative and executive office activities (e.g., copier fluids and cleaning
supplies) may be Handled at the Premises without Landlord's prior written
consent. Tenant's Hazardous Material shall be Handled at all times in compliance
with the manufacturer's instructions therefor and all applicable Environmental
Laws, as defined herein.
(B) Notwithstanding the obligation of Tenant to indemnify Landlord
pursuant to this Lease, Tenant shall, at its sole cost and expense, promptly
take all actions required by any Regulatory Authority, as defined herein, or
necessary for Landlord to make full economic use of the Premises or any portion
of the Building, which requirements or necessity arises from the Handling of
Tenant's Hazardous Materials upon, about, above or beneath the Premises or any
portion of the Building. Such actions shall include, but not be limited to, the
investigation of the environmental condition of the Premises or any portion of
the Building, the preparation of any feasibility studies or reports and the
performance of any cleanup, remedial, removal or restoration work. Tenant shall
take all actions necessary to restore the Premises or any portion of the
Building to the condition existing prior to the introduction of Tenant's
Hazardous Materials, notwithstanding any less stringent standards or remediation
allowable
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under applicable Environmental Laws. Tenant shall nevertheless obtain Landlord's
written approval prior to undertaking any actions required by this Section,
which approval shall not be unreasonably withheld so long as such actions would
not potentially have a material adverse long-term or short-term effect on the
Premises or any portion of the Building.
(C) Tenant agrees to execute affidavits, representations, and the
like from time to time at Landlord's request stating Tenant's best knowledge and
belief regarding the presence of Hazardous Materials on the Premises.
(D) "Environmental Laws" means and includes all now and hereafter
existing statutes, laws, ordinances, codes, regulations, rules, rulings, orders,
decrees, directives, policies and requirements by any Regulatory Authority
regulating, relating to, or imposing liability or standards of conduct
concerning public health and safety or the environment.
(E) "Hazardous Materials" means: (a) any material or substance: (i)
which is defined or becomes defined as a "hazardous substance", "hazardous
waste", "infectious waste", "chemical mixture or substance", or "air pollutant"
under Environmental Laws; (ii) containing petroleum, crude oil or any fraction
thereof; (iii) containing polychlorinated biphenyls (PCB's); (iv) containing
asbestos; (v) which is radioactive; (vi) which is infectious; or (b) any other
material or substance displaying toxic, reactive, ignitable or corrosive
characteristics, as all such terms are used in their broadest sense, and are
defined, or become defined by Environmental Laws, or (c) materials which cause a
nuisance upon or waste to the Premises or any portion of the Building.
(F) "Handle," "handle," "Handled," "handled," "Handling," or
"handling" shall mean any installation, handling, generation, storage,
treatment, use, disposal, discharge, release, manufacture, refinement, presence,
migration, emission, abatement, removal, transportation, or any other activity
of any type in connection with or involving Hazardous Materials.
(G) "Regulatory Authority" shall mean any federal, state or local
governmental agency, commission, board or political subdivision.
ARTICLE VII - UTILITIES AND SERVICES.
------------------------------------
7.1. BUILDING SERVICES. As long as Tenant is not in monetary default
-----------------
under this Lease, Landlord agrees to furnish or cause to be furnished to the
Premises, the following utilities and services, subject to the conditions and
standards set forth herein:
(A) Non-attended automatic elevator service (if the Building has such
equipment serving the Premises), in common with Landlord and other tenants and
occupants and their agents and invitees.
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(B) During Business Hours, such air conditioning, heating and
ventilation as in Landlord's reasonable judgment, are required for the
comfortable use and occupancy of the Premises; provided, however, that if Tenant
shall require heating, ventilation or air conditioning in excess of that which
Landlord shall be required to provide hereunder. Landlord may provide such
additional heating, ventilation or air conditioning at such rates and upon such
additional conditions as shall be determined by Landlord from time to time.
(C) Water for drinking and rest room purposes.
(D) Reasonable janitorial and cleaning services, provided that the
Premises are used exclusively for office purposes and are kept reasonably in
order by Tenant. If the Premises are not used exclusively as offices, Landlord,
at Landlord's sole discretion, may require that the Premises be kept clean and
in order by Tenant, at Tenant's expense, to the satisfaction of Landlord and by
persons approved by Landlord; and, in all events, Tenant shall pay Landlord the
cost of removal of Tenant's refuse and rubbish, to the extent that the same
exceeds the refuse and rubbish attendant to normal office usage.
(E) At all reasonable times, electric current as required for
building standard lighting and fractional horsepower office machines; provided,
however, that: (i) without Landlord's consent, Tenant shall not install, or
permit the installation, in the Premises of any computers, word processors,
electronic data processing equipment or other type of equipment or which will
increase Tenant's use of electric current in excess of that which Landlord is
obligated to provide hereunder (provided, however, that the foregoing shall not
preclude the use of personal computers or similar office equipment); (ii) if
Tenant shall require electric current which may disrupt the provision of
electrical service to other tenants, Landlord may refuse to grant its consent or
may condition its consent upon Tenant's payment of the cost of installing and
providing any additional facilities required to furnish such excess power to the
Premises and upon the installation in the Premises of electric current meters to
measure the amount of electric current consumed, in which latter event Tenant
shall pay for the cost of such meter(s) and the cost of installation,
maintenance and repair thereof, as well as for all excess electric current
consumed at the rates charged by the applicable local public utility, plus a
reasonable amount to cover the additional expenses incurred by Landlord in
keeping account of the electric current so consumed; and (iii) if Tenant's
increased electrical requirements will materially affect the temperature level
in the Premises or the Building, Landlord's consent may be conditioned upon
Tenant's requirement to pay such amounts as will be incurred by Landlord to
install and operate any machinery or equipment necessary to restore the
temperature level to that otherwise required to be provided by Landlord,
including but not limited to the cost of modifications to the air conditioning
system. Landlord shall not, in any way, be liable or responsible to Tenant for
any loss or damage or expense which Tenant may incur or sustain if, for any
reasons beyond Landlord's reasonable control, either the quantity or character
of electric service is changed or is no longer available or suitable for
Tenant's requirements. Tenant covenants that at all times its use of electric
current shall never exceed the capacity of the feeders, risers or electrical
installations of the Building. If submetering of electricity in the
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Building will not be permitted under future laws or regulations, the Rent will
then be equitably and periodically adjusted to include an additional payment to
Landlord reflecting the cost to Landlord for furnishing electricity to Tenant in
the Premises.
Any amounts which Tenant is required to pay to Landlord pursuant to this
Section 7.1 shall be payable upon demand by Landlord and shall constitute
additional rent.
7.2. INTERRUPTION OF SERVICES. Landlord shall not be liable for any
------------------------
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 7.1, when such failure is caused by
accident, breakage, repairs, strikes, lockouts, labor disputes, labor
disturbances, governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action, or any other cause beyond Landlord's
reasonable control and, in such event, Tenant shall not be entitled to any
damages nor shall any failure or interruption abate or suspend Tenant's
obligation to pay Base Rent and additional rent required under this Lease or
constitute or be construed as a constructive or other eviction of Tenant.
Further, in the event any governmental authority or public utility promulgates
or revises any law, ordinance, rule or regulation, or issues mandatory controls
or voluntary controls relating to the use or conservation of energy; water, gas,
light or electricity, the reduction of automobile or other emissions, or the
provision of an other utility or service, Landlord may take any reasonably
appropriate action to comply with such law, ordinance, rule, regulation,
mandatory control or voluntary guideline and Tenant's obligations hereunder
shall not be affected by any such action of Landlord. The parties acknowledge
that safety and security devices, services and programs provided by Landlord, if
any, while intended to deter crime and ensure safety, may not in given instances
prevent theft or other criminal acts, or ensure safety of persons or property.
The risk that any safety or security device, service or program may not be
effective, or may malfunction, or be circumvented by a criminal, is assumed by
Tenant with respect to Tenant's property and interests, and Tenant shall obtain
insurance coverage to the extent Tenant desires protection against such criminal
acts and other losses, as further described in this Lease. Tenant agrees to
cooperate in any reasonable safety or security program developed by Landlord or
required by Law.
ARTICLE VIII - MAINTENANCE AND REPAIRS
--------------------------------------
8.1. LANDLORD'S OBLIGATIONS. Except as provided in Sections 8.2 and 8.3
----------------------
below, Landlord shall maintain the Building in reasonable order and repair
throughout the Lease Term; provided, however, that Landlord shall not be liable
for any failure to make any repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
for such repairs or maintenance is given to Landlord by Tenant. Except as
provided in Article XI, there shall be no abatement of Rent, nor shall there be
any liability of Landlord, by reason of any injury or inconvenience to, or
interference with, Tenant's business or operations arising from the making of,
or failure to make, any maintenance or repairs in or to any portion of the
Building.
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8.2. TENANT'S OBLIGATIONS. During the Lease Term, Tenant shall, at its
--------------------
sole cost and expense, maintain the Premises in good order and repair
(including, without limitation, the carpet, wall-covering, doors, plumbing and
other fixtures, equipment, alterations and improvements, whether installed by
Landlord or Tenant). Further, Tenant shall be responsible for, and upon demand
by Landlord shall promptly reimburse Landlord for, any damage to any portion of
the Building or the Premises caused by (a) Tenant's activities in the Building
or the Premises; (b) the performance or existence of any alterations, additions
or improvements made by Tenant in or to the Premises; (c) the installation, use,
operation or movement of Tenant's property in or about the Building or the
Premises; or (d) any act or omission by Tenant or its officers, partners,
employees, agents, contractors or invitees.
8.3. LANDLORD'S RIGHTS. Landlord and its contractors shall have the
-----------------
right, at all reasonable times and upon prior oral or telephonic notice to
Tenant at the Premises, other than in the case of any emergency in which case no
notice shall be required, to enter upon the Premises to make any repairs to the
Premises or the Building reasonably required or deemed reasonably necessary by
Landlord and to erect such equipment, including scaffolding, as is reasonably
necessary to effect such repairs.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
----------------------------------------------------
9.1. LANDLORD'S CONSENT, CONDITIONS. Tenant shall not make or permit to
------------------------------
be made any alterations, additions, or improvements in or to the Premises
('Alterations') without the prior written consent of Landlord, which consent,
with respect to non-structural alterations, shall not be unreasonably withheld.
Landlord may impose as a condition to making any Alterations such requirements
as Landlord in its sole discretion deems necessary or desirable including
without limitation: Tenant's submission to Landlord, for Landlord's prior
written approval, of all plans and specifications relating to the Alterations;
Landlord's prior written approval of the time or times when the Alterations are
to be performed; Landlord's prior written approval of the contractors and
subcontractors performing work in connection with the Alterations; employment of
union contractors and subcontractors who shall not cause labor disharmony;
Tenant's receipt of all necessary permits and approvals from all governmental
authorities having jurisdiction over the Premises prior to the construction of
the Alterations; Tenant's delivery to Landlord of such bonds and insurance as
Landlord shall reasonably require; and, Tenant's payment to Landlord of all
costs and expenses incurred by Landlord because of Tenant's Alterations,
including but not limited to costs incurred in reviewing the plans and
specifications for, and the progress of, the Alterations. Tenant is required to
provide Landlord written notice of whether the Alterations include the Handling
of any Hazardous Materials and whether these materials are of a customary and
typical nature for industry practices. Upon completion of the Alterations,
Tenant shall provide Landlord with copies of as-built plans. Neither the
approval by Landlord of plans and specifications relating to any Alterations nor
Landlord's supervision or monitoring of any Alterations shall constitute any
warranty by Landlord to Tenant of the adequacy of the design for Tenant's
intended use or the proper performance of the Alterations.
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<PAGE>
9.2. PERFORMANCE OF ALTERATIONS WORK. All work relating to the
-------------------------------
Alterations shall be performed in compliance with the plans and specifications
approved by Landlord, all applicable laws, ordinances, rules, regulations and
directives of all governmental Authorities having jurisdiction (including
without limitation Title 24 of the California Administrative Code) and the
requirements of all carriers of insurance on the Premises and the Building, the
Board of Underwriters, Fire Rating Bureau, or similar organization. All work
shall be performed in a diligent, first class manner and so as not to
unreasonably interfere with any other tenants or occupants of the Building. All
costs incurred by Landlord relating to the Alterations shall be payable to
Landlord by Tenant as additional rent upon demand. No asbestos-containing
materials shall be used or incorporated in the Alterations. No lead-containing
surfacing material, solder or other construction materials or fixtures where the
presence of lead might create a condition of exposure not in compliance with
Environmental Laws shall be incorporated in the Alterations.
9.3. LIENS. Tenant shall pay when due all costs for work performed and
-----
materials supplied to the Premises. Tenant shall keep Landlord, the Premises
and the Building free from all liens, stop notices and violation notices
relating to the Alterations or any other work performed for, materials furnished
to or obligations incurred by or for Tenant and Tenant shall protect, indemnify,
hold harmless and defend Landlord, the Premises and the Building of and from any
and all loss, cost, damage, liability and expense, including attorneys' fees,
arising out of or related to any such liens or notices. Further, Tenant shall
give Landlord not less than seven (7) business days prior written notice before
commencing any Alterations in or about the Premises to permit Landlord to post
appropriate notices of non-responsibility. Tenant shall also secure, prior to
commencing any Alterations, at Tenant's sole expense, a completion and lien
indemnity bond satisfactory to Landlord for such work. During the progress of
such work, Tenant shall, upon Landlord's request, furnish Landlord with sworn
contractor's statements and lien waivers covering all work theretofore
performed. Tenant shall satisfy or otherwise discharge all liens, stop notices
or other claims or encumbrances within ten (10) days after Landlord notifies
Tenant in writing that any such lien, stop notice, claim or encumbrance has been
filed. If Tenant fails to pay and remove such lien, claim or encumbrance within
such ten (10) days, Landlord at its election, may pay and satisfy the same and
in such event the sums so paid by Landlord, with interest from the date of
payment at the rate set forth in Section 4.6 hereof for amounts owed Landlord by
Tenant shall be deemed to be additional rent due and payable by Tenant at once
without notice or demand.
9.4. LEASE TERMINATION. Except as provided in this Section 9.4, upon
-----------------
expiration or earlier termination of this Lease Tenant shall surrender the
Premises to Landlord in the same condition as existed on the date Tenant first
occupied the Premises, (whether pursuant to this Lease or an earlier lease),
subject to reasonable wear and tear. All Alterations shall become a part of the
Premises and shall become the property of Landlord upon the expiration or
earlier termination of this Lease, unless Landlord shall, by written notice
given to Tenant, require Tenant to remove some or all of-Tenant's Alterations,
in which event Tenant shall promptly
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remove the designated Alterations and shall promptly repair any resulting
damage, all at Tenant's sole expense. All business and trade fixtures, machinery
and equipment, furniture, movable partitions and items of personal property
owned by Tenant or installed by Tenant at its expense in the Premises shall be
and remain the property of Tenant; upon the expiration or earlier termination of
this Lease, Tenant shall, at its sole expense, remove all such items and repair
any damage to the Premises or the Building caused by such removal. If Tenant
fails to remove any such items or repair such damage promptly after the
expiration or earlier termination of the Lease, Landlord may, but need not, do
so with no liability to Tenant, and Tenant shall pay Landlord the cost thereof
upon demand. Notwithstanding the foregoing to the contrary, in the event that
Landlord gives its consent, pursuant to the provisions of Section 9.1 of this
Lease, to allow Tenant to make an Alteration in the Premises, Landlord agrees,
upon Tenant's written request, to notify Tenant in writing at the time of the
giving of such consent whether Landlord will require Tenant, at Tenant's cost,
to remove such Alteration at the end of the Lease Term.
ARTICLE X - INDEMNIFICATION AND INSURANCE
-----------------------------------------
10.1. INDEMNIFICATION.
---------------
(A) Tenant agrees to protect, indemnify, hold harmless and
defend Landlord and any Mortgagee, as defined herein, and each of their
respective partners, directors, officers, agents and employees, successors and
assigns, (except to the extent of the losses described below are caused by the
gross negligence of Landlord, its agents and employees) from and against:
(i) any and all loss, cost, damage, liability or expense
as incurred (including but not limited to reasonable attorneys' fees and legal
costs) arising out of or related to any claim, suit or judgment brought by or in
favor of any person or persons for damage, loss or expense due to, but not
limited to, bodily injury, including death, or property damage sustained by such
person or persons which arises out of, is occasioned by or, is in any way
attributable to the use or occupancy of the Premises or any portion of the
Building by Tenant or the acts or omissions of Tenant or its agents, employees,
contractors, clients, invitees or subtenants except that caused by the sole
active negligence or willful misconduct of Landlord or its agents or employees.
Such loss or damage shall include, but not be limited to, any injury or damage
to, or death of, Landlord's employees or agents or damage to the Premises or any
portion of the Building.
(ii) any and all environmental damages which arise from:
(i) the Handling of any Tenant's Hazardous Materials, as defined in Section 6.3
or (ii) the breach of any of the provisions of this Lease. For the purpose of
this Lease, "environmental damages" shall mean (a) all claims, judgments,
damages, penalties, fines, costs, liabilities, and losses (including without
limitation, diminution in the value of the Premises or any portion of the
Building, damages for the loss of or restriction on use of rentable or usable
space or of any amenity of the Premises or any portion of the Building, and from
any adverse impact of
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<PAGE>
Landlord's marketing of space); (b) all reasonable sums paid for settlement of
claims, attorneys' fees, consultants' fees and experts' fees; and (c) all costs
incurred by Landlord in connection with investigation or remediation relating to
the Handling of Tenant's Hazardous Materials. whether or not required-by
Environmental Laws, necessary for Landlord to make full economic use of the
Premises or any portion of the Building, or otherwise required under this Lease.
To the extent that Landlord is held strictly liable by a court or other
governmental agency of competent jurisdiction under any Environmental Laws,
Tenant's obligation to Landlord and the other indemnities under the foregoing
indemnification shall likewise be without regard to fault on Tenant's part with
respect to the violation of any Environmental Law which results in liability to
the indemnitee. Tenant's obligations and liabilities pursuant to this Section
10.1 shall survive the expiration or earlier termination of this Lease.
(B) Landlord agrees to protect, indemnify, hold harmless and
defend Tenant from and against any and all loss, cost, damage, liability or
expense, including reasonable attorneys' fees, with respect to any claim of
damage or injury to persons or property at the Premises, caused by the gross
negligence of Landlord or its authorized agents or employees.
(C) Notwithstanding anything to the contrary contained herein,
nothing shall be interpreted or used to in any way affect, limit, reduce or
abrogate any insurance coverage provided by any insurers to either Tenant or
Landlord.
(D) Notwithstanding anything to the contrary contained in this
Lease, nothing herein shall be construed to infer or imply that Tenant is a
partner, joint venturer, agent, employee, or otherwise acting by or at the
direction of Landlord.
10.2. PROPERTY INSURANCE.
------------------
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, "all-risk" property insurance, for damage or
other loss caused by fire or other casualty or cause including, but not limited
to, vandalism and malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting of pipes, explosion, in an amount not less than one
hundred percent (100%) of the replacement cost covering (a) all Alterations made
by or for Tenant in the Premises; and (b) Tenant's trade fixtures, equipment and
other personal property from time to time situated in the Premises. The proceeds
of such insurance shall be used for the repair or replacement of the property so
insured, except that if not so applied or if this Lease is terminated following
a casualty, the proceeds applicable to the leasehold improvements shall be paid
to Landlord and the proceeds applicable to Tenant's personal property shall be
paid to Tenant.
(B) At all times during the Lease Term, Tenant shall procure and
maintain business interruption insurance in such amount as will reimburse Tenant
for direct or indirect loss of earnings attributable to all perils insured
against in Section 10.2(A).
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(C) Landlord shall, at all times during the Lease Term, procure
and maintain "all-risk" property insurance in the amount not less than ninety
percent (90%) of the insurable replacement cost covering the Building in which
the Premises are located and such other insurance as may be required by a
Mortgagee or otherwise desired by Landlord.
10.3. LIABILITY INSURANCE.
-------------------
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, commercial general liability insurance applying
to the use and occupancy of the Premises and the business operated by Tenant.
Such insurance shall have a minimum combined single limit of liability of at
least Two Million Dollars ($2,000,000) per occurrence and a general aggregate
limit of at least Two Million Dollars ($2,000,000). All such policies shall be
written to apply to all bodily injury property damage, personal injury losses
and shall be endorsed to include Landlord and its agents, beneficiaries',
partners, employees, and any deed of trust holder or mortgagee of Landlord or
any ground lessor as additional insureds. Such liability insurance shall be
written as primary policies, not excess or contributing with or secondary to any
other insurance as may be available to the additional insureds.
(B) Prior to the sale, storage, use or giving away of alcoholic
beverages on or from the Premises by Tenant or another person, Tenant, at its
own expense, shall obtain a policy or policies of insurance issued by a
responsible insurance company and in a form acceptable to Landlord saving
harmless and protecting Landlord and the Premises against any and all damages,
claims, liens, judgments, expenses and costs, including actual attorneys' fees,
arising under any present or future law, statute, or ordinance of the State of
California or other governmental authority having jurisdiction of the Premises,
by reason of any storage, sale, use or giving away of alcoholic beverages on or
from the Premises. Such policy or policies of insurance shall have a minimum
combined single limit of One Million Dollars ($1,000,000) per occurrence and
shall apply to bodily injury, fatal or nonfatal; injury to means of support; and
injury to property of any person. Such policy or policies of insurance shall
name Landlord and its agents, beneficiaries, partners, employees and any
mortgagee of Landlord or any ground lessor of Landlord as additional insureds.
(C) Landlord shall, at all times during the Lease Term, procure
and maintain commercial general liability insurance for the Building in which
the Premises are located. Such insurance shall have minimum combined single
limit of liability of at least Two Million Dollars ($2,000,000) per occurrence,
and a general aggregate limit of at least Two Million Dollars ($2,000.000).
10.4. WORKERS' COMPENSATION INSURANCE. At all times during the Lease
-------------------------------
Term, Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of California, and Employer's Liability
insurance with a limit not less than One Million Dollars ($1,000,000) Bodily
Injury Each Accident; One Million Dollars ($1,000,000)
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<PAGE>
Bodily Injury By Disease - Each Person; and One Million Dollars ($1,000,000)
Bodily Injury to Disease - Policy Limit.
10.5. POLICY REQUIREMENTS. All insurance required to be maintained by
-------------------
Tenant shall be issued by insurance companies authorized to do insurance
business in the State of California and rated not less than A-VIII in Best's
Insurance Guide. A certificate of insurance (or, at Landlord's option, copies
of the applicable policies) evidencing the insurance required under this Article
X shall be delivered to Landlord not less than thirty (30) days prior to the
Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any deed of trust holder, mortgagee or ground lessor designated by Landlord to
Tenant. Tenant shall furnish Landlord with a replacement certificate with
respect to any insurance not less than thirty (30) days prior to the expiration
of the current policy. Tenant shall have the right to provide the insurance
required by this Article X pursuant to blanket policies, but only if such
blanket policies expressly provide coverage to the Premises and Landlord as
required by this Lease.
10.6. WAIVER OF SUBROGATION. Each party hereby waives any right of
---------------------
recovery against the other for injury or loss due to hazards covered by
insurance or required to be covered, to the extent of the injury or loss covered
thereby. Any policy of insurance to be provided by Tenant or Landlord pursuant
to this Article X shall contain a clause denying the applicable insurer any
right of subrogation against the other party.
10.7. FAILURE TO INSURE. If Tenant fails to maintain any insurance
-----------------
which Tenant is required to maintain pursuant to this Article X, Tenant shall be
liable to Landlord for any loss or cost resulting from such failure to maintain.
Tenant may not self-insure against any risks required to be covered by insurance
without Landlord's prior written consent.
ARTICLE XI - DAMAGE OR DESTRUCTION
----------------------------------
11.1. TOTAL DESTRUCTION. Except as provided in Section 11.3 below, this
-----------------
Lease shall automatically terminate if the Building is totally destroyed.
11.2. PARTIAL DESTRUCTION OF PREMISES. If the Premises are damaged by
-------------------------------
any casualty and, in Landlord's opinion, the Premises (exclusive of any
alterations made to the Premises by Tenant) can be restored to its pre-existing
condition within two hundred seventy (270) days after the date of the damage or
destruction, Landlord shall, upon written notice from Tenant to Landlord of such
damage, except as provided in Section 11.3, promptly and with due diligence
repair any damage to the Premises (exclusive of any Alterations to the Premises
made by Tenant, which shall be promptly repaired by tenant at its sole expense)
and, until such repairs are completed, the Rent shall be abated from the date of
damage or destruction in the same proportion that the rentable area of the
portion of the Premises which is unusable by Tenant in the conduct of its
business bears to the total rentable area of the Premises. If such repairs
cannot, in Landlord's opinion, be made within said two hundred seventy (270) day
period, then Landlord
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<PAGE>
may, at its option, exercisable by written notice given to Tenant within thirty
(30) days after the date of the damage or destruction, elect to make the repairs
within a reasonable time after the damage or destruction, in which event this
Lease shall remain in full force and effect but the Rent shall be abated as
provided in the preceding sentence; if Landlord does not so elect to make the
repairs, then either Landlord or Tenant shall have the right, by written notice
given to the other within sixty (60) days after the date of the damage or
destruction, to terminate this Lease as of the date of the damage or
destruction.
11.3. EXCEPTIONS TO LANDLORD'S OBLIGATIONS. Notwithstanding anything to
------------------------------------
the contrary contained in this Article XI, Landlord shall have no obligation to
repair the Premises if either: (a) the Building in which the Premises are
located is so damaged as to require repairs to (the Building exceeding twenty
percent (20%) of the full insurable value of the Building; or (b) Landlord
elects to demolish , the Building in which the Premises are located; or (c) the
damage or destruction occurs less than two (2) years prior to the Termination
Date, exclusive of option periods. Further, Tenant's Rent shall not be abated
if either (i) the damage or destruction is repaired within five (5) business
days after Landlord receives written notice from Tenant of the casualty, or
(iii) Tenant, or any officers, partners, employees, agents or invitees of
Tenant, or any assignee or subtenant of Tenant, is, in whole or in part,
responsible for the damage or destruction.
11.4. WAIVER. The provisions contained in this Lease shall supersede
------
any contrary laws (whether statutory, common law or otherwise) now or hereafter
in effect relating to damage, destruction, self-help or termination, including
California Civil Code Sections 1932 and 1933.
ARTICLE XII - CONDEMNATION
--------------------------
12.1. TAKING. If the entire Premises or so much of the Premises as to
-------
render the balance unusable by Tenant shall be taken by condemnation, sale in
lieu of condemnation or in any other manner for any public or quasi-public
purpose (collectively "Condemnation"), and if Landlord, at its option, is unable
or unwilling to provide substitute premises containing at least as much rentable
area as described in Section 1.2 above, then this Lease shall terminate on the
data that title or possession to the Premises is taken by the condemning
authority, whichever is earlier.
12.2. AWARD. In the event of any Condemnation, the entire award for
-----
such taking shall belong to Landlord. Tenant shall have no claim against
Landlord or the award for the value of any unexpired term of this Lease or
otherwise. Tenant shall be entitled to independently pursue a separate award in
a separate proceeding for Tenant's relocation costs directly associated with the
taking, provided such separate award does not diminish Landlord's award.
12.3. TEMPORARY TAKING. No temporary taking of the Premises shall
----------------
terminate this Lease or entitle Tenant to any abatement of the Rent payable to
Landlord under this Lease; provided, further, that any award for such temporary
taking shall belong to Tenant to the extent that the award applies to any time
period during the Lease Term and to Landlord to the extent that the award
applies to any time period outside the Lease Term.
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<PAGE>
ARTICLE XIII - RELOCATION
-------------------------
13.1. RELOCATION. Landlord shall have the right, at its option upon not
----------
less than thirty (30) days prior written notice to Tenant, to relocate Tenant
and to substitute for the Premises described above other space in the Building
containing at least as much rentable area as the Premises described in Section
1.2 above. If Tenant is already in occupancy of the Premises, then Landlord
shall approve in advance the relocation expenses for purposes of reimbursement
for Tenant's reasonable moving and telephone relocation expenses and for
reasonable quantities of new stationery upon submission to Landlord of receipts
for such expenditures incurred by Tenant.
ARTICLE XIV - ASSIGNMENT AND SUBLETTING
---------------------------------------
14.1. RESTRICTION. Without the prior written consent of Landlord,
-----------
Tenant shall not, either voluntarily or by operation of law, assign, encumber,
or otherwise transfer this Lease or any interest herein, or sublet the Premises
or any part thereof, or permit the Premises to be occupied by anyone other than
Tenant or Tenant's employees (any such assignment, encumbrance, subletting,
occupation, or transfer is hereinafter referred to as a "Transfer"). For
purposes of this Lease, the term "Transfer" shall also include, (a) if Tenant is
a partnership, the withdrawal or change, voluntary, involuntary or by operation
of law, of a majority of the partners, or a transfer of a majority of
partnership interests, within a twelve month period, or the dissolution of the
partnership, and (b) if Tenant is a closely held corporation (i.e., whose stock
is not publicly held and not traded through an exchange or over the counter) or
a limited liability company, the dissolution, merger, consolidation, division,
liquidation or other reorganization of Tenant, or within a twelve month period:
(i) the sale or other transfer of more than an aggregate of 50% of the voting
securities of Tenant (other than to immediate family members by reason of gift
or death) or (ii) the sale, mortgage, hypothecation or pledge of more than an
aggregate of 50% of Tenant's net assets. An assignment, subletting or other
action in violation of the foregoing shall be void and, at Landlord's option,
shall constitute a material breach of this Lease. Notwithstanding anything
contained in this Article XIV to the contrary, Tenant shall have the right to
assign the Lease or sublease the Premises, or any part thereof, to an
"Affiliate" without the prior written consent of Landlord, but upon at least
(20) days' prior written notice to Landlord, provided that said Affiliate is not
in default under any other lease for space in a property that is managed by
Heitman Properties Ltd. or any of its affiliates. For purposes of this
provision, the term "Affiliate" shall mean any corporation or other entity
controlling, controlled by, or under common control with (directly or
indirectly) Tenant, including, without limitation, any parent corporation
controlling Tenant or any subsidiary that Tenant controls. The term "control,"
as used herein, shall mean the power to direct or cause the direction of the
management and policies of the controlled entity through the ownership of more
than fifty percent (50%) of the voting securities in such controlled entity.
Notwithstanding anything contained in this Article XIV to the contrary, Tenant
expressly covenants and agrees not to enter into any lease, sublease, license,
concession or other agreement for use, occupancy or utilization of the Premises
which provides for rental or other payment for such use, occupancy or
utilization
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<PAGE>
based in whole or in part on the net income or profits derived by any person
from the property leased, used, occupied or utilized (other than an amount based
on a fixed percentage or percentages of receipts or sales), and that any such
purported lease, sublease, license, concession or other agreement shall be
absolutely void and ineffective as a conveyance of any right or interest in the
possession, use, occupancy or utilization of any part of the Premises.
14.2. NOTICE TO LANDLORD. If Tenant desires to assign this Lease or
------------------
any interest herein, or to sublet all or any part of the Premises, then at least
thirty (30) days but not more than one hundred eighty (180) days prior to the
effective date of the proposed assignment or subletting, Tenant shall submit to
Landlord in connection with Tenant's request for Landlord's consent:
(A) A statement containing (i) the name and address of the
proposed assignee or subtenant; (ii) such financial information with respect to
the proposed assignee or subtenant as Landlord shall reasonably require, (iii)
the type of use proposed for the Premises; and (iv) all of the principal terms
of the proposed assignment or subletting; and
(B) Four (4) originals of the assignment or sublease on a form
approved by Landlord and four (4) originals of the Landlord's Consent to
Sublease or Assignment and Assumption of Lease and Consent.
14.3. LANDLORD'S RECAPTURE RIGHTS. At any time within twenty (20)
---------------------------
business days after Landlord's receipt of all (but not less than all) of the
information and documents described in Section 14.2 above, Landlord may, at its
option by written notice to Tenant, elect to: (a) sublease the Premises or the
portion thereof proposed to be sublet by Tenant upon the same terms as those
offered to the proposed subtenant; (b) take an assignment of the Lease upon the
same terms as those offered to the proposed assignee; or (c) terminate the Lease
in its entirety or as to the portion of the Premises proposed to be assigned or
sublet, with a proportionate adjustment in the Rent payable hereunder if the
Lease is terminated as to less than all of the Premises. If Landlord does not
exercise any of the options described in the preceding sentence, then, during
the above-described twenty (20) business day period, Landlord shall either
consent or deny its consent to the proposed assignment or subletting.
14.4. LANDLORD'S CONSENT; STANDARDS. Landlord's consent to a proposed
-----------------------------
assignment or subletting shall not be unreasonably withheld; but, in addition to
any other grounds for denial. Landlord's consent shall be deemed reasonably
withheld if, in Landlord's good faith judgment: (i) the proposed assignee or
subtenant does not have the financial strength to perform its obligations under
this Lease or any proposed sublease; (ii) the business and operations of the
proposed assignee or subtenant are not of comparable quality to the business and
operations being conducted by other tenants in the Building; (iii) the proposed
assignee or subtenant intends to use any part of the Premises for a purpose not
permitted under this Lease; (iv) either the proposed assignee or subtenant, or
any person which directly or indirectly controls, is controlled by, or is-under
common control with the proposed assignee or subtenant occupies
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space in the Building, or is negotiating with Landlord to lease space in the
Building; (v) the proposed assignee or subtenant is disreputable; or (vi) the
use of the Premises or the Building by the proposed assignee or subtenant would,
in Landlord's reasonable judgment, impact the Building in a negative manner
including but not limited to significantly increasing the pedestrian traffic in
and out of the Building or requiring any alterations to the Building to comply
with applicable laws; (vii) the subject space is not regular in shape with
appropriate means of ingress and egress suitable for normal renting purposes;
(viii) the transferee is a government (or agency or instrumentality thereof) or
(ix) Tenant has failed to cure a default at the time Tenant requests consent to
the Proposed Transfer.
14.5. ADDITIONAL RENT. If Landlord consents to any such assignment or
---------------
subletting, two-thirds (2/3) of the amount by which all sums or other economic
consideration received by Tenant in connection with such assignment or
subletting, whether denominated as rental or otherwise, exceeds, in the
aggregate, the total sum which Tenant is obligated to pay Landlord under this
Lease (prorated to reflect obligations allocable to less than all of the
Premises under a sublease) shall be paid to Landlord promptly after receipt as
additional Rent under the Lease without affecting or reducing any other
obligation of Tenant hereunder.
14.6. LANDLORD'S COSTS. If Tenant shall Transfer this Lease or all or
----------------
any part of the Premises or shall request the consent of Landlord to any
Transfer, Tenant shall pay to Landlord as additional rent Landlord's costs
related thereto, including Landlord's reasonable attorneys' fees and a minimum
fee to Landlord of Five Hundred Dollars ($500.00).
14.7. CONTINUING LIABILITY OF TENANT. Notwithstanding any Transfer,
------------------------------
Tenant shall remain as fully and primarily liable for the payment of Rent and
for the performance of all other obligations of Tenant contained in this Lease
to the same extent as if the Transfer had not occurred; provided, however, that
any act or omission of any transferee, other than Landlord, that violates the
terms of this Lease shall be deemed a violation of this Lease by Tenant.
14.8. NON-WAIVER. The consent by Landlord to any Transfer shall not
----------
relieve Tenant, or any person claiming through or by Tenant, of the obligation
to obtain the consent of Landlord, pursuant to this Article XIV, to any further
Transfer. In the event of an assignment or subletting, Landlord may collect
rent from the assignee or the subtenant without waiving any rights hereunder and
collection of the rent from a person other than Tenant shall not be deemed a
waiver of any Landlord's rights under this Article XIV, an acceptance of
assignee or subtenant as Tenant, or a release of Tenant from the performance of
Tenant's obligations under this Lease. If Tenant shall default under this Lease
and fail to cure within the time permitted, Landlord is irrevocably authorized,
as Tenant's agent and attorney-in-fact, to direct any transferee to make all
payments under or in connection with the Transfer directly to Landlord (which
Landlord shall apply towards Tenant's obligations under this Lease) until such
default is cured.
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ARTICLE XV - DEFAULT AND REMEDIES
---------------------------------
15.1. EVENTS OF DEFAULT BY TENANT. The occurrence of any of the
---------------------------
following shall constitute a material default and breach of this Lease by
Tenant:
(A) The failure by Tenant to pay Base Rent or make any other
payment required to be made by Tenant hereunder as and when due.
(B) The abandonment of the Premises by Tenant or the vacation of
the Premises by Tenant for fourteen (14) consecutive days (with or without the
payment of Rent).
(C) The failure by Tenant to observe or perform any other
provision of this Lease to be observed or performed by Tenant, other than those
described in Sections 15.1 (A) and 15.1 (B) above, if such failure continues for
ten (10) days. after written notice thereof by Landlord to Tenant; provided,
however, that if the nature of the default is such that it cannot be cured
within the ten (10) day period, no default shall exist if Tenant commences the
curing of the default within the ten (10) day period and thereafter diligently
prosecutes the same to completion. The ten (10) day notice described herein
shall be in lieu of, and not in addition to, any notice required under Section
1161 of the California Code of Civil Procedure or any other law now or hereafter
in effect requiring that notice of default be given prior to the commencement of
an unlawful detainer or other legal proceeding.
(D) The making by Tenant or its Guarantor of any general
assignment for the benefit of creditors, the filing by or against Tenant or its
Guarantor of a petition under any federal or state bankruptcy or insolvency laws
(unless, in the case of a petition filed against Tenant or its Guarantor the
same is dismissed within thirty (30) days after filing); the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
at the Premises or Tenant's interest in this Lease or the Premises; when
possession is not restored to Tenant within thirty (30) days; or the attachment,
execution, or other seizure of substantially all of Tenant's assets located at
the Premises or Tenant's interest in this Lease or the Premises, if such seizure
is not discharged within thirty (30) days.
(E) Any material misrepresentation herein, or material
misrepresentation or omission in any financial statements or other materials
provided by Tenant or any Guarantor in connection with negotiating or entering
into this Lease or in connection with any Transfer under Section 14.1.
15.2. LANDLORD'S RIGHT TO TERMINATE UPON TENANT DEFAULT. In the event
-------------------------------------------------
of any default by Tenant as provided in Section 15.1 above, Landlord shall have
the right to terminate this Lease and recover possession of the Premises by
giving written notice to Tenant of Landlord's election to terminate this Lease,
in which event Landlord shall be entitled to receive from Tenant:
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(A) The worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus
(B) The worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided; plus
(C) The worth at the time of award of the amount, by which the
unpaid Rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus
(D) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom; and
(E) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by applicable
law.
As used in subparagraphs (A) and (B) above, "worth at the time of
award" shall be computed by allowing interest on such amounts at the then
highest lawful rate of interest, but in no event to exceed one percent (1%) per
annum plus the rate established by the Federal Reserve Bank of San Francisco on
advances made to member banks under Sections 13 and 13a of the Federal Reserve
Act ("discount rate") prevailing at the time of the award. As used in paragraph
(C) above, "worth at the time of award" shall be computed by discounting such
amount by (i) the discount rate of the Federal Reserve Bank of San Francisco
prevailing at the time of award plus (ii) one percent (1%).
15.3. MITIGATION OF DAMAGES. If Landlord terminates this Lease or
---------------------
Tenant's right to possession of the Premises, Landlord shall have no obligation
to mitigate Landlord's damages except to the extent required by applicable law.
If Landlord has not terminated this Lease or Tenant's right to possession of the
Premises, Landlord shall have no obligation to mitigate under any circumstances
and may permit the Premises to remain vacant or abandoned. If Landlord is
required to mitigate damages as provided herein (i) Landlord shall be required
only to use reasonable efforts to mitigate, which shall not exceed such efforts
as Landlord generally uses to lease other space in the Building, (ii) Landlord
will not be deemed to have failed to mitigate if Landlord or its affiliates
lease any other portions of the Building or other projects owned by Landlord or
its affiliates in the same geographic area, before reletting all or any of the
Premises, and (iii) any failure to mitigate as described herein with respect to
any period of time shall only reduce the Rent and other amounts to which
Landlord is entitled hereunder by the reasonable rental value of the Premises
during such period. In recognition that the value of the Building at the time
in question, or at Landlord's option, below the rates provided in this Lease, or
containing terms less favorable than those contained herein, shall not give rise
to a claim by Tenant that Landlord failed to mitigate Landlord's damages.
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15.4. LANDLORD'S RIGHT TO CONTINUE LEASE UPON TENANT DEFAULT. In the
------------------------------------------------------
event of a default of this Lease and abandonment of the Premises by Tenant, if
Landlord does not elect to terminate this Lease as provided in Section 15.2
above, Landlord may from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease. Without limiting the
foregoing, Landlord has the remedy described in California Civil Code Section
1951.4 (Landlord may continue this Lease in effect after Tenant's default and
abandonment and recover Rent as it becomes due, if Tenant has the right to
Transfer, subject only to reasonable limitations). In the event Landlord re-
lets the Premises, to the fullest extent permitted by law, the proceeds of any
reletting shall be applied first to pay to Landlord all costs and expenses of
such reletting (including without limitation, costs and expenses of retaking or
repossessing the Premises, removing persons and property therefrom, securing new
tenants, including expenses for redecoration, alterations and other costs in
connection with preparing the Premises for the new tenant, and if Landlord shall
maintain and operate the Premises the costs thereof) and receivers' fees
incurred in connection with the appointment of and performance by a receiver to
protect the Premises and Landlord's interest under this Lease and any necessary
or reasonable alterations; second, to the payment of any indebtedness of Tenant
to Landlord other than Rent due and unpaid hereunder; third, to the payment of
Rent due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of other or future obligations of Tenant to
Landlord as the same may become due and payable, and Tenant shall not be
entitled to receive any portion of such revenue.
15.5. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
----------------------------
performed by Tenant under this Lease shall be. performed by Tenant at Tenant's
sole cost and expense. If Tenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder or shall fail to perform any other act
on its part to be performed hereunder, Landlord may, but shall not be obligated
to, make any payment or perform any such other act on Tenant's part to be made
or performed, without waiving or releasing Tenant of its obligations under this
Lease. Any sums so paid by Landlord and all necessary incidental costs,
together with interest thereon at the lesser of the maximum rate permitted by
law if any or twelve percent (12%) per annum from the date of such payment,
shall be payable to Landlord as additional rent on demand and Landlord shall
have the same rights and remedies in the event of nonpayment as in the case of
default by Tenant in the payment of Rent.
15.6. DEFAULT UNDER OTHER LEASES. If the term of any lease, other than
--------------------------
this Lease, heretofore or hereafter made by Tenant for any office space in the
Building shall be terminated or terminable after the making of this Lease
because of any default by Tenant under such other lease, such fact shall empower
Landlord. at Landlord's sole option, to terminate this Lease by notice to Tenant
or to exercise any of the rights or remedies set forth in Section 15.02.
15.7. NON-WAIVER. Nothing in this Article shall be deemed to affect
----------
Landlord's rights to indemnification for liability or liabilities arising prior
to termination of this Lease or Tenant's right to possession of the Premises for
personal injury or property damages under the indemnification clause or clauses
contained in this Lease. No acceptance by Landlord of a lesser
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sum than the Rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in the Lease provided. The delivery of keys to any
employee of Landlord or to Landlord's agent or any employee thereof shall not
operate as a termination of this Lease or a surrender of the Premises.
15.8. CUMULATIVE REMEDIES. The specific remedies to which Landlord may
-------------------
resort under the terms of the Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which it may be lawfully
entitled in case of any breach or threatened breach by Tenant of any provisions
of the Lease. In addition to the other remedies provided in the Lease, Landlord
shall be entitled to a restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of the
Lease. or to a decree compelling specific performance of any such covenants,
conditions or provisions.
15.9. DEFAULT BY LANDLORD. Landlord's failure to perform or observe,
-------------------
any of its obligations under this Lease shall constitute a default by Landlord
under this Lease only if such failure shall continue for a period of thirty (30)
days (or the additional time, if any, that is reasonably necessary to promptly
and diligently cure the failure) after Landlord receives written notice from
Tenant specifying the default. The notice shall give in reasonable detail the
nature and extent of the failure and shall identify the Lease provision(s)
containing the obligation(s). If Landlord shall default in the performance of
any of its obligations under this Lease (after notice and opportunity to cure as
provided herein), Tenant may pursue any remedies available to it under the law
and this Lease, except that in on event shall Landlord be liable for punitive
damages, lost profits, business interruption, speculative, consequential or
other such damages. In recognition that Landlord must receive timely payments
of Rent and operate the Building, Tenant shall have no right of self-help to
perform repairs or any other obligation of Landlord, and shall have no right to
withhold, set-off, or abate Rent.
ARTICLE XV1 - ATTORNEYS FEES; COSTS OF SUIT
-------------------------------------------
16.1. ATTORNEYS FEES. If either Landlord or Tenant shall commence any
--------------
action or other proceeding against the other arising out of, or relating to,
this Lease or the Premises, the prevailing party shall be entitled to recover
from the losing party in addition to any other relief, its actual attorneys fees
irrespective of whether or not the action or other proceeding is prosecuted to
judgment and irrespective of any court schedule of reasonable attorneys' fees.
In addition, Tenant shall reimburse Landlord, upon demand, for all reasonable
attorneys' fees incurred in collecting Rent or otherwise seeking enforcement
against Tenant, its sublessees and assigns, of Tenant's obligations under this
Lease.
16.2. INDEMNIFICATION. Should Landlord be made a party to any
---------------
litigation instituted by Tenant against a party other than Landlord, or by a
third-party against Tenant, Tenant shall
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indemnify, hold harmless and defend Landlord from any and all loss, cost,
liability, damage or expense incurred by Landlord, including attorneys' fees, in
connection with the litigation.
ARTICLE XVII - SUBORDINATION- AND ATTORNMENT
--------------------------------------------
17.1. SUBORDINATION. This Lease, and the rights of Tenant hereunder,
-------------
are and shall be subject and subordinate to the interests of (i) all present and
future ground leases and master leases of all or any part of the Building; (ii)
present and future mortgages and deeds of trust encumbering all or any part of
the Building, (iii) all past and future advances made under an such mortgages or
deeds of trust; and (iv) all renewals, modifications, replacements and
extensions of any such ground leases, master leases, mortgages and deeds of
trust; provided, however, that any lessor under any such ground lease or master
lease or any mortgagee or beneficiary under any such mortgage or deed of trust
(any such lessor, mortgagee or beneficiary is hereinafter referred to as a
"Mortgagee") shall have the right to elect, by written notice given to Tenant,
to have this Lease made superior in whole or in part to any such ground lease,
master lease, mortgage or deed of trust (or subject and subordinate to such
ground lease, master lease, mortgage or deed of trust but superior to any junior
mortgage or junior deed of trust). Upon demand, Tenant shall execute,
acknowledge and deliver any instruments reasonably requested by Landlord or any
such Mortgagee to effect the purposes of this Section 17.1. Such instruments
may contain, among other things, provisions to the effect that such Mortgagee
(hereafter, for the purposes of this Section 17.1, a "Successor Landlord") shall
(i) not be liable for any act or omission of Landlord or its predecessors, if
any, prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease; (ii) not be subject to any offsets or defenses which
Tenant might have been able to assert against Landlord or its predecessors, if
any, prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease; (iii) not be liable for the return of any security
deposit under the Lease unless the same shall have actually been deposited with
such Successor Landlord; (iv) be entitled to receive notice of any Landlord
default under this Lease plus a reasonable opportunity to cure such default
prior to Tenant having any right or ability to terminate this Lease as a result
of such Landlord default; (v) not be bound by any rent or additional rent which
Tenant might have paid for more than the current month to Landlord; (vi) not be
bound by any amendment or modification of the Lease or any cancellation or
surrender of the same made without Successor Landlord's prior written consent;
(vii) not be bound by any obligation to make any payment to Tenant which was
required to be made prior to the time such Successor Landlord succeeded to
Landlord's interest and (viii) not be bound by any obligation under the Lease to
perform any work or to make any improvements to the demised Premises. Any
obligations of any Successor Landlord under its respective lease shall be non-
recourse as to any assets of such Successor Landlord other than its interest in
the Premises and improvements.
17.2. ATTORNMENT. If the interests of Landlord under the Lease shall
----------
be transferred to any superior Mortgagee or other purchaser or person taking
title to the Building by reason of the termination of any superior lease or the
foreclosure of any superior mortgage or deed of trust, Tenant shall be bound to
such Successor Landlord under all of the terms, covenants and
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conditions of the Lease for the balance of the term thereof remaining and any
extensions or renewals thereof which may be effected in accordance with any
option therefor in the Lease, with the same force and effect as if Successor
Landlord were the landlord under the Lease, and Tenant shall attorn to and
recognize as Tenant's landlord under this Lease such Successor Landlord as its
landlord, said attornment to be effective and self-operative without the
execution of any further instruments upon Successor Landlord's succeeding to the
interest of Landlord under the Lease. Tenant shall, upon demand, execute any
documents reasonably requested by any such person to evidence the attornment
described in this Section 17.2. Concurrently, upon written request from Tenant,
and provided Tenant is not in default under this Lease, Landlord agrees to use
diligent, commercially reasonable efforts to obtain a Non-Disturbance Agreement
from the Successor Landlord. Such Non-Disturbance Agreement may be embodied in
the Mortgagee's customary form of Subordination and Non-Disturbance Agreement.
If, after exerting diligent, commercially reasonable efforts, Landlord is unable
to obtain a Non-Disturbance Agreement from any such Mortgagee, Landlord shall
have no further obligation to Tenant with respect thereto.
17.3. MORTGAGEE PROTECTION. Tenant agrees to give any Mortgagee, by
--------------------
registered or certified mail, a copy of any notice of default served upon
Landlord by Tenant, provided that prior to such notice Tenant has been notified
in writing (by way of service on Tenant of a copy of Assignment of Rents and
Leases, or otherwise) of the address of such Mortgagee (hereafter the "Notified
Party"). Tenant further agrees that if Landlord shall have failed to cure such
default within twenty (20) days after such notice to Landlord (or if such
default cannot be cured or corrected within that time, then such additional time
as may be necessary if Landlord has commenced within such twenty (20) days and
is diligently pursuing the remedies or steps necessary to cure or correct such
default then the Notified Party shall have an additional thirty (30) days within
which to cure or correct such default, (or if such default cannot be cured or
corrected within that time, then such additional time as may be necessary if the
Notified Party has commenced within such thirty (30) days and is diligently
pursuing the remedies or steps necessary to cure or correct such default).
Until the time allowed, as aforesaid, for the Notified Party to cure such
default has expired without cure, Tenant shall have no right to, and shall not,
terminate this Lease on account of Landlord's default.
ARTICLE XVIII - QUIET ENJOYMENT
-------------------------------
18.1. Provided that Tenant performs all of its obligations hereunder.
Tenant shall have and peaceably enjoy the Premises during the Lease Term free of
claims by or through Landlord, subject to all of the terms and conditions
contained in this Lease.
ARTICLE XIX - RULES AND REGULATIONS
-----------------------------------
19.1. The Rules and Regulations attached hereto as Exhibit Care hereby
incorporated by reference herein and made a part hereof. Tenant shall abide by,
and faithfully observe and comply with the Rules and Regulations and any
reasonable and non-discriminatory amendments.
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modifications and/or additions thereto as may hereafter be adopted and published
by written notice to tenants by Landlord for the safety, care, security, good
order and/or cleanliness of the Premises and/or the Building. Landlord shall not
be liable to Tenant for any violation of such rules and regulations by any other
tenant or occupant of the Building.
ARTICLE XX - ESTOPPEL CERTIFICATES
----------------------------------
20.1. Tenant agrees at any time and from time to time upon not less than
ten (10) days' prior written notice from Landlord to execute, acknowledge and
deliver to Landlord a statement in writing addressed and certifying to Landlord,
to any current or prospective Mortgagee or, any assignee thereof, to any
prospective purchaser of the land, improvements or both comprising the Building,
and to any other party designated by Landlord, that this Lease is unmodified and
in full force and effect (or if there have been modifications, that the same is
in full force and effect as modified and stating the modifications); that Tenant
has accepted possession of the Premises, which are acceptable in all respects,
and that any improvements required by the terms of this Lease to be made by
Landlord have been completed to the satisfaction of Tenant; that Tenant is in
full occupancy of the Premises; that no rent has been paid more than thirty (30)
days in advance; that the first month's Base Rent has been paid; that Tenant is
entitled to no free rent or other concessions except as stated in this Lease;
that Tenant has not been notified of any previous assignment of Landlord's or
any predecessor landlord's interest under this Lease; the dates to which Base
Rent, additional rental and other charges have been paid; that Tenant, as of the
date of such certificate, has no charge, lien or claim of setoff under this
Lease or otherwise against Base Rent, additional rental or other charges due or
to become due under this Lease; that Landlord is not in default in performance
of any covenant, agreement or condition contained in this Lease; or any other
matter relating to this Lease or the Premises or, if so, specifying each such
default. If there a Guaranty under this Lease, said Guarantor shall confirm the
validity of the Guaranty by joining in the execution of the Estoppel Certificate
or other documents so requested by Landlord or Mortgagee. In addition, in the
event that such certificate is being given to any Mortgagee such statement may
contain any other provisions customarily required by such Mortgagee including,
without limitation, an agreement on the part of Tenant to furnish to such
Mortgagee, written notice of any Landlord default and a reasonable opportunity
for such Mortgagee to cure such default prior to Tenant being able to terminate
this Lease. Any such statement delivered pursuant to this Section may be relied
upon by Landlord or any Mortgagee, or prospective purchaser to whom it is
addressed and such statement, if required by its addressee, may so specifically
state. If Tenant does not execute, acknowledge and deliver to Landlord the
statement as and when required herein, Landlord is hereby granted an irrevocable
power-of-attorney, coupled with an interest, to execute such statement on
Tenant's behalf, which statement shall be binding on Tenant to the same extent
as if executed by Tenant.
ARTICLE XXI - ENTRY BY LANDLORD
-------------------------------
21.1. Landlord may enter the Premises at all reasonable times to:
inspect the same; exhibit the same to prospective purchasers, Mortgagees or
tenants; determine whether Tenant is
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complying with all of its obligations under this Lease; supply janitorial and
other services to be provided by Landlord to Tenant under this Lease; post
notices of non-responsibility; and make repairs or improvements in or to the
Building or the Premises; provided, however, that all such work shall be done as
promptly as reasonably possible and so as to cause as little interference to
Tenant as reasonably possible. Tenant hereby waives any claim for damages for
any injury or inconvenience to, or interference with, Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises or any other loss
occasioned by such entry. Landlord shall at all times have and retain a key with
which to unlock all of the doors in, or about the Premises (excluding Tenant's
vaults, safes and similar areas designated by Tenant in writing in advance), and
Landlord shall have the right to use any and all means by which landlord may
deem proper to open such doors to obtain entry to the Premises, and any entry to
the Premises obtained by Landlord by any such means, or otherwise, shall not
under any circumstances be deemed or construed to be a forcible or unlawful
entry into or a detainer of the Premises or an eviction, actual or constructive,
of Tenant from any part of the Premises. Such entry by Landlord shall not act as
a termination of Tenant's duties under this Lease. If Landlord shall be required
to obtain entry by means other than a key provided by Tenant; the cost of such
entry shall be payable by Tenant to Landlord as additional rent.
ARTICLE XXII
------------
LANDLORD'S LEASE UNDERTAKINGS-EXCULPATION FROM PERSONAL LIABILITY;
------------------------------------------------------------------
TRANSFER OF LANDLORD'S INTEREST
-------------------------------
22.1. LANDLORD'S LEASE UNDERTAKINGS. Notwithstanding anything to the
-----------------------------
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of Tenant or its
successors or assigns against Landlord with respect to the alleged breach by or
on the part of Landlord of any representation, warranty, covenant, undertaking
or agreement contained in any of the Lease Documents or otherwise arising out of
Tenant's use of the Premises or the Building (collectively, "Landlord's Lease
Undertakings") shall extend only to Landlord's interest in the real estate of
which the Premises demised under the Lease Documents are a part ("Landlord's
Real Estate") and not to any other assets of Landlord or its beneficiaries; and
(b) except to the extent of Landlord's interest in Landlord's Real Estate, no
personal liability or personal responsibility of any sort with respect to any of
Landlord's Lease Undertakings or any alleged breach thereof is assumed by, or
shall at any time be asserted or enforceable against, Landlord, Heitman Capital
Management Corporation or Heitman Properties Ltd., or against any of their
respective directors, officers, employees, agents, constituent partners,
beneficiaries, trustees or representatives.
22.2. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of
-------------------------------
Landlord's interest in the Building, Landlord shall be automatically freed and
relieved from all applicable liability with respect to performance of any
covenant or obligation on the part of Landlord,
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provided any deposits or advance rents held by Landlord are turned over to the
grantee and said grantee expressly assumes, subject to the limitations of this
Section 22, all the terms, covenants and conditions of this Lease to be
performed on the part of Landlord, it being intended hereby that the covenants
and obligations contained in this Lease on the part of Landlord shall, subject
to all the provisions of this Section 22, be binding on Landlord, its successors
and assigns, only during their respective periods of ownership.
ARTICLE XXIII - HOLDOVER TENANCY
--------------------------------
23.1. If Tenant holds possession of the Premises after the expiration or
termination of the Lease Term, by lapse of time or otherwise, Tenant shall
become a tenant at sufferance upon all of the terms contained herein, except as
to Lease Term and Rent. During such holdover period, Tenant shall pay to
Landlord a monthly rental equivalent to two hundred percent (200%) of the Rent
payable by Tenant to Landlord with respect to the last month of the Lease Term.
The monthly rent payable for such holdover period shall in no event be construed
as a penalty or as liquidated damages for such retention of possession. Without
limiting the foregoing, Tenant hereby agrees to indemnify, defend and hold
harmless Landlord, its beneficiary, and their respective agents, contractors and
employees, from and against any and all claims, liabilities, actions losses,
damages (including without limitation, direct, indirect, incidental and
consequential) and expenses (including, without limitation, court costs and
reasonable attorneys' fees) asserted against or sustained by any such party and
arising from or by reason of such retention of possession, which obligations
shall survive the expiration or termination of the Lease Term.
ARTICLE XXIV - NOTICES
----------------------
24.1. All notices which Landlord or Tenant may be required, or may desire,
to serve on the other may be served, as an alternative to personal service, by
mailing the same by registered or certified mail, postage prepaid, addressed to
Landlord at the address for Landlord set forth in Section 1.12 above and to
Tenant at the address for Tenant set forth in Section 1.13 above, or, from and
after the Commencement Date, to Tenant at the Premises whether or not Tenant has
departed from, abandoned or vacated the Premises, or addressed to such other
address or addresses as either Landlord or Tenant may from time to time
designate to the other in writing. Any notice shall be deemed to have been
served at the time the same was posted.
ARTICLE XXV - BROKERS
---------------------
25.1. The parties recognize as the broker(s) who procured this Lease the
firm(s) specified in Section 1.14 and agree that Landlord shall be solely
responsible for the payment of any brokerage commissions to said broker(s), and
that Tenant shall have no responsibility therefor unless written provision to
the contrary has been made a part of this Lease. If Tenant has dealt with any
other person or real estate broker in respect to leasing, subleasing or renting
space in the Building, Tenant shall be solely responsible for the payment of any
fee due said
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<PAGE>
person or firm and Tenant shall protect, indemnify, hold harmless and defend
Landlord from any liability in respect thereto.
ARTICLE XXVI - COMMUNICATIONS AND COMPUTER LINES
------------------------------------------------
26.1. Tenant may, in a manner consistent with the provisions and
requirements of this Lease, install, maintain, replace, remove or use any
communications or computer wires, cables and related devices (collectively the
"Lines") at the building in or serving the Premises, provided: (a) Tenant shall
obtain Landlord's prior written consent, which consent may be conditioned as
required by Landlord, (b) if Tenant at any time uses any equipment that may
create an electromagnetic field exceeding the normal insulation ratings of
ordinary twisted pair riser cable or cause radiation higher than normal
background radiation, the Lines therefor (including riser cables) shall be
appropriately insulated to prevent such excessive electromagnetic fields or
radiation, and (c) Tenant shall pay all costs in connection therewith. Landlord
reserves the right to require that Tenant remove any Lines which are installed
in violation of these provisions.
Landlord may (but shall not have the obligation to): (i) install new
Lines at the Property, and (ii) create additional space for Lines at the
Property, and adopt reasonable and uniform rules and regulations with respect to
the Lines.
Notwithstanding anything to the contrary contained in Article IX,
Landlord reserves the right to require that Tenant remove any or all Lines
installed by or for Tenant within or serving the Premises upon termination of
this Lease. Tenant shall not, without the prior written consent of Landlord in
each instance, grant to any third party a security interest or lien in or on the
Lines, and any such security interest or lien granted without Landlord's written
consent shall be null and void. Except to the extent arising from the
intentional or negligent acts of Landlord or Landlord's agents or employees,
Landlord shall have no liability for damages arising from, and Landlord does not
warrant that Tenant's use of any Lines will be free from the following
(collectively called "Line Problems"): (x) any eavesdropping or wire-tapping by,
unauthorized parties, (y) any failure of any Lines to satisfy Tenant's
requirements, or (z) any shortages, failures, variations, interruptions,
disconnections, loss or damage caused by the installation, maintenance,
replacement, use or removal of Lines by or for other tenants or occupants at the
Property. Under no circumstances shall any Line Problems be deemed an actual or
constructive eviction of Tenant, render Landlord liable to Tenant for abatement
of Rent, or relieve Tenant from performance of Tenant's obligations under this
Lease. Landlord in no event shall be liable for damages by reason of loss of
profits, business interruption or other consequential damage arising from any
Line Problems.
ARTICLE XXVII - MISCELLANEOUS
-----------------------------
27.1. ENTIRE AGREEMENT. This Lease contains all of the agreements and
----------------
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant
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<PAGE>
in connection with such leasing. Landlord has not made, and Tenant is not
relying upon, any warranties, or representations, promises or statements made by
Landlord or any agent of Landlord, except as expressly set forth herein. This
Lease supersedes any and all prior agreements and understandings between
Landlord and Tenant and alone expresses the agreement of the parties.
27.2. AMENDMENTS. This Lease shall not be amended, changed or modified
----------
in any way unless in writing executed by Landlord and Tenant. Landlord shall
not have waived or released any of its rights hereunder unless in writing and
executed by Landlord.
27.3. SUCCESSORS. Except as expressly provided herein, this Lease and
----------
the obligations of Landlord and Tenant contained herein shall bind and benefit
the successors and assigns of the parties hereto.
27.4. FORCE MAJEURE. Landlord shall incur no 'liability' to Tenant with
-------------
respect to, and shall not be responsible for any failure to perform, any of
Landlord's obligations hereunder if such failure is caused by any reason beyond
the control of Landlord including, but not limited to, strike, labor trouble,
governmental rule, regulations, ordinance, statute or interpretation, or by
fire, earthquake, civil commotion, or failure or disruption of utility services.
The amount of time for Landlord to perform any of Landlord's obligations shall
be extended by the amount of time Landlord is delayed in performing such
obligation by reason of any force majeure occurrence whether similar to or
different from the foregoing types of occurrences.
27.5. SURVIVAL OF OBLIGATIONS. Any obligations of Tenant accruing prior
-----------------------
to the expiration of the Lease shall survive the expiration or earlier
termination of the Lease, and Tenant shall promptly perform all such obligations
whether or not this Lease has expired or been terminated.
27.6. LIGHT AND AIR. No diminution or shutting off-of any light, air or
-------------
view by any structure now or hereafter erected shall in any manner affect this
Lease or the obligations of Tenant hereunder, or increase any of the obligations
of Landlord hereunder.
27.7. GOVERNING LAW. This Lease shall be governed by, and construed in
-------------
accordance with, the laws of the State of California.
27.8. SEVERABILITY. In the event any provision of this Lease is found
------------
to be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
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<PAGE>
27.9. CAPTIONS. All captions, headings, titles, numerical references
--------
and computer highlighting are for convenience only and shall have no effect on
the interpretation of this Lease.
27.10. INTERPRETATION. Tenant acknowledges that it has read and
--------------
reviewed this Lease and that it has had the opportunity to confer with counsel
in the negotiation of this Lease. Accordingly, this Lease shall be construed
neither for nor against Landlord or Tenant, but shall be given a fair and
reasonable interpretation in accordance with the meaning of its terms and the
intent of the parties.
27.11. INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
---------------------
other provision of this Lease to be performed by Tenant are separate and
independent covenants of Tenant, and not dependent on any other provision of the
Lease.
27.12. NUMBER AND GENDER. All terms and words used in this Lease,
-----------------
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender as the context may require.
27.13. TIME IS OR THE ESSENCE. Time is of the essence of this Lease and
----------------------
the performance of all obligations hereunder.
27.14. JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
---------------------------
person or entity or if this Lease is guaranteed by any party, all such persons
shall be jointly and severally liable for payment of rents and the performance
of Tenant's obligations hereunder.
27.15. EXHIBITS. Exhibits A (Outline of Premises), B (Work Letter
--------
Agreement), C (Rules and Regulations), D (Guaranty) and E (Suite Acceptance
Letter) are incorporated into this Lease by reference arid made a part hereof.
27.16. OFFER TO LEASE. The submission of this Lease to Tenant or its
--------------
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until (a) it is executed
and delivered by Tenant to Landlord and (b) it is fully reviewed and executed by
Landlord; provided, however, that, upon execution of this Lease by Tenant and
delivery to Landlord, such execution and delivery by Tenant shall, in
consideration of the time and expense incurred by Landlord in reviewing the
Lease and Tenant's credit, constitute an offer by Tenant to Lease the Premises
upon the terms and conditions set forth herein (which offer to Lease shall be
irrevocable for twenty (20) business days following the date of delivery).
27.17. NO COUNTERCLAIM: CHOICE OF LAWS. It is mutually agreed that in
-------------------------------
the event Landlord commences any summary proceeding for non-payment of Rent,
Tenant will not interpose any counterclaim of whatever nature or description in
any such proceeding. In addition, Tenant hereby submits to local jurisdiction
in the State of California and agrees that any action by Tenant against Landlord
shall be instituted in the State of California and that Landlord
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<PAGE>
shall have personal jurisdiction over Tenant for any action brought by Landlord
against Tenant in the State of California.
27.18. ELECTRICAL SERVICE TO THE PREMISES. Anything set forth in
----------------------------------
Section 7.1 or elsewhere in this Lease to the contrary notwithstanding,
electricity to the Premises shall not be furnished by Landlord, but shall be
furnished by the approved electric utility company serving the Building.
Landlord shall permit Tenant to receive such service directly from such utility
company at Tenant's cost (except as otherwise provided herein) and shall permit
Landlord's wire and conduits, to the extent available, suitable and safely
capable, to be used for such purposes.
27.19. RIGHTS RESERVED BY LANDLORD. Landlord reserves the following
---------------------------
rights exercisable without notice (except as otherwise expressly provided to the
contrary in this Lease) and without being deemed an eviction or disturbance of
Tenant's use or possession of the Premises or giving rise to any claim for set-
off or abatement of Rent: (i) to change the name or street address of the
Building; (ii) to install, affix and maintain all signs on the exterior and/or
interior of the Building; (iii) to designate and/or approve prior to
installation, all types of signs, window shades, blinds, drapes, awnings or
other similar items, and all internal lighting that may be visible from the
exterior of the Premises and, notwithstanding the provisions of Article IX, the
design, arrangement, style, color and general appearance of the portion of the
Premises visible from the exterior, and contents thereof, including, without
limitation, furniture, fixtures, signs, art work, wall coverings, carpet and
decorations, and all changes, additions and removals thereto, shall, at all
times have the appearance of premises having the same type of exposure and used
for substantially the same purposes that are generally prevailing in comparable
office buildings in the area. Any violation of this provision shall be deemed a
material breach of this Lease; (iv) to change the arrangement of entrances,
doors, corridors, elevators and/or stairs in the Building, provided no such
change shall materially adversely affect access to the Premises; (v) to grant
any party the exclusive right to conduct any business or render any service in
the Building, provided such exclusive right shall not operate to prohibit Tenant
from using the Premises for the purposes permitted under this Lease; (vi) to
prohibit the placement of vending or dispensing machines of any kind in or about
the Premises other than for use by Tenant's employees; (vii) to prohibit the
placement of video or other electronic games in the Premises, (viii) to have
access for Landlord and other tenants of the Building to any mail chutes and
boxes located in or on the Premises according to the rules of the United States
Post Office and to discontinue any mail chute business in the Building; (ix) to
close the Building after normal business hours, except that Tenant and its
employees and invitees shall be entitled to admission at all times under such
rules and regulations as Landlord prescribes for security purposes; (x) to
install, operate and maintain security systems which monitor, by close circuit
television or otherwise, all persons entering or leaving the Building; (xi) to
install and maintain pipes, ducts, conduits, wires and structural elements
located in the Premises which serve other parts or other tenants of the
Building; and (xii) to retain at all times master keys or pass keys to the
Premises.
27.20. ASBESTOS. Tenant acknowledges that it has been expressly
--------
disclosed to Tenant by Landlord's Managing Agent that the Building and the
Premises contain asbestos-containing
-36-
<PAGE>
materials ("ACM"). The acknowledgment by Tenant of the ACM does not in any
manner impose any liability or responsibility on Tenant for removal, treatment
or abatement of such ACM or any responsibility whatsoever regarding such ACM
provided, however, that Tenant shall comply with all applicable laws and
regulations is connection with any work in the Premises including, but not
limited to, work with requires entry into the ceiling.
ARTICLE XXVIII
--------------
28.1. See attached Rider.
IN WITNESS WHEREOF, the parties hereto have executed this lease as of the
date first above written.
LANDLORD: TENANT:
STATE STREET BANK AND TRUST INTERNET CAPITAL GROUP, L.L.C.,
COMPANY OF CALIFORNIA, N.A., not THE ACCESS FUND, HAROLD S. ZLOT,
individually, but as Ancillary HAMILTON LANE ADVISORS, AND
Trustee for State Street Bank MARTIN S. GANS, joint and several
and Trust Company, a Massachusetts
banking corporation, not personally
but solely as Trustee for Telephone
Real Estate Equity Trust.
By: /s/ Kenneth A. Fox
----------------------------
By: HEITMAN CAPITAL MANAGEMENT Its: Internet Capital Group
CORPORATION, an Illinois corporation, ----------------------------
its duly authorized agent and attorney /s/ Harold S. Zlot
- -in-fact ----------------------------
By: ________________________________
Its: _______________________________
-37-
<PAGE>
RIDER TO LEASE DATED AS OF _________, 1996,
BY AND BETWEEN
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A. ("LANDLORD"),
AND INTERNET CAPITAL GROUP, L.L.C., THE ACCESS FUND, HAROLD S. ZLOT
HAMILTON LANE ADVISORS, AND MARTIN S. GANS, JOINT AND SEVERAL ("TENANT")
This Rider and the Lease shall, for any and all purposes, be deemed to be
one instrument. In the event of any conflict or inconsistency between the terms
and provisions of the Lease and the terms and provisions of this Rider, the
terms and provisions of this Rider shall, in all instances, control and prevail.
Except as expressly defined or modified in this Rider, all words and phrases
which are defined in the Lease shall have the same meaning in this Rider as is
ascribed to such words and phrases in the Lease.
ARTICLE 1.05 - COMMENCEMENT DATE. (ADDED MATERIAL)
-----------------
Tenant may take possession November 9, 1996, provided that the Premises are
considered substantially complete, which Landlord shall make its best commercial
effort to complete, further described in the Work Letter, Exhibit B, free from
Base Rent, provided that all other terms and conditions under this Lease are
satisfied.
ARTICLE 1.07 - BASE RENT.
---------
Subject to adjustment as provided in Article 4, the "Base Rent" schedule shall
be:
<TABLE>
<CAPTION>
Monthly Per
Period Base Rent Square Foot
------ --------- -----------
<S> <C> <C>
December 1, 1996-November 30, 1997 $ 9,017.50 $30.00
December 1, 1997-November 30, 1998 $ 9,919.25 $33.00
December 1, 1998-November 30, 1999 $10,219.83 $34.00
December 1, 1999-November 30, 2000 $10,520.42 $35.00
December 1, 2000-November 30, 2001 $10,821.00 $36.00
</TABLE>
ARTICLE 28 - OPTION TO RENEW.
---------------
28.1. RENEWAL OPTION. Tenant shall have an option (the "Renewal Option")
--------------
to renew the initial term with respect to all (but not less than all) of the
Premises demised under or pursuant to this Lease as of the expiration date of
the Term for one additional term (the "Renewal Term") of five (5) years,
commencing on the day immediately following the expiration
-1-
<PAGE>
date of the initial Term, under the following terms and conditions and subject
to credit approval by Landlord:
(1) Tenant gives Landlord written notice of its election to exercise
the Renewal Option no earlier than the date which is three hundred sixty-five
(365) days prior to the expiration date of the initial Term and no later than
the date which is two hundred seventy (270) days prior to the expiration date of
the initial Term;
(2) Tenant is not in breach or default under this Lease either on the
date Tenant exercises the Renewal Option or at any time through and including
the proposed commencement date of the Renewal Term.
28.2 TERM. If Tenant timely and property exercises the Renewal Option in
----
accordance with the provisions of Section 28.1:
(1) The Rent payable for the Renewal Term shall be based on the then
prevailing rent for similar space in this property, but in no event shall the
rental rate be less than the adjusted rental rate payable under this Lease on
the expiration date of this initial Term. For purposes of the preceding
sentence, "prevailing rental rate" shall mean the total rental then being quoted
by Landlord to third party tenants form reasonably comparable space in the
Building for leases approximately as long, and commencing at approximately the
same time, as the Renewal Term, subject to reasonable adjustment for the
desirability of the applicable floor or area of the Building. If Landlord is not
then quoting rental rates for comparable space, the rates used for purposes of
this provision shall be those rates Landlord would have used if Landlord had
quoted such rates. Landlord's good faith determination of the "prevailing rental
rate" shall be conclusive and binding as to Landlord and Tenant. If Tenant
timely and properly exercises the Renewal Option, Landlord agrees to give Tenant
written notice setting forth the prevailing rental rate, which notice shall be
given prior to the commencement date of the Renewal Term.
(2) Tenant shall have no further options to renew the initial Term of
this Lease beyond the expiration date of (the Renewal Term.
(3) Landlord shall not be obligated to perform any leasehold
improvement work in the Premises or give Tenant an allowance or other economic
concession for any such work or for any other purposes.
(4) Except as otherwise provided herein, all of the terms and
provisions of this Lease shall remain the same and in full force and effect
during the Renewal Term.
28.3 AMENDMENT. If Tenant exercises the Renewal Option, Landlord and
---------
Tenant shall execute and deliver an amendment to this Lease (or, at Landlord's
option, a new lease oil the form then in use for the Building) reflecting the
lease of the Premises by Landlord to Tenant for the Renewal Term on the terms
provided above, which amendment (or new lease,
-2-
<PAGE>
as the case may be) Shall be executed and delivered prior to the commencement
date of the Renewal Term.
28.4 TERMINATION. The Renewal Option shall automatically terminate and
-----------
become null and void and of no force or effect upon the earlier to occur of (1)
expiration or termination of this Lease, (2) the termination of the Tenant's
right to possession of the Premises, (3) the assignment of this Lease by Tenant,
(4) the sublease by Tenant of all or part of the Premises, or (5) the failure of
Tenant to timely or properly exercise the Renewal Option or (6) the default by
Tenant under the Lease.
EXHIBIT B, WORK LETTER AGREEMENT, PARAGRAPH 1 (ADDED MATERIAL)
Tenant and Landlord hereby agree that Landlord shall provide the depicted
sink (without plumbing) and Building Standard millwork upon delivery of the
Premises. All plumbing for cold water supply and drainage related to the sink
shall be completed no later than June 1. 1997, at Landlord's expense. The
delayed finish of this Work described herein above is due to the mutual effort
of Landlord and Tenant to save money in improving the Premises.
IN WITNESS WHEREOF, the parties have caused this Rider to be executed on
the same date as the form lease attached.
TENANT: LANDLORD:
- ------ --------
INTERNET CAPITAL GROUP, L.L.C., STATE STREET BANK AND TRUST
THE ACCESS FUND, HAMILTON COMPANY OF CALIFORNIA, N.A., not
LANE ADVISORS, AND MARTIN S. individually, but as Ancillary Trustee for
GANS, JOINT AND SEVERAL State Street Bank and Trust Company, a
Massachusetts banking corporation, not
personally but solely as Trustee for
Telephone Real Estate Equity Trust
By: _____________________________ By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois
corporation, its duly authorized agent and
Title: __________________________ attorney-in-fact
By: ________________________________________
Title: _____________________________________
-3-
<PAGE>
EXHIBIT A
FLOOR PLAN OF PREMISES
----------------------
(INTENTIONALLY OMITTED
-1-
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
---------------------
[LANDLORD PERFORMS WORK]
[ALLOWANCE]
This Work Letter Agreement ("Work Letter") is executed simultaneously with
that certain Office Lease (the "Lease") between HAROLD S. ZLOT, as "Tenant", and
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., not individually but as
Ancillary Trustee for State Street Bank and Trust Company, a Massachusetts
banking corporation, not personally but solely as Trustee for Telephone Real
Estate Equity Trust, as "Landlord", relating to demised premises ("Premises") at
the building commonly known as 44 MONTGOMERY STREET (the "Building"), which
Premises are more fully identified in the Lease. Capitalized terms used herein,
unless otherwise defined in this Work Letter shall have the respective meanings
ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Landlord and Tenant hereby
agree as follows:
1. TENANT'S INITIAL PLANS; THE WORK. Tenant desires Landlord to perform
--------------------------------
certain leasehold improvement work in the Premises in substantial accordance
with the plan or plans (collectively, the "Initial Plan") prepared by
Malesardi Design Group dated TBD and last revised
_________________________, a copy or copies of which is/are attached hereto as
Schedule 1. Such work, as shown in the Initial Plan and as more fully detailed
in the Working Drawings (as defined and described in Paragraph 2 below), shall
be hereinafter referred to as the "Work". Not later than Sept. 6, 1996 ,
Tenant shall furnish to Landlord such additional plans, drawings. specifications
and finish details as Landlord may reasonably request to enable Landlord's
artchitects and engineers to prepare mechanical, electrical and plumbing plans
and to prepare the Working Drawings, including a final telephone layout and
special electrical connection requirements, if any. All plans, drawings,
specifications and other details describing the Work which have been or are
hereafter furnished by or on behalf of Tenant shall be subject to Landlord's
approval, which Landlord agrees shall not be unreasonably withheld. Landlord
shall not be deemed to have acted unreasonably if it withholds its approval of
any plans, specifications, drawings or other details or of any Additional Work
(as defined in Paragraph 7 below) because, in Landlord's reasonable opinion, the
work, as described in any such item, or the Additional Work, as the case may be:
(a) is likely to adversely affect Building systems, the structure of the
Building or the safety of the Building and/or its occupants; (b) might impair
Landlord's ability to furnish services to Tenant or other tenants in the
Building; (c) would increase the cost of operating the Building; (d) would
violate any governmental laws, rules or ordinances (or interpretations thereof),
(e) contains or uses hazardous or toxic materials or substances; (f) would
adversely affect the appearance of the Building; (g) might adversely affect
another tenant's premises, (h) is prohibited by any ground lease affecting the
Building or any
-1-
<PAGE>
mortgage, trust deed or other instrument encumbering the Building; or (i) is
likely to be substantially delayed because of unavailability or shortage of
labor or materials necessary to perform such work or the difficulties or unusual
nature of such work. The foregoing reasons, however, shall not be the only
reasons for which Landlord may withhold its approval, whether or not such other
reasons are similar or dissimilar to the foregoing. Neither the approval by
Landlord of the Work or the Initial Plan or any other plans, drawings,
specifications or other items associated with the Work nor Landlord's
performance, supervision or monitoring of the Work shall constitute any warranty
by Landlord to Tenant of the adequacy of the design for Tenant's intended use of
the Premises. SEE ATTACHED LEASE RIDER FOR ADDED MATERIAL
2. WORKING DRAWINGS. If necessary for the performance of the Work and
----------------
not included as part of the Initial Plan attached hereto Landlord shall prepare
or cause to be prepared final working drawings and specifications for the Work
(the "Working Drawings") based on and consistent with (the Initial Plan and the
other plans, drawings, specifications, finish details and other information
furnished by Tenant to Landlord and approved by Landlord pursuant to Paragraph 1
above. So long as the Working Drawings are consistent with the Initial Plan,
Tenant shall approve the Working Drawings within three (3) days after receipt of
same from Landlord by initialing and returning to Landlord each sheet of the
Working Drawings or by executing Landlord's approval form then in use, whichever
method of approval Landlord may designate.
3. PERFORMANCE OF THE WORK ALLOWANCE. Except as hereinafter provided to
---------------------------------
the contrary, Landlord shall cause the performance of the Work using (except as
may be stated or shown otherwise in the Working Drawings) building standard
materials, quantities and procedures then in use by Landlord ("Building
Standards"). Landlord shall pay for a portion of the "Cost of the Work" as
defined below) in an amount not to exceed $86,568.00 (such amount being $24.00
per rentable square foot of the Premises which is to be improved, as described
in the Working Drawings) (the "Allowance"), and Tenant shall pay for the entire
Cost of the Work in excess of the Allowance. Tenant shall not be entitled to any
credit, abatement or payment from Landlord in the event that the amount of the
Allowance specified above exceeds the Cost of the Work. For purposes of this
Agreement, the term "Cost of the Work" shall mean and include any and all costs
and expenses of the Work, including, without limitation, the cost of the Working
Drawings and of all labor (including overtime) and materials constituting the
work.
4. PAYMENT. Prior to commencing the Work, Landlord shall submit to
-------
Tenant a written statement of the total Cost of the Work (which shall include
the amount of any overtime projected as necessary to substantially complete the
Work (by the Commencement Date specified in the Lease) as then known by
Landlord, and such statement shall indicate the amount, if any, by which the
total Cost of the Work exceeds the Allowance (the "Excess Costs"). Tenant
agrees, within three (3) days after submission to it of such statement, to
execute and deliver to Landlord, in the form then in use by Landlord, an
authorization to proceed with the Work, and Tenant shall also then pay to
Landlord an amount equal to the Excess Costs. No Work shall be commenced until
Tenant has fully complied with the preceding provisions of this Paragraph 4. In
the event,
-2-
<PAGE>
and each time, that any change order by Tenant, unknown field condition, delay
caused by acts beyond Landlord's control or other event or circumstance causes
the Cost of the Work to be increased after the time that Landlord delivers to
Tenant the aforesaid initial statement of the Cost of the Work. Landlord shall
deliver to Tenant a revised statement of the total Cost of the Work, indicating
the revised calculation of the Excess Costs, if any. Within three (3) days after
submission to Tenant of any such revised statement, Tenant shall pay to Landlord
an amount equal to the Excess Costs, as shown in such revised statement, less
the amounts previously paid by Tenant to Landlord on account of the Excess
Costs, and Landlord shall not be required to proceed further with the Work until
Tenant has paid such amount. Delays in the performance of the Work resulting
from the failure of Tenant to comply with the provisions of this Paragraph 4
shall be deemed to be delays caused by Tenant.
5. SUBSTANTIAL COMPLETION. Landlord shall cause the Work to be
----------------------
"substantially completed" on or before the scheduled date of commencement of the
term of the Lease as specified in Section 1.5 of the Lease, subject to delays
caused by strikes, lockouts, boycotts or other labor problems, casualties,
discontinuance of any utility or other service required for performance of the
Work, unavailability or shortages of materials or other problems in obtaining
materials necessary for performance of the Work or any other matter beyond the
control of Landlord (or beyond the control of Landlord's contractors or
subcontractors performing the Work) and also subject to "Tenant Delays" (as
defined and described in Paragraph 6 of this Work Letter). The Work shall be
deemed to be "substantially completed" for all purposes under this Work Letter
and the Lease if and when Landlord's architect issues a written certificate to
Landlord and Tenant, certifying that the Work has been substantially completed
(i.e., completed except for "punchlist" items listed in such architect's
certificate) in substantial compliance with the Working Drawings, or when Tenant
first takes occupancy of the Premises, whichever first occurs. If the Work is
not deemed to be substantially completed on or before the scheduled date of the
commencement of the term of the Lease as specified in Section 1.5 of the Lease,
(a) Landlord agrees to use reasonable efforts to complete the Work as soon as
practicable thereafter, (b) the Lease shall remain in full force and effect, (c)
Landlord shall not be deemed to be in breach or default of the Lease or this
Work Letter as a result thereof and Landlord shall have no liability to Tenant
as a result of any delay in occupancy (whether for damages, abatement of Rent or
otherwise), and (d) except in the event of Tenant Delays, and notwithstanding
anything contained in the Lease to the contrary, the Commencement Date of the
Lease Term as specified in Section 1.5 of the Lease shall be extended to the
date on which the Work is deemed to be substantially completed and the
Expiration Date of the Lease Term as specified in Section 1.6 of the Lease shall
be extended by an equal number of days. At the request of either Landlord or
Tenant in the event of such extensions in the commencement and expiration dates
of the term of the Lease, Tenant and Landlord shall execute and deliver an
amendment to the Lease reflecting such extensions. Landlord agrees to use
reasonable diligence to complete all punchlist work listed in the aforesaid
architect's certificate promptly after substantial completion.
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<PAGE>
6. TENANT DELAYS. There shall be no extension of the scheduled
-------------
commencement or expiration date of the term of the Lease (as otherwise
permissibly extended under Paragraph 5 above) if the Work has not been
substantially completed on said scheduled commencement date by reason of any
delay attributable to Tenant ("Tenant Delays"), including without limitation:
(i) the failure of Tenant to furnish all or any plans,
drawings, specifications, finish details or the other information required under
Paragraph 1 above on or before the date stated in Paragraph 1;
(ii) the failure of Tenant to grant approval of the Working
Drawings within the time required under Paragraph 2 above;
(iii) the failure of Tenant to comply with the requirements of
Paragraph 4 above;
(iv) Tenant's requirements for special work or materials,
finishes, or installations other than the Building Standards or Tenant's
requirements for special construction staging or phasing;
(v) the performance of any Additional Work (as defined in
Paragraph 7 below) requested by Tenant or the performance of any work in the
Premises by any person, firm or corporation employed by or on behalf of Tenant,
or any failure to complete or delay in completion of such work; or
(vi) any other act or omission of Tenant that causes a delay.
7. ADDITIONAL WORK. Upon Tenant's request and submission by Tenant (at
---------------
Tenant's sole cost and expense) of the necessary information and/or plans and
specifications for work other than the Work described in the Working Drawings
("Additional Work") and the approval by Landlord of such Additional Work, which
approval Landlord agrees shall not be unreasonably withheld, Landlord shall
perform such Additional Work, at Tenant's sole cost and expense, subject,
however, to the following provisions of this Paragraph 7. Prior to commencing
any Additional Work requested by Tenant, Landlord shall submit to Tenant a
written statement of the cost of such Additional Work, which cost shall include
a fee payable to Landlord in the amount of 15% of the total cost of such
Additional Work as compensation to Landlord for monitoring the Additional Work
and for administration, overhead and field supervision associated with the
Additional Work and an additional charge payable to Landlord in the amount of 5%
of the total Cost of the Work as compensation for Landlord's general conditions
(such fee and additional charge being hereinafter referred to collectively as
"Landlord's Additional Compensation"), and, concurrently with such statement of
cost, Landlord shall also submit to Tenant a proposed tenant extra order (the
"TEO") for the Additional Work in the standard form then in use by Landlord.
Tenant shall execute and deliver to Landlord such TEO and shall pay to Landlord
the entire cost of the Additional Work, including Landlord's Additional
Compensation
-4-
<PAGE>
(as reflected in Landlord's statement of such cost, with five (5) days after
Landlord's submission of such statement and TEO to Tenant. If Tenant fails to
execute or deliver such TEO or pay the entire cost of such Additional Work
within such 5-day period. then Landlord shall not be obligated to do' any of the
Additional Work and may proceed to do only the Work, as specified in the Working
Drawings.
8. TENANT ACCESS. Landlord, in Landlord's reasonable discretion and upon
-------------
request by Tenant, may grant to Tenant a license to have access to the Premises
prior to the date designated in the Lease for the commencement of the term of
the Lease to allow Tenant to do other work required by Tenant to make the
Premises ready for Tenant's use and occupancy (the "Tenant's Pre-Occupancy
Work"). It shall be a condition to the grant by Landlord and continued
effectiveness of such license that:
(a) Tenant shall give to Landlord a written request to have such
access to the Premises not less than five (5) days prior to the date on which
such access will commence, which written request shall contain or shall be
accompanied by each of the following items, all in form and substance reasonably
acceptable to Landlord: (i) a detailed description of and schedule for Tenant's
Pre-Occupancy Work; (ii) the names and addresses of all contractors
subcontractors and material suppliers and all other representatives of Tenant
who or which will be entering the Premises on behalf of Tenant to perform
Tenant's Pre-Occupancy Work or will be supplying materials for such work, and
the approximate number of individuals, itemized by trade, who will be present in
the Premises; (iii) copies of all contracts, subcontracts and material purchase
orders pertaining to Tenant's Pre-Occupancy Work; (iv) copies of all plans and
specifications pertaining to Tenant's Pre-Occupancy Work; (v) copies of all
licenses and permits required in connection with the performance of Tenant's
Pre-Occupancy Work; (vi) certificates of insurance (in amounts satisfactory to
Landlord and with the parties identified in, or required by, the Lease named as
additional insureds) and instruments of indemnification against all claims,
costs, expenses, damages and liabilities which may arise in connection with
Tenant's Pre-Occupancy Work; and (vii) assurances of the ability of Tenant to
pay for all of Tenant's Pre-Occupancy Work and/or a letter of credit or other
security deemed appropriate by Landlord securing Tenant's lien-free completion
of Tenant's Pre-Occupancy Work.
(b) Such pre-term, access by Tenant and its representatives shall be
subject to scheduling by Landlord.
(c) Tenant's employees, agents, contractors, workmen, mechanics,
suppliers and invitees shall work in harmony and not interfere with Landlord or
Landlord's agents in performing the Work and any Additional Work in the
Premises, Landlord's work in other premises and in common areas of the Building,
or the general operation of the Building. If at any time any such person
representing Tenant shall cause or threaten to cause such disharmony or
interference, including labor disharmony, and Tenant fails to immediately
institute and maintain such corrective actions as directed by Landlord, then
Landlord may withdraw such license upon twenty-four (24) hours' prior written
notice to Tenant.
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<PAGE>
(d) Any such entry into and occupancy of the Premises by Tenant or any
person or entity working for or on behalf of Tenant shall be deemed to be
subject to all of (the terms, covenants, conditions and provisions of the Lease,
specifically including the provisions of Section IX thereof (regarding Tenant's
improvements and alterations to the. Premises), and excluding only the covenant
to pay Rent. Landlord shall not be liable for any injury, loss or damage which
may occur to any of Tenant's Pre-Occupancy Work made in or about the Premises or
to property placed therein prior to the commencement of the term of the Lease,
the same being at Tenant's sole risk and liability. Tenant shall be liable to
Landlord for any damage to the Premises or to any portion of the Work or
Additional Work caused by Tenant or any of Tenant's employees, agents,
contractors, workmen or suppliers in the event that the performance of Tenant's
Pre-Occupancy Work causes extra costs to Landlord or requires the use of
elevators during hours other than 7:00 a.m. to 6:00 p.m. on Monday
---- ----
through Friday (excluding holidays) or of other Building services, Tenant shall
reimburse Landlord for such extra cost and/or shall pay Landlord for such
elevator service or other Building services at Landlord's standard rates then in
effect.
9. LEASE PROVISIONS. The terms and provisions of the Lease, insofar as
----------------
they are applicable to this Work Letter, are hereby incorporated herein by
reference. All amounts payable by Tenant to Landlord hereunder shall be deemed
to be additional Rent under the Lease and, up on any default in the payment of
same, Landlord shall have all of the rights and remedies provided for in the
Lease.
10. MISCELLANEOUS.
-------------
(a) This Work Letter shall be governed by the laws of the state in
which the Premises are located.
(b) This Work Letter may not be amended except by a written instrument
signed by the party or parties to be bound thereby.
(c) Any person signing this Work Letter on behalf of Tenant warrants
and represents he/she has authority to sign and deliver this Work Letter and
bind Tenant.
(d) Notices under this Work Letter shall be given in the same manner
as under the Lease.
(e) The headings set forth herein are for convenience only.
(f) This Work Letter sets forth the entire agreement of Tenant and
Landlord regarding the Work.
(g) In the event that the final working drawings and specifications
are included as part of the Initial Plan attached hereto, or in the event
Landlord performs the Work without the necessity of preparing working drawings
and specifications, then whenever the term
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<PAGE>
"Working Drawings" is used in this Agreement, such term shall be deemed to refer
to the Initial Plan and all supplemental plans and specifications approved by
Landlord.
11. ___________________________. Notwithstanding anything to the contrary
contained in this Work Letter, it is expressly understood and agreed by and
between the parties hereto that:
(a) The recourse of Tenant or its successors or assigns against
Landlord with respect to the alleged breach by or on the part of Landlord of any
representation, warranty, covenant, undertaking or agreement contained in this
Work Letter (collectively, "Landlord's Work Letter Undertakings") shall extend
only to Landlord's interest in the real estate of which the Premises demised
under the Lease are a part (hereinafter, "Landlord's Real Estate") and not to
any other assets of Landlord or its beneficiaries; and
(b) Except to (the extent of Landlord's interest in Landlord's Real
Estate, no personal liability or personal responsibility of any sort with
respect to any of Landlord's Work Letter Undertakings or any alleged breach
thereof is assumed by or shall at any, time be asserted or enforceable against,
Landlord, Heitman Capital Management Corporation or Heitman Properties Ltd., or
against any of their respective directors, officers, employees, agents,
constituent partners, beneficiaries, trustees or representatives.
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<PAGE>
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the _____
day of ____________________, 19___.
TENANT: LANDLORD:
- ------ --------
INTERNET CAPITAL GROUP, L.L.C., STATE STREET BANK AND TRUST
THE ACCESS FUND, HAMILTON COMPANY OF CALIFORNIA, N.A., not
LANE ADVISORS, AND MARTIN S. individually, but as Ancillary Trustee for
GANS, JOINT AND SEVERAL State Street Bank and Trust Company, a
Massachusetts banking corporation, not
personally but solely as Trustee for
Telephone Real Estate Equity Trust
By: _____________________________ By: HEITMAN CAPITAL
MANAGEMENT CORPORATION, an
Illinois corporation, its duly authorized
Title: __________________________ agent and attorney-in-fact
By: ______________________________________
Its:______________________________________
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<PAGE>
EXHIBIT C
---------
RULES AND REGULATIONS
---------------------
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress. The halls, passages, entrances, elevators,
stairways, balconies and roof are not for the use of the general public, and
Landlord shall in all cases retain the right to control or prevent access
thereto by all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation or interests of Landlord and
its tenants, provided that nothing herein contained shall be construed to
prevent such access by persons with whom the tenant normally deals in the
ordinary course of its business unless such persons are engaged in illegal
activities. No tenant and no employees of any tenant shall go upon the roof of
the Building without the written consent of Landlord.
2. No awnings or other projections shall be attached to the outside walls
or surfaces of the Building nor shall the interior or exterior of any windows be
coated without the prior written consent of Landlord. Except as otherwise
specifically approved by Landlord, all electrical ceiling fixtures hung in
offices or spaces along the perimeter of the Building must be fluorescent and of
a quality, the design and bulb color approved by Landlord. Tenant shall not
place anything or allow anything to be placed near the glass of any window,
door, partition or wall which may appear unsightly from outside the Premises.
3. No sign, picture, plaque, advertisement, notice or other material
shall be exhibited, painted, inscribed or affixed by any tenant on any part of,
or so as to be seen from the outside of, the Premises or the Building without
the prior written consent of Landlord. In the event of the violation of the
foregoing by any tenant, Landlord may remove the same without any liability, and
may charge the expense incurred in such removal to the tenant violating this
rule. Interior signs on doors and the directory tablet shall be inscribed,
painted or affixed for each tenant by Landlord at the expense of such tenant,
and shall be of a size, color and style acceptable to Landlord.
4. The toilets and wash basins and other plumbing fixtures shall not be
used for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damage resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
5. No tenant or its officers, agents, employees or invitees shall mark,
paint, drill into, or in any way deface any part of the Premises or the
Building. No boring, cutting or stringing of wires or laying of linoleum or
other similar floor coverings shall be permitted except with the prior written
consent of Landlord and as Landlord may direct.
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<PAGE>
6. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises and no cooking shall be done or permitted by any
tenant on the Premises except that microwave cooking in a UL-approved microwave
oven and the preparation of coffee, tea, hot chocolate and similar items for the
tenant and its employees and business visitors shall be permitted. Tenant shall
not cause or permit any unusual or objectionable odors to escape from the
Premises.
7. The Premises shall not be used for manufacturing or for the storage
of, merchandise except as such storage may be incidental to the use of the
Premises for general office purposes. No tenant shall engage or pay any
employees on the Premises except those actually working for such tenant on the
Premises nor advertise for laborers giving an address at the Premises. The
Premises shall not be used for lodging or sleeping or for any immoral or illegal
Purposes.
8. No tenant or its officers, agents, employees or invitees shall make,
or permit to be made any unseemly or disturbing noises, sounds or vibrations or
disturb or interfere with occupants of this or neighboring buildings or Premises
or those having business with them whether by the use of any musical instrument,
radio, phonograph, unusual noise, or in any other way.
9. No tenant or its officers, agents, employees or invitees shall throw
anything out of doors, balconies or down the passageways.
10. Tenant shall not maintain armed security in or about the Premises nor
possess any weapons, explosives, combustibles or other hazardous devices in or
about the Building and/or Premises.
11. No tenant or its officers, agents, employees or invitees shall at any
time use, bring or keep upon the Premises any flammable, combustible, explosive,
foul or noxious fluid, chemical or substance, or do or permit anything to be
done in the leased Premises, or bring or keep anything therein, which shall in
any way increase the rate of fire insurance on the Building, or on the property
kept therein, or obstruct or interfere with the rights of other tenants, or in
any way injure or annoy them, or conflict with the regulations of the Fire
Department or the fire laws, or with any insurance policy upon the Building, or
any part thereof, or with any rules and ordinances established by the Board of
Health or other governmental authority.
12. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanism thereof. Each tenant must, upon the termination of this
tenancy, restore to Landlord all keys of stores, offices, and toilet rooms,
either furnished to, or otherwise procured by, such tenant, and in the event of
the loss of any keys so furnished, such tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such change.
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<PAGE>
13. All removals, or the carrying in or out of any sales, freight,
furniture, or bulky matter of any description must take place during the hours
which Landlord may determine from time to time. The moving of safes or other
fixtures or bulky matter of any kind must be made upon previous notice to the
manger of the Building and under his or her supervision, and the persons
employed by any tenant for such work must be acceptable to Landlord. Landlord
reserves the right to inspect all safes, freight or other bulky articles to be
brought into the Building and to exclude from the Building all safes, freight or
other bulky articles which violate any of these Rules and Regulations or the
Lease of which these Rules and Regulations are a part. Landlord reserves the
right to prohibit or impose conditions upon the installation in the Premises of
heavy objects which might overload the building floors. Landlord will not be
responsible for loss of or damage to any safes, freight, bulky articles or other
property from any cause, and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
the tenant.
14. No tenant shall purchase or otherwise obtain for use in the Premises
water, ice, towel, vending machine, janitorial, maintenance or other like
services, or accept barbering or bootblacking services, except from persons
authorized by Landlord, and at hours and under regulations fixed by Landlord.
15. Landlord shall have the right to prohibit any advertising by any
tenant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as an office building and upon written notice from
Landlord any tenant shall refrain from or discontinue such advertising.
16. Landlord reserves the right to exclude from the Building between the
hours of 10:00 p.m. and 7:00 a.m. and at all hours of Saturdays, Sundays and
legal holidays all persons who do not present a pass signed by Landlord.
Landlord shall furnish passes to persons for whom any tenant requests the same
in writing. Each tenant shall be responsible for all persons for whom he
requests passes and shall be liable to Landlord for all acts of such persons.
Landlord shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In the case of
invasion, mob, riot, public excitement or other commotion, Landlord reserves the
right to prevent access to the Building during the continuance of the same, by
the closing of the gates and doors or otherwise, for the safety of the tenants
and others and the protection of the Building and the property therein.
17. Any outside contractor employed by any tenant shall, while in the
Building, be subject to the prior written approval of Landlord and subject to
the Rules and Regulations of the Building. Tenant shall be responsible for all
acts of such persons and Landlord shall not be responsible for any loss or
damage to property in the Premises, however occurring.
18. All doors opening onto public corridors shall be kept closed, except
when in use for ingress and egress, and left locked when not in use.
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<PAGE>
19. The requirements of tenants will be attended to only upon, application
to the Office of the Building.
20. Canvassing, soliciting and peddling in the Building are prohibited and
each tenant shall cooperate to prevent the same.
21. All office equipment of any electrical or mechanical nature shall be
placed by tenants in the Premises in settings approved by Landlord, to absorb or
prevent any vibration, noise or annoyance.
22. No air conditioning unit or other similar apparatus shall be installed
or used by any tenant without the written consent of Landlord.
23. There shall not be used in any space, or in the public halls of the
Building either by any tenant or others, any hand trucks except those equipped
with rubber tires and side guards.
24. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires or
stringing of wires will be allowed without written consent of Landlord. The
location of telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the approval of Landlord. All such work shall be
effected pursuant to permits issued by all applicable governmental authorities
having jurisdiction.
25. No vendor with the intent of selling such goods shall be allowed to
transport or carry beverages, food, food containers, etc., on any passenger
elevators. The transportation of such items shall be via the service elevators
in such manner as prescribed by Landlord.
26. Tenants shall cooperate with Landlord in the conservation of energy
used in or about the Building, including without limitation, cooperating with
Landlord in obtaining maximum effectiveness of the cooling system by closing
drapes or other window coverings when the sun's rays fall directly on windows of
the Premises, and closing windows and doors to prevent heat loss. Tenant shall
not obstruct, alter or in any way impair the efficient operation of Landlord's
heating, lighting, ventilating and air conditioning system and shall not place
bottles, machines, parcels or any other articles on the induction unit enclosure
so as to interfere with air flow. Tenant shall not tamper with or change the
setting of any thermostats or temperature control valves, and shall in general
use heat, gas, electricity, air conditioning equipment and heating equipment in
a manner compatible with sound energy conservation practices and standards.
27. All parking ramps and areas, pedestrian walkways, plazas, and other
public areas forming a part of the Building shall be under the sole and absolute
control of Landlord with
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<PAGE>
the exclusive right to regulate and control these areas. Tenant agrees to
conform to the rules and regulations that may be established by Landlord for
these areas from time to time.
28. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
29. Tenant and its employees, agents, subtenants, contractors and invitees
shall comply with all applicable "no-smoking" ordinances and, irrespective of
such ordinances, shall not smoke or permit cigarettes, cigars or pipes outside
of Tenant's Premises (including plaza areas) in any portions of the Building
except areas specifically designated as smoking areas by Landlord. If required
by applicable ordinance, Tenant shall provide smoking areas within Tenant's
Premises.
30. Parking ramps, pedestrian walkways, plazas, and other public areas
forming a part of the Building shall be under the sole and absolute control of
Landlord with the exclusive right to regulate and control these areas. Tenant
agrees to conform to the rules and regulations that may be established by
Landlord for these areas from time to time.
31. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor, or drugs, or who shall in any manner do any act in violation of any
of the rules and regulations of the Building.
32. Tenant and its employees, agents, subtenants, contractors and invitees
shall comply with all applicable `nonsmoking' ordinances and, irrespective of
such ordinances, shall not smoke or permit smoking of cigarettes, cigars or
pipes outside of Tenant's Premises (including plaza areas) in any portions of
the Building except areas specifically designated as smoking areas by Landlord.
If required by applicable ordinance, Tenant shall provide smoking areas within
Tenant's Premises.
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EXHIBIT D
---------
GUARANTY
--------
(INTENTIONALLY OMITTED)
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<PAGE>
EXHIBIT E
---------
SUITE ACCEPTANCE AGREEMENT
--------------------------
Building Name/Address:__________________________________________________________
Tenant Name:____________________________________________________________________
Tenant Code:________________ Suite #:________________________________________
Management's Tenant Contact:____________ Phone #:_____________________________
Gentlemen:
As a representative of the above referenced tenant, I/we have physically
inspected the suite noted above and its improvements with a representative of
(name of HPL Corporation). I/we accept the suite improvements as to compliance
with all the requirements indicated in our lease, also including the following
verified information below:
Lease Commencement Date: ____________ Occupancy Date: ______________
Lease Rent Start Date*: ____________ Actual Rent Start Date*: ______________
Lease Expiration Date: ____________ Actual Expiration Date: ______________
Date Keys Delivered: ____________ ______________
Items requiring attention: _____________________________________________________
* If these dates are not the same, attach documentation.
NOTE: This inspection is to be made prior to tenant move-in.
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<PAGE>
- --------------------------------------------------------------------------------
INTERNET CAPITAL GROUP, INC.
- --------------------------------------------------------------------------------
$50,000,000 SECURED REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
INTERNET CAPITAL GROUP, INC.
INTERNET CAPITAL GROUP OPERATIONS, INC.
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, As Agent
Dated as of April 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C>
1. CERTAIN DEFINITIONS.......................................................................................... 1
1.1 Certain Definitions..................................................................................... 1
1.2 Construction............................................................................................ 21
1.2.1 Number; Inclusion................................................................................ 21
1.2.2 Agent's Discretion and Consent................................................................... 21
1.2.3 Documents Taken as a Whole....................................................................... 21
1.2.4 Headings......................................................................................... 21
1.2.5 Implied References to this Agreement............................................................. 21
1.2.6 Persons.......................................................................................... 21
1.2.7 Modifications to Documents....................................................................... 22
1.2.8 From, To and Through............................................................................. 22
1.2.9 Shall; Will...................................................................................... 22
1.3 Accounting Principles................................................................................... 22
2. REVOLVING CREDIT FACILITY.................................................................................... 22
2.1 Revolving Credit Commitments............................................................................ 22
2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans..................................... 23
2.3 Commitment Fees......................................................................................... 23
2.4 Revolving Credit Closing Fees........................................................................... 23
2.5 Revolving Credit Loan Requests.......................................................................... 23
2.6 Making Revolving Credit Loans........................................................................... 24
2.7 Revolving Credit Notes.................................................................................. 24
2.8 Letter of Credit Subfacility............................................................................ 25
2.8.1 Issuance of Letters of Credit.................................................................... 25
2.8.2 Letter of Credit Fees............................................................................ 25
2.8.3 Disbursements, Reimbursement..................................................................... 25
2.8.4 Repayment of Participation Advances.............................................................. 27
2.8.5 Documentation.................................................................................... 27
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C>
2.8.6 Determinations to Honor Drawing Requests................................................... 27
2.8.7 Nature of Reimbursement Obligations........................................................ 27
2.8.8 Indemnity.................................................................................. 29
2.8.9 Liability for Acts and Omissions........................................................... 29
2.9 Valuation of Private Company Restricted Securities; Sale.......................................... 30
2.10 Sale of Public Company Restricted Securities and Public Company Unrestricted Securities........... 31
3. INTEREST RATES......................................................................................... 31
3.1 Revolving Credit Interest Rate Options............................................................ 31
3.1.1 Revolving Credit Interest Rate Options..................................................... 31
3.1.2 Rate Quotations............................................................................ 31
3.2 Interest Periods.................................................................................. 32
3.2.1 Amount of Borrowing Tranche................................................................ 32
3.2.2 Renewals................................................................................... 32
3.3 Interest After Default............................................................................ 32
3.3.1 Letter of Credit Fees, Interest Rate....................................................... 32
3.3.2 Other Obligations.......................................................................... 32
3.3.3 Acknowledgment............................................................................. 32
3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.................... 33
3.4.1 Unascertainable............................................................................ 33
3.4.2 Illegality; Increased Costs; Deposits Not Available........................................ 33
3.4.3 Agent's and Bank's Rights.................................................................. 33
3.5 Selection of Interest Rate Options................................................................ 34
4. PAYMENTS............................................................................................... 34
4.1 Payments.......................................................................................... 34
4.2 Pro Rata Treatment of Banks....................................................................... 35
4.3 Interest Payment Dates............................................................................ 35
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C>
4.4 Prepayments of Loans............................................................................ 35
4.4.1 Right to Prepay......................................................................... 35
4.4.2 Mandatory Prepayment of Loans........................................................... 36
4.4.3 Replacement of a Bank................................................................... 37
4.4.4 Change of Lending Office................................................................ 37
4.5 Additional Compensation in Certain Circumstances................................................ 37
4.5.1 Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc............................................................. 37
4.5.2 Indemnity............................................................................... 38
5. REPRESENTATIONS AND WARRANTIES....................................................................... 39
5.1 Representations and Warranties.................................................................. 39
5.1.1 Organization and Qualification.......................................................... 39
5.1.2 Capitalization and Ownership............................................................ 40
5.1.3 Subsidiaries............................................................................ 40
5.1.4 Power and Authority..................................................................... 40
5.1.5 Validity and Binding Effect............................................................. 40
5.1.6 No Conflict............................................................................. 41
5.1.7 Litigation.............................................................................. 41
5.1.8 Title to Properties..................................................................... 41
5.1.9 Financial Statements.................................................................... 42
5.1.10 Use of Proceeds; Margin Stock........................................................... 42
5.1.11 Full Disclosure......................................................................... 43
5.1.12 Taxes................................................................................... 43
5.1.13 Consents and Approvals.................................................................. 43
5.1.14 No Event of Default; Compliance with Instruments........................................ 44
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.......................................... 44
5.1.16 Security Interests...................................................................... 44
5.1.17 Status of the Pledged Collateral........................................................ 45
5.1.18 Insurance............................................................................... 45
5.1.19 Compliance with Laws.................................................................... 45
5.1.20 Material Contracts; Burdensome Restrictions............................................. 45
5.1.21 Investment Companies; Regulated Entities................................................ 46
5.1.22 Plans and Benefit Arrangements.......................................................... 46
5.1.23 Employment Matters...................................................................... 47
5.1.24 Environmental Matters................................................................... 47
5.1.25 Senior Debt Status...................................................................... 48
5.1.26 Year 2000............................................................................... 48
</TABLE>
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<TABLE>
<CAPTION>
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5.1.27 Validity and Binding Effect................................................................ 49
5.1.28 Solvency................................................................................... 49
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT.................................................. 49
6.1 First Loans and Letters of Credit................................................................... 49
6.1.1 Officer's Certificate...................................................................... 49
6.1.2 Secretary's Certificate.................................................................... 50
6.1.3 Delivery of Loan Documents................................................................. 50
6.1.4 Delivery of Material Contracts, Consents, Certificates and Powers relating to
VerticalNet; Delivery of Warrant; Closing Date Compliance Certificate...................... 50
6.1.5 Warrant Agreement.......................................................................... 51
6.1.6 Collateral Assignment of Contract Rights................................................... 51
6.1.7 Opinion of Counsel......................................................................... 51
6.1.8 Legal Details.............................................................................. 51
6.1.9 Payment of Fees............................................................................ 51
6.1.10 Consents................................................................................... 52
6.1.11 Officer's Certificate Regarding MACs....................................................... 52
6.1.12 No Violation of Laws....................................................................... 52
6.1.13 No Actions or Proceedings.................................................................. 52
6.1.14 Insurance Policies; Certificates of Insurance; Endorsements................................ 52
6.1.15 Actions to Perfect Liens; Lien Searches.................................................... 52
6.1.16 Administrative Questionnaire............................................................... 53
6.1.17 Borrowing Base Certificate................................................................. 53
6.1.18 Comfort Letter from Safeguard Scientifics, Inc............................................. 53
6.1.19 Minimum Commitments........................................................................ 53
6.2 Each Additional Loan or Letter of Credit............................................................ 53
7. COVENANTS................................................................................................ 54
7.1 Affirmative Covenants............................................................................... 54
7.1.1 Preservation of Existence, Etc............................................................. 54
7.1.2 Payment of Liabilities, Including Taxes, Etc............................................... 54
7.1.3 Maintenance of Insurance................................................................... 55
7.1.4 Maintenance of Properties and Leases....................................................... 55
7.1.5 Maintenance of Patents, Trademarks, Etc.................................................... 55
7.1.6 Visitation Rights.......................................................................... 55
</TABLE>
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7.1.7 Keeping of Records and Books of Account............................................... 55
7.1.8 Plans and Benefit Arrangements........................................................ 56
7.1.9 Compliance with Laws.................................................................. 56
7.1.10 Use of Proceeds....................................................................... 56
7.1.11 Further Assurances.................................................................... 56
7.1.12 Subordination of Intercompany Loans................................................... 56
7.1.13 Dispositions.......................................................................... 57
7.1.14 Amendments of Purpose Statements...................................................... 57
7.1.15 Investments........................................................................... 57
7.1.16 Minimum Margin Value.................................................................. 57
7.1.17 Delivery of Material Contracts........................................................ 57
7.1.18 Delivery of Consents.................................................................. 58
7.1.19 Delivery of Certificates and Powers................................................... 58
7.1.20 Periodic Review of Cost Basis Determinations.......................................... 59
7.1.21 Year 2000 Compliance.................................................................. 59
7.1.22 Subordinated Loan Documents........................................................... 59
7.2 Negative Covenants............................................................................. 60
7.2.1 Indebtedness.......................................................................... 60
7.2.2 Liens................................................................................. 60
7.2.3 Guaranties............................................................................ 60
7.2.4 Loans and Investments................................................................. 61
7.2.5 Dividends and Related Distributions................................................... 61
7.2.6 Liquidations, Mergers, Consolidations, Acquisitions................................... 62
7.2.7 Dispositions of Assets or Subsidiaries................................................ 62
7.2.8 Affiliate Transactions................................................................ 63
7.2.9 Subsidiaries, Partnerships and Joint Ventures......................................... 63
7.2.10 Continuation of or Change in Business................................................. 63
7.2.11 Plans and Benefit Arrangements........................................................ 64
7.2.12 Fiscal Year........................................................................... 64
7.2.13 Changes in Organizational Documents................................................... 64
7.2.14 Negative Pledges...................................................................... 64
7.2.15 Amendment or Waiver of Subordinated Debt; Prepayment of Subordinated Debt............. 64
7.2.16 Minimum Liquidity..................................................................... 65
7.2.17 Maximum Leverage Ratio................................................................ 65
7.3 Reporting Requirements......................................................................... 66
7.3.1 Quarterly Financial Statements........................................................ 66
7.3.2 Annual Financial Statements........................................................... 66
</TABLE>
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7.3.3 Quarterly Performance and Financial Information....................................... 66
7.3.4 Borrowing Base Certificate............................................................ 67
7.3.5 Certificate of the Borrower........................................................... 67
7.3.6 1998 Audited Annual Statements........................................................ 67
7.3.7 Notice of Default..................................................................... 68
7.3.8 Notice of Litigation.................................................................. 68
7.3.9 Certain Events........................................................................ 68
7.3.10 Budgets, Forecasts, Other Reports and Information..................................... 68
7.3.11 Notices Regarding Plans and Benefit Arrangements...................................... 69
8. DEFAULT............................................................................................. 69
8.1 Events of Default.............................................................................. 69
8.1.1 Payments Under Loan Documents......................................................... 69
8.1.2 Breach of Warranty.................................................................... 70
8.1.3 Breach of Negative Covenants or Visitation Rights..................................... 70
8.1.4 Breach of Other Covenants............................................................. 70
8.1.5 Defaults in Other Agreements or Indebtedness.......................................... 70
8.1.6 Final Judgments or Orders............................................................. 70
8.1.7 Loan Document Unenforceable........................................................... 70
8.1.8 Uninsured Losses; Proceedings Against Assets.......................................... 71
8.1.9 Notice of Lien or Assessment.......................................................... 71
8.1.10 Events Relating to Plans and Benefit Arrangements..................................... 71
8.1.11 Cessation of Business................................................................. 71
8.1.12 Change of Control..................................................................... 72
8.1.13 Breach of Subordination Terms......................................................... 72
8.1.14 Bankruptcy, Insolvency or Reorganization Proceedings.................................. 72
8.1.15 Investment Company Status............................................................. 73
8.2 Consequences of Event of Default............................................................... 73
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings..... 73
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.................................. 73
8.2.3 Set-off............................................................................... 73
8.2.4 Suits, Actions, Proceedings........................................................... 74
8.2.5 Application of Proceeds............................................................... 74
8.2.6 Other Rights and Remedies............................................................. 75
8.3 Notice of Sale................................................................................. 75
</TABLE>
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9. THE AGENT............................................................................................ 75
9.1 Appointment.................................................................................... 75
9.2 Delegation of Duties........................................................................... 76
9.3 Nature of Duties; Independent Credit Investigation............................................. 76
9.4 Actions in Discretion of Agent; Instructions From the Banks.................................... 76
9.5 Reimbursement and Indemnification of Agent by the Borrowers.................................... 77
9.6 Exculpatory Provisions; Limitation of Liability................................................ 77
9.7 Reimbursement and Indemnification of Agent by Banks............................................ 78
9.8 Reliance by Agent.............................................................................. 79
9.9 Notice of Default.............................................................................. 79
9.10 Notices........................................................................................ 79
9.11 Banks in Their Individual Capacities; Agent in its Individual Capacity......................... 79
9.12 Holders of Notes............................................................................... 80
9.13 Equalization of Banks.......................................................................... 80
9.14 Successor Agent................................................................................ 80
9.15 Agent's Fee.................................................................................... 81
9.16 Availability of Funds.......................................................................... 81
9.17 Calculations................................................................................... 81
9.18 Beneficiaries.................................................................................. 82
10. MISCELLANEOUS........................................................................................ 82
10.1 Modifications, Amendments or Waivers........................................................ 82
10.1.1 Increase of Commitment; Extension of Expiration Date............................... 82
</TABLE>
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10.1.2 Extension of Payment; Reduction of Principal, Interest or Fees; Modification of Terms of
Payment....................................................................................... 82
10.1.3 Release of Collateral or Guarantor............................................................ 83
10.1.4 Miscellaneous................................................................................. 83
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.............................................. 83
10.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes...................................... 83
10.4 Holidays............................................................................................... 84
10.5 Funding by Branch, Subsidiary or Affiliate............................................................. 85
10.5.1 Notional Funding.............................................................................. 85
10.5.2 Actual Funding................................................................................ 85
10.6 ICG as Agent for Loan Parties.......................................................................... 85
10.7 Notices................................................................................................ 86
10.8 Severability........................................................................................... 87
10.9 Governing Law.......................................................................................... 87
10.10 Prior Understanding.................................................................................... 87
10.11 Duration; Survival..................................................................................... 87
10.12 Successors and Assigns................................................................................. 88
10.13 Confidentiality........................................................................................ 89
10.13.1 General....................................................................................... 89
10.13.2 Sharing Information With Affiliates of the Banks.............................................. 89
10.14 Counterparts........................................................................................... 90
10.15 Agent's or Bank's Consent.............................................................................. 90
10.16 Exceptions............................................................................................. 90
10.17 CONSENT TO FORUM; WAIVER OF JURY TRIAL................................................................. 90
10.18 Tax Withholding Clause................................................................................. 91
</TABLE>
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10.19 Joinder of Guarantors.......................................................................... 91
10.20 Joint and Several Obligations of Borrowers; Additional Waivers................................. 92
</TABLE>
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<PAGE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(A-1) - PRIVATE COMPANY RESTRICTED SECURITIES
SCHEDULE 1.1(A-2) - PUBLIC COMPANY RESTRICTED SECURITIES
SCHEDULE 1.1(A-3) - PUBLIC COMPANY UNRESTRICTED SECURITIES
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 2.4 - REVOLVING CREDIT CLOSING FEES
SCHEDULE 5.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 5.1.2 - CAPITALIZATION
SCHEDULE 5.1.3 - SUBSIDIARIES
SCHEDULE 5.1.8 - OWNED AND LEASED PROPERTY
SCHEDULE 5.1.13 - CONSENTS AND APPROVALS
SCHEDULE 5.1.15 - PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
SCHEDULE 5.1.17 - SHAREHOLDER AGREEMENTS; PARTNERSHIP AGREEMENTS;
LLC AGREEMENTS REGARDING PLEDGED COLLATERAL
SCHEDULE 5.1.18 - INSURANCE POLICIES
SCHEDULE 5.1.20 - MATERIAL CONTRACTS
SCHEDULE 5.1.22 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.24 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
SCHEDULE 7.2.3 - PERMITTED GUARANTIES
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(B) - BORROWING BASE CERTIFICATE
EXHIBIT 1.1(C) - CONVERTIBLE SUBORDINATED NOTES
EXHIBIT 1.1(D) - TERMS OF SUBORDINATION
EXHIBIT 1.1(G)(1) - GUARANTOR JOINDER
EXHIBIT 1.1(G)(2) - GUARANTY AGREEMENT
EXHIBIT 1.1(I)(2) - INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(P)(1) - PATENT, TRADEMARK AND COPYRIGHT SECURITY AGREEMENT
EXHIBIT 1.1(P)(2) - PLEDGE AGREEMENT
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - SECURITY AGREEMENT
EXHIBIT 2.5 - REVOLVING CREDIT LOAN REQUEST
EXHIBIT 6.1.4 - CLOSING DATE COMPLIANCE CERTIFICATE
EXHIBIT 6.1.5 - WARRANT AGREEMENT
-x-
<PAGE>
EXHIBIT 6.1.6 - COLLATERAL ASSIGNMENT OF CONTRACT RIGHTS
EXHIBIT 6.1.7 - OPINION OF COUNSEL
EXHIBIT 6.1.19 - COMFORT LETTER FROM SAFEGUARD SCIENTIFICS, INC.
EXHIBIT 7.3.3 - QUARTERLY PERFORMANCE REPORT
EXHIBIT 7.3.5 - QUARTERLY COMPLIANCE CERTIFICATE
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of April 30, 1999 and is made by and
among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations" and
together with ICG, each a "Borrower" and collectively the "Borrowers"), the
BANKS (as hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its
capacity as agent for the Banks under this Agreement (hereinafter referred to in
such capacity as the "Agent").
WITNESSETH:
WHEREAS, the Borrowers and the Guarantors have requested the Banks to
provide a revolving credit facility to the Borrowers in an aggregate principal
amount not to exceed $50,000,000 with a $5,000,000 sublimit for letters of
credit; and
WHEREAS, the revolving credit facilities shall be used for working
capital purposes and capital expenditures, including issuance of letters of
credit and for Investments (as hereinafter defined), subject to the limitations
set forth in Section 7.1.15 hereof; and
WHEREAS, the Banks are willing to provide such credit upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
-------------------
1.1 Certain Definitions.
-------------------
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following meanings,
respectively, unless the context hereof clearly requires otherwise:
Administrative Borrower shall have the meaning specified
-----------------------
therefor in Section 10.06 hereof.
Affiliate as to any Person shall mean any other Person (i)
---------
which directly or indirectly controls, is controlled by, or is under common
control with such Person, (ii) which beneficially owns or holds 10% or more of
any class of the voting or other equity interests of such Person, or (iii) 10%
or more of any class of voting interests or other equity interests of which is
beneficially owned or held, directly or indirectly, by such Person. Control, as
used in this definition, shall mean the possession, directly or indirectly, of
the power to direct or cause the
<PAGE>
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, including the power to
elect a majority of the directors or trustees of a corporation or trust, as the
case may be.
Agent shall mean PNC Bank, National Association, and its
-----
successors and assigns.
Agent's Fee shall have the meaning assigned to that term in
-----------
Section 9.1 5.
Agent's Letter shall have the meaning assigned to that term
--------------
in Section 9.15.
Agreement shall mean this Credit Agreement, as the same may
---------
be supplemented or amended from time to time, including all schedules and
exhibits.
Annual Statements shall have the meaning assigned to that
-----------------
term in Section 5.1.9(i).
Applicable Margin shall mean 2.50% per annum.
-----------------
Assignment and Assumption Agreement shall mean an Assignment
-----------------------------------
and Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and
the Agent, as Agent and on behalf of the remaining Banks, substantially in the
form of Exhibit 1.1(A).
-------------
Authorized Officer shall mean those individuals, designated
------------------
by written notice to the Agent from the Administrative Borrower, authorized to
execute notices, reports and other documents on behalf of the Loan Parties
required hereunder. The Administrative Borrower may amend such list of
individuals from time to time by giving written notice of such amendment to the
Agent. As of the Closing Date, such authorized officers shall be any of the
Chief Executive Officer, President, Chief Financial Officer, Treasurer or
Assistant Treasurer of each Loan Party.
Banks shall mean the financial institutions named on
-----
Schedule 1.1(B) and their respective successors and assigns as permitted
- --------------
hereunder, each of which is referred to herein as a Bank.
Base Rate shall mean the greater of (i) the interest rate
---------
per annum announced from time to time by the Agent at its Principal Office as
its then prime rate, which rate may not be the lowest rate then being charged
commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus
1/2% per annum.
Base Rate Option shall mean the option of the Borrowers to
----------------
have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1(i).
-2-
<PAGE>
Benefit Arrangement shall mean at any time an "employee
-------------------
benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a
Plan nor a Multiemployer Plan and which is maintained, sponsored or otherwise
contributed to by any member of the ERISA Group.
Borrower and Borrowers shall have the meaning specified
-------- ---------
therefor in the preamble.
Borrowing Base shall mean, as of any date, the lesser of (a)
--------------
the Commitments and (b) a dollar amount equal to the sum of (i) the Private
Company Advance (as hereinafter defined) and the Additional Private Company
Advance (as hereinafter defined), if any; (ii) fifteen (15%) percent of the
aggregate dollar value of the Qualified Public Company Restricted Securities;
and (iii) twenty-five (25%) percent of the aggregate dollar value of the
Qualified Public Company Unrestricted Securities; provided, however, that in no
-------- -------
event shall any advance made hereunder based on the aggregate dollar value of
Qualified Public Company Restricted Securities and the aggregate dollar value of
Qualified Public Company Unrestricted Securities in accordance with clauses (ii)
and (iii) above exceed 50% (or the then maximum "Loan Value" for margin stock
pursuant to Regulation U) of the aggregate dollar value of the Qualified Public
Company Restricted Securities and the aggregate dollar value of the Qualified
Public Company Unrestricted Securities upon which such advance is made (the
"Minimum Margin Value"). The value of Public Company Restricted Securities and
Public Company Unrestricted Securities as of a particular date shall be
determined using the closing market value on the last trading day immediately
prior the date of such determination as reported on a recognized national
securities exchange or by the Nasdaq National or small-cap market, or on the
over-the-counter market, all as of the close of the last previous trading day.
The Private Company Advance shall mean the applicable amount
set forth on the table below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AGGREGATE COST BASIS OF QUALIFIED
- ---------------------------------
PRIVATE COMPANY RESTRICTED
- --------------------------
SECURITIES PRIVATE COMPANY ADVANCE
- ---------- -----------------------
- --------------------------------------------------------------------------------
<S> <C>
$0 - $100,000,000.00 10% of cost basis
- --------------------------------------------------------------------------------
$100,000,000.01 - 119,999,999.99 $10,000,000.00
- --------------------------------------------------------------------------------
$120,000,000.00 - 139,999,999.99 $12,500,000.00
- --------------------------------------------------------------------------------
OVER $140,000,000.00 $15,000,000.00
- --------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
The Banks will consider the Borrowers' request on a case by
case basis to make additional advances up to ten million dollars
($10,000,000.00), notwithstanding the maximum Private Company Advance provided
for above, based upon increases in the value of the Private Company Restricted
Securities (determined in accordance with Section 2.9 hereof) (the "Additional
Private Company Advance").
For purposes of this definition, "cost basis" of Private
Company Restricted Securities shall mean the sum of the aggregate amount of
Cash, Cash Equivalents, and the securities (including the principal amount of
any Subordinated Debt) of any Borrower or any Investment Entity (subject to the
limitations set forth in Section 7.2.8 [Affiliated Transactions]) invested by
the Borrowers in any Private Company Restricted Securities, as adjusted, in
accordance with the valuation method prescribed for determinations of cost basis
hereunder, to reflect additional investments in such securities and increases in
value determined in accordance with Section 2.9 hereof, or as such amounts may
be reduced in accordance with Section 7.1.20 [Periodic Review of Cost Basis
Determinations] hereof, in each case as set forth in a Borrowing Base
Certificate delivered in accordance with the terms hereof. Notwithstanding
anything to the contrary contained herein, when determining the Borrowing Base,
no more than $25,000,000 of the Borrowing Base shall be attributed to Pledged
Collateral issued by any individual Investment Entity.
Borrowing Base Availability shall mean the unused portion of
---------------------------
the Borrowing Base at the date of determination as calculated by the most recent
Borrowing Base Certificate.
Borrowing Base Certificate shall mean the Borrowing Base
--------------------------
Certificate given by the Borrowers to the Banks on the Closing Date and from
time to time pursuant to Section 7.3.4 [Borrowing Base Certificate] in the form
of Exhibit 1.1(B).
-------------
Borrowing Date shall mean, with respect to any Loan, the
--------------
date for the making thereof or the renewal or conversion thereof at or to the
same or a different Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans
-----------------
outstanding as follows: (i) any Loans to which a Euro-Rate Option applies which
become subject to the same Interest Rate Option under the same Loan Request by
the Borrowers and which have the same Interest Period shall constitute one
Borrowing Tranche, and (ii) all Loans to which a Base Rate Option applies shall
constitute one Borrowing Tranche.
Business Day shall mean any day other than a Saturday or
------------
Sunday or a legal holiday on which commercial banks are authorized or required
to be closed for business in Pittsburgh, Pennsylvania or San Francisco,
California and if the applicable Business Day relates to any Loan to which the
Euro-Rate Option applies, such day must also be a day on which dealings are
carried on in the London interbank market.
-4-
<PAGE>
Cash shall be defined according to GAAP.
----
Cash Equivalents: (a) securities with maturities of 365 days
----------------
or less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of 365 days or less from the date
of acquisition and overnight bank deposits of any Bank or of any commercial bank
having capital and surplus in excess of $500,000,000, (c) repurchase obligations
of any Bank or of any commercial bank satisfying the requirements of clause (b)
of this definition, having a term of not more than seven days with respect to
securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-1 or the
equivalent thereof by Standard & Poor's or P-1 or the equivalent thereof by
Moody's Investors Service, Inc. ("Moody's") and in either case maturing within
-------
270 days after the day of acquisition, (e) securities with maturities of 365
days or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by Standard & Poor's or A by Moody's, (f)
securities with maturities of 365 days or less from the date of acquisition
backed by standby letters of credit issued by any Bank or any commercial bank
satisfying the requirements of clause (b) of this definition or (g) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.
Closing Date shall mean the Business Day on which the first
------------
Loan shall be made, which shall be April 30, 1999 or, if all the conditions
specified in Section 6 have not been satisfied or waived by such date, not later
than April 30, 1999, as designated by the Borrower by at least two (2) Business
Days' advance notice to the Agent at its Principal Office, or such other date as
the parties agree. The closing shall take place at 10:00 a.m., Eastern time, on
the Closing Date at the offices of Buchanan Ingersoll, Eleven Penn Center, 14th
Floor, 1835 Market Street, Philadelphia, Pennsylvania 19103-2985 or at such
other time and place as the parties agree.
Collateral shall mean the Pledged Collateral, the UCC
----------
Collateral and the Intellectual Property Collateral.
Collateral Assignment of Contract Rights shall mean the
----------------------------------------
Collateral Assignment of Contract Rights in substantially the form of Exhibit
-------
6.1.6 executed and delivered by each Loan Party to the Agent for the benefit of
- -----
the Banks.
Collateral Coverage Securities shall mean, individually, any
------------------------------
Private Company Restricted Securities, any Public Company Restricted Securities
and any Public Company Unrestricted Securities and, collectively, all Private
Company Restricted Securities, all Public Company Restricted Securities and all
Public Company Unrestricted Securities.
-5-
<PAGE>
Commitment shall mean as to any Bank its Revolving Credit
----------
Commitment, and Commitments shall mean the aggregate of the Revolving Credit
Commitments of all of the Banks.
Commitment Fee shall have the meaning assigned to that term
--------------
in Section 2.3.
Committed Subscriptions shall mean capital calls committed
-----------------------
to the Borrower in writing, in form and substance reasonably satisfactory to the
Agent and the Banks.
Company Insiders as to the Borrowers shall mean (i)
----------------
shareholders, directors, officers and employees of ICG or its Affiliates and
(ii) shareholders, directors, officers, employees or Affiliates of any
Investment Entity.
Consolidated Tangible Net Worth shall mean as of any date of
-------------------------------
determination total stockholders' equity plus minority interests in net assets
of any Subsidiaries less intangible assets of the Borrowers and their respective
Subsidiaries as of such date determined and consolidated in accordance with
GAAP.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean
-----------------------------
lawful money of the United States of America.
Drawing Date shall have the meaning assigned to that term in
------------
Section 2.8.3.2.
Environmental Law shall have the meaning set forth in
-----------------
Section 5.1.24 hereof.
Environmental Permits shall have the meaning set forth in
---------------------
Section 5.1.24 hereof.
ERISA shall mean the Employee Retirement Income Security Act
-----
of 1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
ERISA Group shall mean, at any time, the Borrower and all
-----------
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other entities which,
together with the Borrower, are treated as a single employer under Section 414
of the Internal Revenue Code.
Euro-Rate shall mean, with respect to the Loans comprising
---------
any Borrowing Tranche to which the Euro-Rate Option applies for any Interest
Period, the interest rate per annum determined by the Agent by dividing (the
resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1%
per annum) (i) the rate of interest determined by the
-6-
<PAGE>
Agent in accordance with its usual and customary procedures (which determination
shall be conclusive absent manifest error) to be the average of the London
interbank offered rates for U.S. Dollars quoted by the British Bankers'
Association as set forth on Dow Jones Markets Service (formerly known as
Telerate) (or appropriate successor or, if the British Bankers' Association or
its successor ceases to provide such quotes, a comparable replacement determined
by the Agent) display page 3750 (or such other display page on the Dow Jones
Markets Service system as may replace display page 3750) two (2) Business Days
prior to the first day of such Interest Period for an amount comparable to such
Borrowing Tranche and having a borrowing date and a maturity comparable to such
Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve
Percentage. The Euro-Rate may also be expressed by the following formula:
Average of London interbank offered rates quoted
by BBA or appropriate successor as shown on
Euro-Rate = Dow Jones Markets Service display page 3750
-------------------------------------------
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Loan to which the Euro-Rate
Option applies that is outstanding on the effective date of any change in the
Euro-Rate Reserve Percentage as of such effective date. The Agent shall give
prompt notice to the Borrower of the Euro-Rate as determined or adjusted in
accordance herewith, which determination shall be conclusive absent manifest
error.
Euro-Rate Option shall mean the option of the Borrower to
----------------
have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1(ii).
Euro-Rate Reserve Percentage shall mean as of any day the
----------------------------
maximum percentage in effect on such day as prescribed by the Board of Governors
of the Federal Reserve System (or any successor) for determining the reserve
requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities").
Event of Default shall mean any of the events described in
----------------
Section 8.1 and referred to therein as an "Event of Default."
Expiration Date shall mean, with respect to the Revolving
---------------
Credit Commitments, April 28, 2000.
Facility Fees shall mean the fees referred to in Section
-------------
2.4.
Federal Funds Effective Rate for any day shall mean the rate
----------------------------
per annum (based on a year of 360 days and actual days elapsed and rounded
upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New
York (or any successor) on such day as being the weighted average of the rates
on overnight federal funds transactions arranged by
-7-
<PAGE>
federal funds brokers on the previous trading day, as computed and announced by
such Federal Reserve Bank (or any successor) in substantially the same manner as
such Federal Reserve Bank computes and announces the weighted average it refers
to as the "Federal Funds Effective Rate" as of the date of this Agreement;
provided, if such Federal Reserve Bank (or its successor) does not announce such
- --------
rate on any day, the "Federal Funds Effective Rate" for such day shall be the
Federal Funds Effective Rate for the last day on which such rate was announced.
GAAP shall mean generally accepted accounting principles as
----
are in effect from time to time in the United States, subject to the provisions
of Section 1.3, and applied on a consistent basis both as to classification of
items and amounts.
Governmental Acts shall have the meaning assigned to that
-----------------
term in Section 2.8.8.
Guarantor shall mean each Person which joins this Agreement
---------
as a Guarantor after the date hereof pursuant to Section 10.19.
Guarantor Joinder shall mean a joinder by a Person as a
-----------------
Guarantor under this Agreement, the Guaranty Agreement and the other Loan
Documents in the form of Exhibit 1.1(G)(1).
----------------
Guaranty of any Person shall mean any obligation of such
--------
Person guaranteeing or in effect guaranteeing any liability or obligation of any
other Person in any manner, whether directly or indirectly, including any
agreement to indemnify or hold harmless any other Person, any performance bond
or other suretyship arrangement and any other form of assurance against loss,
except endorsement of negotiable or other instruments for deposit or collection
in the ordinary course of business.
Guaranty Agreement shall mean the Guaranty and Suretyship
------------------
Agreement in substantially the form of Exhibit 1.1(G)(2) executed and delivered
----------------
by each of the Guarantors to the Agent for the benefit of the Banks.
Hazardous Substances shall have the meaning set forth in
--------------------
Section 5.1.24 hereof.
Historical Statements shall have the meaning assigned to
---------------------
that term in Section 5.1.9(i).
ICG Shares shall have the meaning assigned to that term in
----------
Section 5.1.2.
ICG Operations Shares shall have the meaning assigned to
---------------------
that term in Section 5.1.2.
-4-
<PAGE>
Indebtedness shall mean, as to any Person at any time, any
------------
and all indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device,
(iv) any other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (v) any Guaranty of Indebtedness for
borrowed money.
Insolvency Proceeding shall mean, with respect to any
---------------------
Person, (a) a case, action or proceeding with respect to such Person (i) before
any court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Loan Party or otherwise
relating to the liquidation, dissolution, winding-up or relief of such Person,
or (b) any general assignment for the benefit of creditors, composition,
marshaling of assets for creditors, or other, similar arrangement in respect of
such Person's creditors generally or any substantial portion of its creditors;
undertaken under any Law.
Intellectual Property Collateral shall mean all of the
--------------------------------
property described in the Patent, Trademark and Copyright Assignment.
Intercompany Subordination Agreement shall mean a
------------------------------------
Subordination Agreement among the Loan Parties in the form attached hereto as
Exhibit 1.1(I)(2).
- ----------------
Interest Period shall mean the period of time selected by
---------------
the Borrower in connection with (and to apply to) any election permitted
hereunder by the Borrower to have Revolving Credit Loans bear interest under the
Euro-Rate Option. Subject to the last sentence of this definition, such period
shall be one, two, three or six Months. Such Interest Period shall commence on
the effective date of such Interest Rate Option, which shall be (i) the
Borrowing Date if the Borrower is requesting new Loans, or (ii) the date of
renewal of or conversion to the Euro-Rate Option if the Borrower is renewing or
converting to the Euro-Rate Option applicable to outstanding Loans.
Notwithstanding the second sentence hereof: (A) any Interest Period which would
otherwise end on a date which is not a Business Day shall be extended to the
next succeeding Business Day unless such Business Day falls in the next calendar
month, in which case such Interest Period shall end on the next immediately
preceding Business Day, and (B) the Borrower shall not select, convert to or
renew an Interest Period for any portion of the Loans that would end after the
Expiration Date.
-9-
<PAGE>
Interest Rate Option shall mean any Euro-Rate Option or Base
--------------------
Rate Option.
Internal Revenue Code shall mean the Internal Revenue Code
---------------------
of 1986, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
Investments shall mean investments in the ordinary course of
-----------
business of the Borrower in any Person, including, but not limited to, any
loans, advances or extensions of credit (other than guaranties) or any purchase
of any debt or equity security, including without limitation, capital stock,
bonds, debentures, notes, general partnership interests, limited partnership
interests, warrants or other rights, all whether certificated or uncertificated.
Investment Entity of any Borrower shall mean any Person with
-----------------
respect to whom such Borrower has acquired an ownership interest by virtue of
Investments by such Borrower permitted in accordance with the terms hereof.
Labor Contracts shall mean all employment agreements,
---------------
employment contracts, collective bargaining agreements and other agreements
among any Loan Party or Subsidiary of a Loan Party and its employees.
Law shall mean any law (including common law), constitution,
---
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree, bond, judgment, authorization or approval, lien or
award of or settlement agreement with any Official Body.
Letter Agreement shall mean that certain Letter Agreement,
----------------
dated as of April 30, 1999, among each Loan Party and the Agent.
Letter of Credit shall have the meaning assigned to that
----------------
term in Section 2.8.1.
Letter of Credit Borrowing shall have the meaning assigned
--------------------------
to that term in Section 2.8.3.4.
Letter of Credit Fee shall have the meaning assigned to that
--------------------
term in Section 2.8.2.
Letters of Credit Outstanding shall mean at any time the sum
-----------------------------
of (i) the aggregate undrawn face amount of outstanding Letters of Credit and
(ii) the aggregate amount of all unpaid and outstanding Reimbursement
Obligations and Letter of Credit Borrowings.
Lien shall mean any deed of trust, pledge, lien, security
----
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or
-10-
<PAGE>
involuntarily given, including any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security and any filed financing statement or other notice
of any of the foregoing (whether or not a lien or other encumbrance is created
or exists at the time of the filing).
Loan Documents shall mean this Agreement, the Agent's
--------------
Letter, the Intercompany Subordination Agreement, the Notes, the Patent,
Trademark and Copyright Assignment, the Pledge Agreement, the Security
Agreement, the Letter Agreement, the Collateral Assignment of Contract Rights
and the Warrant and any other instruments, certificates or documents delivered
or contemplated to be delivered hereunder or thereunder or in connection
herewith or therewith, as the same may be supplemented or amended from time to
time in accordance herewith or therewith, and Loan Document shall mean any of
-------------
the Loan Documents.
Loan Parties shall mean the Borrowers and the Guarantors.
------------
Loan Request shall have the meaning given to such term in
------------
Section 2.5.
Loans shall mean collectively all Revolving Credit Loans and
-----
Loan shall mean separately any Revolving Credit Loan.
Material Adverse Change means a material adverse effect on
-----------------------
(a) the validity or enforceability of this Agreement or any other Loan Document,
(b) the business, properties, assets, condition (financial or otherwise),
results of operations or prospects of the Loan Parties taken as a whole, (c) the
ability of the Loan Parties taken as a whole to duly and punctually pay or
perform their Indebtedness, or (d) the ability of the Agent or any of the Banks,
to the extent permitted, to enforce their legal remedies pursuant to this
Agreement or any other Loan Document.
Material Contracts means, with respect to any Loan Party,
------------------
(a) each contract to which such Loan Party is a party involving aggregate
consideration payable to or by such Loan Party of $2,000,000 or more and (b) any
contract, document, instrument or other agreement entered into by such Loan
Party or any Subsidiary of such Loan Party relating to the acquisition of and
rights to transfer or dispose of any securities evidencing any Investment in, or
Pledged Collateral of, any Investment Entity.
Minimum Margin Value shall have the meaning ascribed thereto
--------------------
in the definition Borrowing Base.
Month, with respect to an Interest Period under the Euro-
-----
Rate Option, shall mean the interval between the days in consecutive calendar
months numerically corresponding to the first day of such Interest Period. If
any Euro-Rate Interest Period begins on a day of a calendar month for which
there is no numerically corresponding day in the month in which such Interest
Period is to end, the final month of such Interest Period shall be deemed to end
on the last Business Day of such final month.
-11-
<PAGE>
Multiemployer Plan shall mean any Plan which is a "multiemployer
------------------
plan" within the meaning of Section 4001(a)(3) of ERISA and to which the
Borrower or any member of the ERISA Group is then making or accruing an
obligation to make contributions or, within the preceding five Plan years, has
made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more
----------------------
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
Notes shall mean the Revolving Credit Notes.
-----
Notices shall have the meaning assigned to that term in Section
-------
10.7.
Obligation shall mean any obligation or liability of any of the
----------
Loan Parties to the Agent or any of the Banks, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Letters of Credit, the Agent's Letter or any other Loan Document.
Official Body shall mean any national, federal, state, local or
-------------
other government or political subdivision or any agency, authority, board,
bureau, central bank, commission, department or instrumentality of either, or
any court, tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
Participation Advance shall mean, with respect to any Bank, such
---------------------
Bank's payment in respect of its participation in a Letter of Credit Borrowing
according to its Ratable Share pursuant to Section 2.8.3.4.
Patent, Trademark and Copyright Assignment shall mean the Patent,
------------------------------------------
Trademark and Copyright Security Agreement in substantially the form of Exhibit
-------
1.1(P)(1) executed and delivered by each of the Loan Parties to the Agent for
- ---------
the benefit of the Banks.
PBGC shall mean the Pension Benefit Guaranty Corporation
----
established pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Investments shall mean:
---------------------
(i) direct obligations of the United States of America
or any agency or instrumentality thereof or obligations backed by the full faith
and credit of the United States of America maturing in twelve (12) months or
less from the date of acquisition;
-12-
<PAGE>
(ii) commercial paper maturing in 270 days or less rated
not lower than A-1, by Standard & Poor's or P-1 by Moody's Investors Service,
Inc. on the date of acquisition; and
(iii) demand deposits, time deposits or certificates of
deposit maturing within one year in commercial banks whose obligations are rated
A-1, A or the equivalent or better by Standard & Poor's on the date of
acquisition.
Permitted Liens shall mean:
---------------
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable or which are being contested in good faith by appropriate proceedings,
provided that adequate reserves with respect thereto are maintained on the books
- --------
of such Borrower and its respective Subsidiaries, as the case may be, in
conformity with GAAP;
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default except where contested in good faith by appropriate proceedings;
provided that adequate reserves with respect thereto are maintained on the books
- --------
of such Borrower and its respective Subsidiaries, as the case may be, in
conformity with GAAP;
(iv) Good-faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of property, none of which materially
impairs the use of such property or the value thereof, and none of which is
violated in any material respect by existing or proposed structures or land use;
(vi) Liens and security interests in favor of the Agent
for the benefit of the Banks;
-13-
<PAGE>
(vii) Any Lien existing on the date of this Agreement and
described on Schedule 1.1(P), provided that the principal amount secured thereby
--------------- --------
is not hereafter increased, and no additional assets become subject to such
Lien;
(viii) Purchase Money Security Interests, provided that the
--------
aggregate amount of loans and deferred payments secured by such Purchase Money
Security Interests shall not exceed $2,000,000 (excluding for the purpose of
this computation any loans or deferred payments secured by Liens described on
Schedule 1.1(P)); and
- ---------------
(ix) Claims or Liens upon, and defects of title to, real
or personal property other than the Collateral, including any attachment of real
or personal property or other legal process prior to adjudication of a dispute
on the merits.
Person shall mean any individual, corporation, partnership,
------
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
Plan shall have the meaning set forth in Section 5.1.22.
----
Pledge Agreement shall mean the Pledge Agreement in
----------------
substantially the form of Exhibit 1.1(P)(2) executed and delivered by ICG to the
-----------------
Agent for the benefit of the Banks.
Pledged Collateral shall mean the Pledged Securities in
------------------
which security interests are to be granted under the Pledge Agreement.
Pledged Securities shall have the meaning ascribed to such
------------------
term in the Pledge Agreement.
PNC Bank shall mean PNC Bank, National Association, its
--------
successors and assigns.
Potential Default shall mean any event or condition
-----------------
specified in Section 8.1, whether or not any requirement for the giving of
notice, the lapse of time or both, or any other condition, has been satisfied.
Principal Office shall mean the main banking office of the
----------------
Agent in Pittsburgh, Pennsylvania.
Prior Security Interest shall mean a valid and enforceable
-----------------------
perfected first-priority security interest under the Uniform Commercial Code in
the UCC Collateral and the Pledged Collateral which is subject only to Liens for
taxes not yet due and payable to the extent such prospective tax payments are
given priority by statute or Purchase Money Security Interests as permitted
hereunder.
-14-
<PAGE>
Private Company Restricted Securities shall mean Pledged
-------------------------------------
Securities now or hereafter owned by any Borrower which such Borrower is, or
Agent or any Bank if acquired from Borrower as pledgor would be, prohibited
under applicable federal or state law or regulations, or pursuant to private
contract, including any underwriter's lock-up agreement, from publicly offering
or selling in open market transactions throughout the United States. The initial
list of the issuers of Private Company Restricted Securities is set forth on
Schedule 1.1(A-1) attached hereto. The Administrative Borrower shall promptly
upon acquisition or sale of such securities, and in any event no later than the
date required for delivery of the next Borrowing Base Certificate required to be
delivered after any such acquisition or sale in accordance with Section 7.3.4
[Borrowing Base Certificate] hereof, amend such list of Private Company
Restricted Securities from time to time to reflect any such acquisition or sale
of any such securities by giving written notice of such amendment to the Agent.
Prohibited Transaction shall mean any prohibited transaction
----------------------
as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
for which neither an individual nor a class exemption has been issued by the
United States Department of Labor.
Property shall mean all real property, both owned and
--------
leased, of any Loan Party or Subsidiary of a Loan Party.
Public Company Restricted Securities shall mean Pledged
------------------------------------
Securities consisting of securities issued by one or more corporations but only
as long as (A) such class of securities is listed on a recognized national
securities exchange, on the Nasdaq National market or small-cap market or on the
over-the-counter market and (B) such securities are Restricted Securities. The
initial list of the issuers of Public Company Restricted Securities is set forth
on Schedule 1.1(A-2) attached hereto. The Borrower shall promptly upon
acquisition or sale of such securities, and in any event no later than the date
required for delivery of the next Borrowing Base required to be delivered after
any such acquisition or sale in accordance with the Section 7.3.4 [Borrowing
Base Certificate] hereof, amend such list of Public Company Restricted
Securities from time to time to reflect any such acquisition or sale of any such
securities by giving written notice of such amendment to the Agent.
Public Company Unrestricted Securities shall mean Pledged
--------------------------------------
Securities consisting of securities issued by one or more corporations but only
as long as (A) such class of securities is listed on a recognized national
securities exchange, on the Nasdaq National market or small-cap market or on the
over-the-counter market and (B) such securities are not Restricted Securities.
The initial list of the issuers of Public Company Unrestricted Securities is set
forth on Schedule 1.1(A-3) attached hereto. The Borrower shall promptly upon
acquisition or sale of such securities, and in any event no later than the date
required for delivery of the next Borrowing Base Certificate required to be
delivered after any such acquisition or sale in accordance with Section 7.3.4
[Borrowing Base Certificate] hereof, amend such list of Public Company
Unrestricted Securities from time to time to reflect any such acquisition or
sale of any such securities by giving written notice of such amendment to the
Agent.
-15-
<PAGE>
Purchase Money Security Interest shall mean Liens upon
--------------------------------
tangible personal property securing loans to any Loan Party or Subsidiary of a
Loan Party or deferred payments by such Loan Party or Subsidiary for the
purchase of such tangible personal property not exceeding the value of such
property.
Purchasing Bank shall mean a Bank which becomes a party to
---------------
this Agreement by executing an Assignment and Assumption Agreement.
Qualified Private Company Restricted Securities shall mean,
-----------------------------------------------
for purposes of determining the Borrowing Base, that any Private Company
Restricted Securities have met all of the following minimum requirements:
(1) all Material Contracts required to be delivered in
accordance with the terms of Section 7.17 (i) and (iii) [Delivery of Material
Contracts] shall have been delivered to the Agent. Notwithstanding anything to
the contrary contained herein, upon delivery of any such Material Contracts in
accordance with the terms hereof, Schedule 5.1.20 shall be deemed to have been
---------------
automatically, and without further act, updated to reflect the delivery of any
such Material Contracts.
(2) all consents to the pledge of such Investment
Entity's securities and assignment of applicable contract rights to the Agent,
including, without limitation, any applicable consents from such Investment
Entity, any applicable consents from founders or shareholders of such Investment
Entity and any other Persons from whom consent needs to be obtained in order to
have an effective pledge and assignment of the Collateral to the Agent in
accordance with the terms hereof and the other Loan Documents (collectively, the
"Consents") required to have been executed and delivered in accordance with the
terms of Section 7.1.18 (i) and (iii) [Delivery of Consents] shall have been
executed and delivered to the Agent, in form and substance satisfactory to the
Agent; and
(3) all original certificates evidencing ownership of
such Investment Entity's securities and notes or other debt instruments
evidencing any Borrower's Investment in such Investment Entity (collectively,
the "Certificates"), together with executed and undated stock powers and warrant
powers (collectively, the "Powers"), required to have been delivered in
accordance with the terms of Section 7.1.19 (i) and (iii) shall have been
delivered to the Agent; provided, however, that notwithstanding the foregoing,
-------- -------
(i) for any Investments in Private Company Restricted Securities made by any
Borrower after the Closing Date, the securities so acquired shall be deemed to
constitute Qualified Private Company Restricted Securities to the extent that
such Borrower shall have provided to the Agent a representation that such
Borrower has received all Consents necessary to pledge such securities in the
relevant Borrowing Base Certificate, and such Consents, together with the
Certificates and the Powers with respect to such Investment Entity's securities
shall in any event be delivered to the Agent on behalf of the Banks within ten
(10) Business Days of the making of any such Investment and (ii) for any
Investments in the securities of Commerx, Inc., E-Chemicals, Inc. or
MessageQuest, Inc. shall also be deemed
-16-
<PAGE>
to constitute Qualified Private Company Restricted Securities provided that the
Certificates and the Powers with respect to such Investment Entity's securities
shall have been delivered within ten (10) Business Days of the Closing Date.
Qualified Public Company Restricted Securities shall mean,
----------------------------------------------
for purposes of the determining the Borrowing Base, that any Public Company
Restricted Securities have met all of the following minimum requirements:
(1) all Material Contracts required to be delivered in
accordance with the terms of Section 7.17 (ii) and (iii) shall have been
delivered to the Agent. Notwithstanding anything to the contrary contained
herein, upon delivery of any such Material Contracts in accordance with the
terms hereof, Schedule 5.1.20 shall be deemed to have been automatically, and
---------------
without further act, updated to reflect the delivery of any such Material
Contracts;
(2) all Consents required to have been executed and
delivered in accordance with the terms of Section 7.1.18 (ii) and (iii) shall
have been executed and delivered to the Agent, in form and substance
satisfactory to the Agent; and
(3) all Certificates and Powers required to have been
executed and delivered in accordance with the terms of Section 7.1.19 (ii) and
(iii) hereof shall have been executed and delivered to the Agent.
Qualified Public Company Unrestricted Securities shall mean,
------------------------------------------------
for purposes of determining the Borrowing Base, that any Public Company
Unrestricted Securities have met all of the following minimum requirements:
(1) all Material Contracts required to have been executed
and delivered in accordance with Section 7.1.17 (iii) hereof shall have been
delivered to the Agent. Notwithstanding anything to the contrary contained
herein, upon delivery of any such Material Contracts in accordance with the
terms hereof, Schedule 5.1.20 shall be deemed to have been automatically and
---------------
without further act, updated to reflect the delivery of any such Material
Contracts;
(2) all Consents required to have been executed and
delivered in accordance with Section 7.1.18 (iii) hereof shall have been
executed and delivered to the Agent, in form and substance satisfactory to the
Agent; and
(3) all Certificates and Powers required to have been
executed and delivered in accordance with the terms of Section 7.1.19 (iii)
hereof shall have been executed and delivered to the Agent.
Ratable Share shall mean the proportion that a Bank's
-------------
Commitment bears to the Commitments of all of the Banks.
-17-
<PAGE>
Regulation U shall mean Regulation U, T, G or X as
------------
promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time.
Reimbursement Obligation shall have the meaning assigned to
------------------------
such term in Section 2.8.3.2.
Reportable Event shall mean a reportable event described in
----------------
Section 4043 of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
Required Banks shall mean
--------------
(i) if there are no Loans, Reimbursement Obligations or
Letter of Credit Borrowings outstanding, Banks whose Commitments aggregate at
least 60% of the Commitments of all of the Banks, which Banks shall in any event
include the Agent, or
(ii) if there are Loans, Reimbursement Obligations, or
Letter of Credit Borrowings outstanding, any Bank or group of Banks if the sum
of the Loans, Reimbursement Obligations and Letter of Credit Borrowings of such
Banks then outstanding aggregates at least 60% of the total principal amount of
all of the Loans , Reimbursement Obligations and Letter of Credit Borrowings
then outstanding, which Bank or group of Banks shall in any event include the
Agent.
Restricted Securities shall mean securities now or hereafter
---------------------
owned by a Borrower which such Borrower is, or Agent or any Bank if acquired
from a Borrower as pledgor would be, prohibited under applicable federal or
state law or regulation, or pursuant to private contract, including any
underwriters' lock-up agreement, from publicly offering or selling such
securities in open market transactions throughout the United States. For this
purpose securities that may lawfully be sold pursuant to Rule 144 of the
Securities Act of 1933, as amended, subject only to volume limitations set forth
in Rule 144(e) are not "Restricted Securities" solely by reason of such volume
limitations.
Revolving Credit Commitment shall mean, as to any Bank at
---------------------------
any time, the amount initially set forth opposite its name on Schedule 1.1(B) in
---------------
the column labeled "Amount of Commitment for Revolving Credit Loans," and
thereafter on Schedule I to the most recent Assignment and Assumption Agreement,
and Revolving Credit Commitments shall mean the aggregate Revolving Credit
----------------
Commitments of all of the Banks.
- -----------
Revolving Credit Loans shall mean collectively and Revolving
---------------------- ---------
Credit Loan shall mean separately all Revolving Credit Loans or any Revolving
- -----------
Credit Loan made by the Banks or one of the Banks to the Borrowers pursuant to
Section 2.1 or 2.8.3.
Revolving Credit Notes shall mean collectively and Revolving
---------------------- ---------
Credit Note shall mean separately all the Revolving Credit Notes of the
- -----------
Borrowers in the form of
-18-
<PAGE>
Exhibit 1.1(R) evidencing the Revolving Credit Loans together with all
- --------------
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
Revolving Facility Usage shall mean at any time the sum of
------------------------
the Revolving Credit Loans outstanding and the Letters of Credit Outstanding.
Security Agreement shall mean the Security Agreement in
------------------
substantially the form of Exhibit 1.1(S) executed and delivered by each of the
--------------
Loan Parties to the Agent for the benefit of the Banks.
Solvent shall mean, with respect to any Person on a
-------
particular date, that on such date (i) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (ii) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person is
engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.
Standard & Poor's shall mean Standard & Poor's Ratings
-----------------
Services, a division of The McGraw-Hill Companies, Inc.
Standby Letter of Credit shall mean a Letter of Credit
------------------------
issued to support obligations of one or more of the Loan Parties, contingent or
otherwise, which finance the working capital and capital expenditures of the
Loan Parties incurred in the ordinary course of business.
Subordinated Debt shall mean any unsecured Indebtedness of a
-----------------
Borrower, including any Subordinated Loans, no part of the principal of which is
stated to be payable or is required to be paid (whether by way of mandatory
sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to
May 1, 2000, and the payment of the principal of and interest on which and other
obligations of any Borrower in respect thereof are subordinated to the prior
payment in full of the principal of and interest (including post-petition
interest) on the Notes and all other obligations and liabilities of such
Borrower to the Agent and the Banks hereunder on terms and conditions
substantially as set forth in Exhibit 1.1(D) attached hereto.
--------------
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<PAGE>
Subordinated Lender shall mean any Person who makes a loan
-------------------
to any Loan Party to the extent such loan constitutes Subordinated Debt
hereunder, together with such Person's successors and assigns.
Subordinated Loans shall mean up to $100,000,000 of
------------------
subordinated loans, inclusive of the loans evidenced by the Subordinated Notes,
made by the Subordinated Lender(s) to ICG pursuant to the Subordinated Loan
Documents.
Subordinated Loan Documents shall mean (a) any and all
---------------------------
instruments, certificates or documents delivered or contemplated to be delivered
in connection with any Subordinated Debt and (b) the Subordinated Notes and all
other instruments, certificates or documents delivered or contemplated to be
delivered thereunder or in connection therewith, as the same may be supplemented
or amended from time to time in accordance herewith.
Subordinated Note(s) shall mean the Convertible Note(s) of
--------------------
ICG payable to Subordinated Lenders, each of which shall be executed and
delivered substantially in the form of Exhibit 1.1(C) hereof.
---------------------
Subsidiary of any Person at any time shall mean (i) any
----------
corporation or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, (ii) any partnership of which such Person is
a general partner or of which 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, (iii) any limited liability company of which such Person is a
member or of which 50% or more of the limited liability company interests is at
the time directly or indirectly owned by such Person or one or more of such
Person's Subsidiaries or (iv) any corporation, trust, partnership, limited
liability company or other entity which is controlled or capable of being
controlled by such Person or one or more of such Person's Subsidiaries.
Notwithstanding anything to the contrary, for purposes of this Agreement and the
other Loan Documents, the term "Subsidiary" shall not include any Investment
Entity.
Subsidiary Shares shall have the meaning assigned to that
-----------------
term in Section 5.1.3.
Transferor Bank shall mean the selling Bank pursuant to an
---------------
Assignment and Assumption Agreement.
UCC Collateral shall mean the property of the Loan Parties
--------------
in which security interests are to be granted under the Security Agreement.
Uniform Commercial Code shall have the meaning assigned to
-----------------------
that term in Section 5.1.16.
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<PAGE>
Warrant shall mean the Warrants in substantially the form of
-------
Exhibit 6.1.5 executed and delivered by ICG to each of the Banks.
- -------------
1.2 Construction.
------------
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 Number; Inclusion.
-----------------
references to the plural include the singular, the plural,
the part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 Agent's Discretion and Consent.
------------------------------
whenever the Agent or the Banks are granted the right herein
to act in its or their sole discretion or to grant or withhold consent such
right shall be exercised in good faith;
1.2.3 Documents Taken as a Whole.
--------------------------
the words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
1.2.4 Headings.
--------
the section and other headings contained in this Agreement
or such other Loan Document and the Table of Contents (if any), preceding this
Agreement or such other Loan Document are for reference purposes only and shall
not control or affect the construction of this Agreement or such other Loan
Document or the interpretation thereof in any respect;
1.2.5 Implied References to this Agreement.
------------------------------------
article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the case may be,
unless otherwise specified;
1.2.6 Persons.
-------
reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement or such other Loan Document, as the case may be, and
reference to a Person in a particular capacity excludes such Person in any other
capacity;
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<PAGE>
1.2.7 Modifications to Documents.
--------------------------
reference to any agreement (including this Agreement and any
other Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
1.2.8 From, To and Through.
--------------------
relative to the determination of any period of time, "from" means
"from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.9 Shall; Will.
-----------
references to "shall" and "will" are intended to have the same
meaning.
1.3 Accounting Principles.
---------------------
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
-------- -------
used in Section 7.2 [Negative Covenants] (and all defined terms used in the
definition of any accounting term used in Section 7.2 shall have the meaning
given to such terms (and defined terms) under GAAP as in effect on the date
hereof applied on a basis consistent with those used in preparing the Annual
Statements referred to in Section 5.1.9(i) [Historical Statements]. In the event
of any change after the date hereof in GAAP, and if such change would result in
the inability to determine compliance with the financial covenants set forth in
Section 7.2 based upon the Borrowers' regularly prepared financial statements by
reason of the preceding sentence, then the parties hereto agree to endeavor, in
good faith, to agree upon an amendment to this Agreement that would adjust such
financial covenants in a manner that would not affect the substance thereof, but
would allow compliance therewith to be determined in accordance with the
Borrowers' financial statements at that time.
2. REVOLVING CREDIT FACILITY
-------------------------
2.1 Revolving Credit Commitments.
----------------------------
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make Revolving Credit Loans to the Borrowers at any time or from time to time on
or after the date hereof and prior to the Expiration Date, provided that after
giving effect to such Loan (i) the aggregate amount of Revolving Credit
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<PAGE>
Loans from such Bank plus such Bank's Ratable Share of the Letters of Credit
Outstanding shall not exceed (x) the lesser of (a) such Bank's Revolving Credit
Commitment or (b) such Bank's Ratable Share of the Borrowing Base, and (ii) the
Revolving Facility Usage shall not exceed the Revolving Facility Commitments.
Within such limits of time and amount and subject to the other provisions of
this Agreement, the Borrowers may borrow, repay and reborrow pursuant to this
Section 2.1.
2.2 Nature of Banks' Obligations with Respect to Revolving Credit
-------------------------------------------------------------
Loans.
- ------
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.5 [Revolving Credit Loan Requests]
in accordance with its Ratable Share. The aggregate of each Bank's Revolving
Credit Loans outstanding hereunder to the Borrowers at any time shall not exceed
such Bank's Revolving Credit Commitment minus its Ratable Share of the Letter of
Credit Outstandings. The obligations of each Bank hereunder are several. The
failure of any Bank to perform its obligations hereunder shall not affect the
Obligations of the Borrowers to any other party nor shall any other party be
liable for the failure of such Bank to perform its obligations hereunder. The
Banks shall have no obligation to make Revolving Credit Loans hereunder on or
after the Expiration Date.
2.3 Commitment Fees.
---------------
Accruing from the date hereof until the Expiration Date, the
Borrowers, jointly and severally, agree to pay to the Agent for the account of
each Bank, as consideration for such Bank's Revolving Credit Commitment
hereunder, a nonrefundable commitment fee (the "Commitment Fee") equal to .25%
per annum (computed on the basis of a year of 360 days and actual days elapsed)
on the average daily difference between the amount of (i) such Bank's Revolving
Credit Commitment as the same may be constituted from time to time and the (ii)
the sum of such Bank's Revolving Credit Loans outstanding plus its Ratable Share
of Letters of Credit Outstanding. All Commitment Fees shall be payable in
arrears on the first Business Day of each April, July, October and January after
the date hereof and on the Expiration Date or upon acceleration of the Notes in
accordance with Section 8.2 [Consequences of Event of Default] hereof.
2.4 Revolving Credit Closing Fees.
-----------------------------
The Borrowers, jointly and severally, agree to pay on the Closing
Date to the Agent for the account of each Bank, as consideration for such Bank's
Revolving Credit Commitment, nonrefundable closing fees (the "Facility Fees"),
as more particularly described on Schedule 2.4.
2.5 Revolving Credit Loan Requests.
------------------------------
Except as otherwise provided herein, the Borrowers may from time to
time prior to the Expiration Date request the Banks to make Revolving Credit
Loans, or renew or convert
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<PAGE>
the Interest Rate Option applicable to existing Revolving Credit Loans pursuant
to Section 3.2 [Interest Periods], by delivering to the Agent, not later than
12:00 noon, Pittsburgh time, (i) three (3) Business Days prior to the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate
Option for any Loans; and (ii) on the proposed Borrowing Date with respect to
the making of a Revolving Credit Loan to which the Base Rate Option applies or
the last day of the preceding Interest Period with respect to the conversion to
the Base Rate Option for any Loan, of a duly completed request therefor
substantially in the form of Exhibit 2.5 or a request by telephone immediately
-----------
confirmed in writing by letter, facsimile or telex in such form (each, a "Loan
Request"), it being understood that the Agent may rely on the authority of any
individual making such a telephonic request without the necessity of receipt of
such written confirmation. Each Loan Request shall be irrevocable and shall
specify (i) the proposed Borrowing Date; (ii) the aggregate amount of the
proposed Loans comprising each Borrowing Tranche, which shall be in integral
multiples of $100,000 and not less than $2,000,000 for each Borrowing Tranche to
which the Euro-Rate Option applies and not less than the lesser of $100,000 or
the maximum amount available for Borrowing Tranches to which the Base Rate
Option applies; (iii) whether the Euro-Rate Option or Base Rate Option shall
apply to the proposed Loans comprising the applicable Borrowing Tranche; and
(iv) in the case of a Borrowing Tranche to which the Euro-Rate Option applies,
an appropriate Interest Period for the Loans comprising such Borrowing Tranche.
2.6 Making Revolving Credit Loans.
-----------------------------
The Agent shall, promptly after receipt by it of a Loan Request
pursuant to Section 2.5 [Revolving Credit Loan Requests], notify the Banks of
its receipt of such Loan Request specifying: (i) the proposed Borrowing Date and
the time and method of disbursement of the Revolving Credit Loans requested
thereby; (ii) the amount and type of each such Revolving Credit Loan and the
applicable Interest Period (if any); and (iii) the apportionment among the Banks
of such Revolving Credit Loans as determined by the Agent in accordance with
Section 2.2 [Nature of Banks' Obligations]. Each Bank shall remit the principal
amount of each Revolving Credit Loan to the Agent such that the Agent is able
to, and the Agent shall, to the extent the Banks have made funds available to it
for such purpose and subject to Section 6.2 [Each Additional Loan], fund such
Revolving Credit Loans to the Borrower in U.S. Dollars and immediately available
funds at the Principal Office prior to 2:00 p.m., Pittsburgh time, on the
applicable Borrowing Date, provided that if any Bank fails to remit such funds
--------
to the Agent in a timely manner, the Agent may elect in its sole discretion to
fund with its own funds the Revolving Credit Loans of such Bank on such
Borrowing Date, and such Bank shall be subject to the repayment obligation in
Section 9.16 [Availability of Funds].
2.7 Revolving Credit Notes.
----------------------
The joint and several Obligation of the Borrowers to repay the
aggregate unpaid principal amount of the Revolving Credit Loans made to them by
each Bank, together with interest thereon, shall be evidenced by a Revolving
Credit Note dated the Closing Date payable to
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<PAGE>
the order of such Bank in a face amount equal to the Revolving Credit Commitment
of such Bank.
2.8 Letter of Credit Subfacility.
----------------------------
2.8.1 Issuance of Letters of Credit.
-----------------------------
The Administrative Borrower may request the issuance of a Standby
Letter of Credit (each a "Letter of Credit") on behalf of itself or another Loan
Party by delivering to the Agent a completed application and agreement for
letters of credit in such form as the Agent may specify from time to time by no
later than 12:00 noon, Pittsburgh time, at least three (3) Business Days, or
such shorter period as may be agreed to by the Agent, in advance of the proposed
date of issuance. Subject to the terms and conditions hereof and in reliance on
the agreements of the other Banks set forth in this Section 2.8, the Agent will
issue a Letter of Credit provided that each Letter of Credit shall (A) have a
maximum maturity of 364 days from the date of issuance, and (B) in no event
expire later than five (5) Business Days prior to the Expiration Date and
providing that in no event shall (i) the Letters of Credit Outstanding exceed,
at any one time, $5,000,000 or (ii) the Revolving Facility Usage exceed, at any
one time, the Revolving Credit Commitments.
2.8.2 Letter of Credit Fees.
---------------------
The Borrowers shall pay to the Agent for the ratable account of
the Banks a fee (the "Letter of Credit Fee") equal to the Applicable Margin
governing Loans under the Euro-Rate Option (computed on the basis of a year of
360 days and actual days elapsed), which fee shall be computed on the daily
average Letters of Credit Outstanding and shall be payable quarterly in arrears
commencing with the first Business Day of each April, July, October and January
following issuance of each Letter of Credit and on the Expiration Date. The
Borrowers shall also pay to the Agent for the Agent's sole account the Agent's
then in effect customary fees and administrative expenses payable with respect
to the Letters of Credit as the Agent may generally charge or incur from time to
time in connection with the issuance, maintenance, modification (if any),
assignment or transfer (if any), negotiation, and administration of Letters of
Credit.
2.8.3 Disbursements, Reimbursement.
----------------------------
2.8.3.1 Immediately upon the Issuance of each
Letter of Credit, each Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Agent a participation in such
Letter of Credit and each drawing thereunder in an amount equal to such Bank's
Ratable Share of the maximum amount available to be drawn under such Letter of
Credit and the amount of such drawing, respectively.
2.8.3.2 In the event of any request for a
drawing under a Letter of Credit by the beneficiary or transferee thereof, the
Agent will promptly notify the Administrative Borrower. Provided that it shall
have received such notice, the Borrowers shall
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<PAGE>
reimburse (such obligation to reimburse the Agent shall sometimes be referred to
as a "Reimbursement Obligation") the Agent prior to 12:00 noon, Pittsburgh time
on each date that an amount is paid by the Agent under any Letter of Credit
(each such date, an "Drawing Date") in an amount equal to the amount so paid by
the Agent. In the event the Borrowers fail to reimburse the Agent for the full
amount of any drawing under any Letter of Credit by 12:00 noon, Pittsburgh time,
on the Drawing Date, the Agent will promptly notify each Bank thereof, and the
Borrowers shall be deemed to have requested that Revolving Credit Loans be made
by the Banks under the Base Rate Option to be disbursed on the Drawing Date
under such Letter of Credit, subject to the amount of the unutilized portion of
the Revolving Credit Commitment and subject to the conditions set forth in
Section 6.2 [Each Additional Loan] other than any notice requirements. Any
notice given by the Agent pursuant to this Section 2.8.3.2 may be oral if
immediately confirmed in writing; provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice.
2.8.3.3 Each Bank shall upon any notice pursuant
to Section 2.8.3.2 make available to the Agent an amount in immediately
available funds equal to its Ratable Share of the amount of the drawing,
whereupon the participating Banks shall (subject to Section 2.8.3.4) each be
deemed to have made a Revolving Credit Loan under the Base Rate Option to the
Borrower in that amount. If any Bank so notified fails to make available to the
Agent for the account of the Agent the amount of such Bank's Ratable Share of
such amount by no later than 2:00 p.m., Pittsburgh time on the Drawing Date,
then interest shall accrue on such Bank's obligation to make such payment, from
the Drawing Date to the date on which such Bank makes such payment (i) at a rate
per annum equal to the Federal Funds Effective Rate during the first three days
following the Drawing Date and (ii) at a rate per annum equal to the rate
applicable to Loans under the Base Rate Option on and after the fourth day
following the Drawing Date. The Agent will promptly give notice of the
occurrence of the Drawing Date, but failure of the Agent to give any such notice
on the Drawing Date or in sufficient time to enable any Bank to effect such
payment on such date shall not relieve such Bank from its obligation under this
Section 2.8.3.3.
2.8.3.4 With respect to any unreimbursed drawing
that is not converted into Revolving Credit Loans under the Base Rate Option to
the Borrowers in whole or in part as contemplated by Section 2.8.3.2, because of
the Borrowers' failure to satisfy the conditions set forth in Section 6.2 [Each
Additional Loan] other than any notice requirements or for any other reason, the
Borrowers shall be deemed to have incurred from the Agent a borrowing (each a
"Letter of Credit Borrowing") in the amount of such drawing. Such Letter of
Credit Borrowing shall be due and payable on demand (together with interest) and
shall bear interest at the rate per annum applicable to the Revolving Credit
Loans under the Base Rate Option plus an additional 2% per annum. Each Bank's
payment to the Agent pursuant to Section 2.8.3.3 shall be deemed to be a payment
in respect of its participation in such Letter of Credit Borrowing and shall
constitute a "Participation Advance" from such Bank in satisfaction of its
participation obligation under this Section 2.8.3.
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<PAGE>
2.8.4 Repayment of Participation Advances.
-----------------------------------
2.8.4.1 Upon (and only upon) receipt by the
Agent for its account of immediately available funds from the Borrowers (i) in
reimbursement of any payment made by the Agent under the Letter of Credit with
respect to which any Bank has made a Participation Advance to the Agent, or (ii)
in payment of interest on such a payment made by the Agent under such a Letter
of Credit, the Agent will pay to each Bank, in the same funds as those received
by the Agent, the amount of such Bank's Ratable Share of such funds, except the
Agent shall retain the amount of the Ratable Share of such funds of any Bank
that did not make a Participation Advance in respect of such payment by Agent.
2.8.4.2 If the Agent is required at any time to
return to any Loan Party, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the payments made by
any Loan Party to the Agent pursuant to Section 2.8.4.1 in reimbursement of a
payment made under the Letter of Credit or interest or fee thereon, each Bank
shall, on demand of the Agent, forthwith return to the Agent the amount of its
Ratable Share of any amounts so returned by the Agent plus interest thereon from
the date such demand is made to the date such amounts are returned by such Bank
to the Agent, at a rate per annum equal to the Federal Funds Effective Rate in
effect from time to time.
2.8.5 Documentation.
-------------
Each Loan Party agrees to be bound by the terms of the Agent's
application and agreement for letters of credit and the Agent's written
regulations and customary practices relating to letters of credit, though such
interpretation may be different from such Loan Party's own. In the event of a
conflict between such application or agreement and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct, the Agent shall not be liable for any
error, negligence and/or mistakes, whether of omission or commission, in
following any Loan Party's instructions or those contained in the Letters of
Credit or any modifications, amendments or supplements thereto.
2.8.6 Determinations to Honor Drawing Requests.
----------------------------------------
In determining whether to honor any request for drawing under any
Letter of Credit by the beneficiary thereof, the Agent shall be responsible only
to determine that the documents and certificates required to be delivered under
such Letter of Credit have been delivered and that they comply on their face
with the requirements of such Letter of Credit.
2.8.7 Nature of Reimbursement Obligations.
-----------------------------------
The Obligations of the Borrowers to reimburse the Agent upon a
draw under a Letter of Credit, shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Section 2.8
under all circumstances, including the following circumstances:
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<PAGE>
(i) any set-off, counterclaim, recoupment,
defense or other right which the Borrower may have against the Agent or any
other Person for any reason whatsoever;
(ii) the failure of any Loan Party or any other
Person to comply, in connection with a Letter of Credit Borrowing, with the
conditions set forth in Section 2.1 [Revolving Credit Commitments], 2.5
[Revolving Credit Loan Requests], 2.6 [Making Revolving Credit Loans] or 6.2
[Each Additional Loan or Letter of Credit] or as otherwise set forth in this
Agreement for the making of a Revolving Credit Loan, it being acknowledged that
such conditions are not required for the making of a Letter of Credit Borrowing;
(iii) any lack of validity or enforceability of
any Letter of Credit;
(iv) the existence of any claim, set-off,
defense or other right which any Loan Party or any Bank may have at any time
against a beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), the Agent or any Bank or any other
Person or, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between any Loan Party or Subsidiaries of a Loan Party and the
beneficiary for which any Letter of Credit was procured);
(v) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect even if the Agent has been notified thereof;
(vi) payment by the Agent under any Letter of
Credit against presentation of a demand, draft or certificate or other document
which does not strictly comply with the terms of such Letter of Credit;
(vii) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of any Loan Party or Subsidiaries of a Loan Party;
(viii) any breach of this Agreement or any
other Loan Document by any party thereto;
(ix) the occurrence or continuance of an
Insolvency Proceeding with respect to any Loan Party;
(x) the fact that an Event of Default or a
Potential Default shall have occurred and be continuing;
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<PAGE>
(xi) the fact that the Expiration Date shall
have passed or this Agreement or the Commitments hereunder shall have been
terminated; and
(xii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.
2.8.8 Indemnity.
---------
In addition to amounts payable as provided in Section 9.5
[Reimbursement of Agent by Borrower, Etc.], the Borrowers hereby agree to
protect, indemnify, pay and save harmless the Agent from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable fees, expenses and disbursements of counsel and allocated
costs of internal counsel) which the Agent may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit, other
than as a result of (A) the gross negligence or willful misconduct of the Agent
as determined by a final judgment of a court of competent jurisdiction or (B)
the wrongful dishonor by the Agent of a proper demand for payment made under any
Letter of Credit, except if such dishonor resulted from any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"Governmental Acts").
2.8.9 Liability for Acts and Omissions.
--------------------------------
As between any Loan Party and the Agent, such Loan Party assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit by,
the respective beneficiaries of such Letters of Credit. In furtherance and not
in limitation of the foregoing, the Agent shall not be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for an
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged
(even if the Agent shall have been notified thereof); (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary of
any such Letter of Credit, or any other party to which such Letter of Credit may
be transferred, to comply fully with any conditions required in order to draw
upon such Letter of Credit or any other claim of any Loan Party against any
beneficiary of such Letter of Credit, or any such transferee, or any dispute
between or among any Loan Party and any beneficiary of any Letter of Credit or
any such transferee; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) errors in interpretation of
technical terms; (vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any such Letter of Credit or
of the proceeds thereof; (vii) the misapplication by the beneficiary of any such
Letter of Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control of the Agent,
including any Governmental
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<PAGE>
Acts, and none of the above shall affect or impair, or prevent the vesting of,
any of the Agent's rights or powers hereunder. Nothing in the preceding sentence
shall relieve the Agent from liability for the Agent's gross negligence or
willful misconduct in connection with actions or omissions described in such
clauses (i) through (viii) of such sentence.
In furtherance and extension and not in limitation of the
specific provisions set forth above, any action taken or omitted by the Agent
under or in connection with the Letters of Credit issued by it or any documents
and certificates delivered thereunder, if taken or omitted in good faith, shall
not put the Agent under any resulting liability to the Borrowers or any Bank
unless such act or omission was the result of the gross negligence or willful
misconduct of the Agent.
2.9 Valuation of Private Company Restricted Securities; Sale.
--------------------------------------------------------
For the purpose of determining the Additional Private Company Advance,
the Administrative Borrower shall send a written request to the Agent seeking an
increase in the valuation of the Private Company Restricted Securities. Such
request shall describe in sufficient detail Administrative Borrower's basis for
any such increase and shall include any relevant supporting documentation. Upon
receipt of such request, the Agent shall confer with the Banks and promptly, and
in any event within ten (10) calendar days, respond in writing either
confirming, on behalf of the Required Banks, the Administrative Borrower's
request or denying, on behalf of the Required Banks, the Administrative
Borrower's request, or if the Agent, with the consent of the Required Banks,
believes that an alternate valuation is appropriate, suggesting such alternative
valuation along with the basis of the Agent's alternative valuation. In the
event that the Agent's response sets forth a valuation different than the
valuation requested by the Administrative Borrower, the Required Banks shall
work together in good faith to determine a mutually acceptable valuation within
ten (10) calendar days following the Agent's response to the Administrative
Borrower's request provided for hereunder. If after the twenty (20) calendar day
period proposed for agreement between the Agent on behalf of the Required Banks
and the Administrative Borrower, no mutually acceptable valuation shall have
been determined, then the determination of value of such Private Company
Restricted Securities made by the Agent, with the consent of the Required Banks,
shall be conclusive and binding on the Loan Parties absent manifest error. The
Borrowers may sell Private Company Restricted Securities in accordance with the
terms of the Pledge Agreement so long as after giving effect to such sale, the
Borrowers are not in violation of the Borrowing Base and the proceeds thereof
shall be paid over to the Agent to the extent required by the Pledge Agreement.
Nothing in this Section 2.9 shall be deemed to permit the Agent or the Banks to
value the Private Company Restricted Securities below the cost basis used to
determine the Private Company Advance, which basis shall be adjusted in
accordance with the provisions of Section 7.1.20 [Periodic Review of Cost Basis
Determinations].
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<PAGE>
2.10 Sale of Public Company Restricted Securities and Public
-------------------------------------------------------
Company Unrestricted Securities.
- -------------------------------
The Borrowers may sell Public Company Restricted Securities and Public
Company Unrestricted Securities in accordance with the terms of the Pledge
Agreement so long as after giving effect to any such sale, the Borrowers are not
in violation of the Borrowing Base and the proceeds thereof shall be paid over
to Agent to the extent required by the Pledge Agreement.
3. INTEREST RATES
3.1 Revolving Credit Interest Rate Options.
--------------------------------------
The Borrowers shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrowers may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, provided that there shall
--------
not be at any one time outstanding more than six (6) Borrowing Tranches in the
aggregate among all of the Loans. If at any time the designated rate applicable
to any Loan made by any Bank exceeds such Bank's highest lawful rate, the rate
of interest on such Bank's Loan shall be limited to such Bank's highest lawful
rate.
3.1.1 Revolving Credit Interest Rate Options.
--------------------------------------
The Borrowers shall have the right to select from the following
Interest Rate Options applicable to the Revolving Credit Loans:
(i) Base Rate Option: A fluctuating rate per
----------------
annum (computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed) equal to the Base Rate, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Base Rate; or
(ii) Euro-Rate Option: A rate per annum (computed
----------------
on the basis of a year of 360 days and actual days elapsed) equal to the Euro-
Rate plus the Applicable Margin.
3.1.2 Rate Quotations.
---------------
The Borrowers may call the Agent on or before the date on which a
Loan Request is to be delivered to receive an indication of the rates then in
effect, but it is
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<PAGE>
acknowledged that such projection shall not be binding on the Agent or the Banks
nor affect the rate of interest which thereafter is actually in effect when the
election is made.
3.2 Interest Periods.
----------------
At any time when the Borrowers shall select, convert to or renew a
Euro-Rate Option, the Administrative Borrower shall notify the Agent thereof at
least three (3) Business Days prior to the effective date of such Euro-Rate
Option by delivering a Loan Request. The notice shall specify an Interest Period
during which such Interest Rate Option shall apply. Notwithstanding the
preceding sentence, the following provisions shall apply to any selection of,
renewal of, or conversion to a Euro-Rate Option:
3.2.1 Amount of Borrowing Tranche.
---------------------------
each Borrowing Tranche of Euro-Rate Loans shall be in integral
multiples of $100,000 and not less than $2,000,000; and
3.2.2 Renewals.
--------
in the case of the renewal of a Euro-Rate Option at the end of an
Interest Period, the first day of the new Interest Period shall be the last day
of the preceding Interest Period, without duplication in payment of interest for
such day.
3.3 Interest After Default.
----------------------
To the extent permitted by Law, upon the occurrence of an Event of
Default and until such time such Event of Default shall have been cured or
waived:
3.3.1 Letter of Credit Fees, Interest Rate.
------------------------------------
the Letter of Credit Fees and the rate of interest for each Loan
otherwise applicable pursuant to Section 2.8.2 [Letter of Credit Fees] or
Section 3.1 [Interest Rate Options], respectively, shall be increased by 2.0%
per annum; and
3.3.2 Other Obligations.
-----------------
each other Obligation hereunder if not paid when due shall bear
interest at a rate per annum equal to the sum of the rate of interest applicable
under the Base Rate Option plus an additional 2% per annum from the time such
Obligation becomes due and payable and until it is paid in full.
3.3.3 Acknowledgment.
--------------
The Borrowers acknowledge that the increase in rates referred to
in this Section 3.3 reflects, among other things, the fact that such Loans or
other amounts have become
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<PAGE>
a substantially greater risk given their default status and that the Banks are
entitled to additional compensation for such risk; and all such interest shall
be payable by the Borrowers upon demand by Agent.
3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits
----------------------------------------------------------------
Not Available.
- -------------
3.4.1 Unascertainable.
---------------
If on any date on which a Euro-Rate would otherwise be
determined, the Agent shall have determined that:
(i) adequate and reasonable means do not exist
for ascertaining such Euro-Rate, or
(ii) a contingency has occurred which materially
and adversely affects the London interbank eurodollar market relating to the
Euro-Rate, the Agent shall have the rights specified in Section 3.4.3.
3.4.2 Illegality; Increased Costs; Deposits Not
Available. -----------------------------------------
- ---------
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any
Loan to which a Euro-Rate Option applies has been made unlawful by compliance by
such Bank in good faith with any Law or any interpretation or application
thereof by any Official Body or with any request or directive of any such
Official Body (whether or not having the force of Law), or
(ii) after making all reasonable efforts,
deposits of the relevant amount in Dollars for the relevant Interest Period for
a Loan to which a Euro-Rate Option applies, respectively, are not available to
such Bank with respect to such Loan, or to banks generally, in the interbank
eurodollar market,
then the Agent shall have the rights specified in Section 3.4.3.
3.4.3 Agent's and Bank's Rights.
-------------------------
In the case of any event specified in Section 3.4.1 above, the
Agent shall promptly so notify the Banks and the Administrative Borrower
thereof, and in the case of an event specified in Section 3.4.2 above, such Bank
shall promptly so notify the Agent and endorse a certificate to such notice as
to the specific circumstances of such notice, and the Agent shall promptly send
copies of such notice and certificate to the other Banks and the Administrative
Borrower. Upon such date as shall be specified in such notice (which shall not
be earlier than the date such notice is given), the obligation of (A) the Banks,
in the case of such notice given by the
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<PAGE>
Agent, or (B) such Bank, in the case of such notice given by such Bank, to allow
the Borrowers to select, convert to or renew a Euro-Rate Option shall be
suspended until the Agent shall have later notified the Administrative Borrower,
or such Bank shall have later notified the Agent, of the Agent's or such Bank's,
as the case may be, determination that the circumstances giving rise to such
previous determination no longer exist. If at any time the Agent makes a
determination under Section 3.4.1 and the Borrowers have previously notified the
Agent of its selection of, conversion to or renewal of a Euro-Rate Option and
such Interest Rate Option has not yet gone into effect, such notification shall
be deemed to provide for selection of, conversion to or renewal of the Base Rate
Option otherwise available with respect to such Loans. If any Bank notifies the
Agent of a determination under Section 3.4.2, the Borrowers shall, subject to
each Loan Party's indemnification Obligations under Section 4.5.2 [Indemnity],
as to any Loan of the Bank to which a Euro-Rate Option applies, on the date
specified in such notice either convert such Loan to the Base Rate Option
otherwise available with respect to such Loan or prepay such Loan in accordance
with Section 4.4 [Voluntary Prepayments]. Absent due notice from the Borrowers
of conversion or prepayment, such Loan shall automatically be converted to the
Base Rate Option otherwise available with respect to such Loan upon such
specified date.
3.5 Selection of Interest Rate Options.
----------------------------------
If any Borrower fails to select a new Interest Period to apply to any
Borrowing Tranche of Loans under the Euro-Rate Option at the expiration of an
existing Interest Period applicable to such Borrowings Tranche in accordance
with the provisions of Section 3.2 [Interest Periods], such Borrower shall be
deemed to have converted such Borrowing Tranche to the Base Rate Option,
commencing upon the last day of the existing Interest Period.
4. PAYMENTS
--------
4.1 Payments.
--------
All payments and prepayments to be made in respect of
principal, interest, Commitment Fees, Facility Fees, Letter of Credit Fees,
Agent's Fee or other fees or amounts due from the Borrowers hereunder shall be
payable prior to 12:00 noon, Pittsburgh time, on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrowers, and without set-off, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue. Such
payments shall be made to the Agent at the Principal Office for the ratable
accounts of the Banks with respect to the Loans in U.S. Dollars and in
immediately available funds, and the Agent shall promptly distribute such
amounts to the Banks in immediately available funds, provided that in the event
--------
payments are received by 12:00 noon, Pittsburgh time, by the Agent with respect
to the Loans and such payments are not distributed to the Banks on the same day
received by the Agent, the Agent shall pay the Banks the Federal Funds Effective
Rate with respect to the amount of such payments for each day held by the Agent
and not distributed to the Banks. The Agent's and each Bank's statement of
account, ledger or other relevant record shall, in the absence of manifest
error, be
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<PAGE>
conclusive as the statement of the amount of principal of and interest on the
Loans and other amounts owing under this Agreement and shall be deemed an
"account stated."
4.2 Pro Rata Treatment of Banks.
---------------------------
Each borrowing shall be allocated to each Bank according to its
Ratable Share, and each selection of, conversion to or renewal of any Interest
Rate Option and each payment or prepayment by the Borrower with respect to
principal, interest, Commitment Fees, Facility Fees, Letter of Credit Fees, or
other fees (except for the Agent's Fee) or amounts due from the Borrowers
hereunder to the Banks with respect to the Loans, shall (except as provided in
Section 3.4.3 [Agent's and Bank's Rights] in the case of an event specified in
Section 3.4 [Euro-Rate Unascertainable; Etc.], 4.4.2 [Replacement of a Bank] or
4.5 [Additional Compensation in Certain Circumstances]) be made in proportion to
the applicable Loans outstanding from each Bank and, if no such Loans are then
outstanding, in proportion to the Ratable Share of each Bank.
4.3 Interest Payment Dates.
----------------------
Interest on Loans to which the Base Rate Option applies shall be due
and payable in arrears on the first Business Day of each April, July, October
and January after the date hereof and on the Expiration Date or upon
acceleration of the Notes. Interest on Loans to which the Euro-Rate Option
applies shall be due and payable on the last day of each Interest Period for
those Loans and, if such Interest Period is longer than three (3) Months, also
on the 90th day of such Interest Period. Interest on the principal amount of
each Loan or other monetary Obligation shall be due and payable on demand after
such principal amount or other monetary Obligation becomes due and payable
(whether on the stated maturity date, upon acceleration or otherwise).
4.4 Prepayments of Loans.
--------------------
4.4.1 Right to Prepay.
---------------
The Borrowers shall have the right at its option from time to
time to prepay the Loans in whole or part without premium or penalty (except as
provided in Section 4.4.2 below or in Section 4.5 [Additional Compensation in
Certain Circumstances]):
(i) at any time with respect to any Loan to
which the Base Rate Option applies,
(ii) on the last day of the applicable Interest
Period with respect to Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any
Bank pursuant to Section 3.4 [Euro-Rate Unascertainable, Etc.] with respect to
any Loan to which a Euro-Rate Option applies.
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<PAGE>
Whenever the Borrowers desire to prepay any part of the
Loans, the Administrative Borrower shall provide a prepayment notice to the
Agent by 1:00 p.m. at least one (1) Business Day prior to the date of prepayment
of Loans setting forth the following information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(y) a statement indicating the application of the
prepayment between the Revolving Credit Loans; and
(z) the total principal amount of such prepayment, which
shall not be less than $100,000.
All prepayment notices shall be irrevocable. The principal
amount of the Loans for which a prepayment notice is given, together with
interest on such principal amount except with respect to Loans to which the Base
Rate Option applies, shall be due and payable on the date specified in such
prepayment notice as the date on which the proposed prepayment is to be made.
Except as provided in Section 3.4.3 [Agent's and Bank's Rights], if any Borrower
prepays a Loan but fails to specify the applicable Borrowing Tranche which such
Borrower is prepaying, the prepayment shall be applied first to Loans to which
the Base Rate Option applies, then to Loans to which the Euro-Rate the Option
applies. Any prepayment hereunder shall be subject to the Borrowers' Obligation
to indemnify the Banks under Section 4.5.2 [Indemnity].
4.4.2 Mandatory Prepayment of Loans.
-----------------------------
The Borrowers agree that at any time the then current
Borrowing Base is less than the sum of (i) the then outstanding principal on all
Loans outstanding plus (ii) the then outstanding amount of all Letters of Credit
Outstanding, the Borrowers will upon any Authorized Officer having obtained
knowledge of the existence of the differential, promptly, and in any event
within five (5) days of obtaining such knowledge, give notice of such
differential to the Agent and prepay the Loans in an amount which will reduce
the sum of the outstanding principal on all Loans outstanding to an amount less
than or equal to the then current Borrowing Base. If at any time after the
Borrowers have complied with the first sentence of this Section 4.4.2, the sum
of the aggregate Letters of Credit Outstanding is greater than the then current
Borrowing Base, the Borrowers shall provide cash collateral to the Agent in the
amount of such excess, which cash collateral shall be in the form of a
certificate of deposit pledged to the Agent and held by the Agent for the
benefit of the Banks and returned to Borrowers; provided, however, that no Event
-------- -------
of Default shall be deemed to have occurred and be continuing at such time that
the aggregate Letters of Credit Outstanding plus the aggregate principal amount
of all outstanding Loans no longer exceed the then current Borrowing Base.
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<PAGE>
4.4.3 Replacement of a Bank.
---------------------
In the event any Bank (i) gives notice under Section 3.4 [Euro-
Rate Unascertainable, Etc.] or Section 4.5.1 [Increased Costs, Etc.], (ii) does
not fund Revolving Credit Loans because the making of such Loans would
contravene any Law applicable to such Bank, or (iii) becomes subject to the
control of an Official Body (other than normal and customary supervision), then
any Borrower shall have the right at its option, with the consent of the Agent,
which shall not be unreasonably withheld, to prepay the Loans of such Bank in
whole, together with all interest accrued thereon, and terminate such Bank's
Commitment after (x) receipt of such Bank's notice under Section 3.4 [Euro-Rate
Unascertainable, Etc.] or 4.5.1 [Increased Costs, Etc.], (y) the date such Bank
has failed to fund Revolving Credit Loans because the making of such Loans would
contravene Law applicable to such Bank, or (z) the date such Bank became subject
to the control of an Official Body, as applicable; provided that the Borrowers
--------
shall also pay to such Bank at the time of such prepayment any amounts required
under Section 4.5 [Additional Compensation in Certain Circumstances] and any
accrued interest due on such amount and any related fees; provided, however,
-------- -------
that the Commitment and any Loan of such Bank shall be provided by one or more
of the remaining Banks or a replacement bank acceptable to the Agent; provided,
--------
further, the remaining Banks shall have no obligation hereunder to increase
- -------
their Commitments. Notwithstanding the foregoing, the Agent may only be replaced
subject to the requirements of Section 9.14 [Successor Agent] and provided that
--------
all Letters of Credit have expired or been terminated or replaced.
4.4.4 Change of Lending Office.
------------------------
Each Bank agrees that upon the occurrence of any event giving
rise to increased costs or other special payments under Section 3.4.2
[Illegality, Etc.] or 4.5.1 [Increased Costs, Etc.] with respect to such Bank,
it will if requested by the Borrowers, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending office
for any Loans or Letters of Credit affected by such event, provided that such
--------
designation is made on such terms that such Bank and its lending office suffer
no economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section. Nothing
in this Section 4.4.4 shall affect or postpone any of the Obligations of the
Borrowers or any other Loan Party or the rights of the Agent or any Bank
provided in this Agreement.
4.5 Additional Compensation in Certain Circumstances.
------------------------------------------------
4.5.1 Increased Costs or Reduced Return Resulting from
------------------------------------------------
Taxes, Reserves, Capital Adequacy Requirements, Expenses,
---------------------------------------------------------
Etc.
---
If, subsequent to the date hereof, any Law, guideline or
interpretation or any change in any Law, guideline or interpretation or
application thereof by any Official Body charged with the interpretation or
administration thereof or compliance with any request or directive (whether or
not having the force of Law) of any central bank or other Official Body:
-37-
<PAGE>
(i) subjects any Bank to any tax or changes the
basis of taxation with respect to this Agreement, the Notes, the Loans or
payments by the Borrowers of principal, interest, Commitment Fees, or other
amounts due from the Borrowers hereunder or under the Notes (except for (i)
taxes on the overall net income of such Bank or (ii) United States federal
withholding Taxes from which a Bank, participant, or assignee is not exempt
either (A) because such Bank, participant or assignee has not properly delivered
the applicable Form required to be delivered pursuant to Section 10.18 of this
Agreement or (B) because such Bank participant or assignee has not established
that it is fully exempt from such taxes at the time such Person became a party,
assignee or participant to this Agreement, as applicable),
(ii) imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against credits or commitments
to extend credit extended by, or assets (funded or contingent) of, deposits with
or for the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A) against assets (funded or
contingent) of, or letters of credit, other credits or commitments to extend
credit extended by, any Bank, or (B) otherwise applicable to the obligations of
any Bank under this Agreement, or
(iv) shall impose on any Bank any other condition,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on any
Bank's capital, taking into consideration such Bank's customary policies with
respect to capital adequacy) by an amount which such Bank deems to be material,
such Bank shall from time to time notify the Borrowers and the Agent of the
amount determined in good faith (using any averaging and attribution methods
employed in good faith) by such Bank to be necessary to compensate such Bank for
such increase in cost, reduction of income, additional expense or reduced rate
of return. Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrowers to such
Bank promptly and in any event twenty (20) Business Days after such notice is
given.
4.5.2 Indemnity.
---------
In addition to the compensation required by Section 4.5.1
[Increased Costs, Etc.], each Borrower shall indemnify each Bank against all
liabilities, losses or expenses (including loss of margin, any loss or expense
incurred in liquidating or employing deposits from third parties and any loss or
expense incurred in connection with funds acquired by a Bank to fund or maintain
Loans subject to a Euro-Rate Option) which such Bank sustains or incurs as a
consequence of any
-38-
<PAGE>
(i) payment, prepayment, conversion or renewal of
any Loan to which a Euro-Rate Option applies on a day other than the last day of
the corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due),
(ii) attempt by any Borrower to revoke (expressly,
by later inconsistent notices or otherwise) in whole or part any Loan Requests
under Section 2.5 [Revolving Credit Loan Requests] or Section 3.2 [Interest
Periods] or notice relating to prepayments under Section 4.4.1 [Right to
Prepay], or
(iii) default by any Borrower in the performance or
observance of any covenant or condition contained in this Agreement or any other
Loan Document, including any failure of any Borrower to pay when due (by
acceleration or otherwise) any principal, interest, Commitment Fee or any other
amount due hereunder.
If any Bank sustains or incurs any such loss or expense, it shall from
time to time notify the Administrative Borrower of the amount determined in good
faith by such Bank (which determination may include such assumptions,
allocations of costs and expenses and averaging or attribution methods as such
Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss
or expense. Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrowers to such
Bank promptly and in any event ten (10) Business Days after such notice is
given.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties.
------------------------------
The Loan Parties, jointly and severally, represent and warrant to the
Agent and each of the Banks as follows:
5.1.1 Organization and Qualification.
------------------------------
Each Loan Party and each Subsidiary of each Loan Party is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Loan Party and each Subsidiary of each Loan Party has the
corporate power to own or lease its properties and to engage in the business it
presently conducts or proposes to conduct. Each Loan Party and each Subsidiary
of each Loan Party is duly licensed or qualified and in good standing in each
jurisdiction listed on Schedule 5.1.1 and in all other jurisdictions where the
--------------
property owned or leased by it or the nature of the business transacted by it or
both makes such licensing or qualification necessary, except where failure to be
so licensed or qualified and in good standing could not reasonably be expected
to result in a Material Adverse Change.
-39-
<PAGE>
5.1.2 Capitalization and Ownership.
----------------------------
(i) As of the Closing Date, the authorized capital stock of
ICG consists of One Hundred and Thirty Million (130,000,000) shares of common
stock, of which Eighty-Two Million Five Thousand Five Hundred Fifty-Five
(82,005,555) shares (referred to herein as the "ICG Shares") are issued and
outstanding, all as more particularly described on Schedule 5.1.2. All of the
--------------
ICG Shares have been validly issued and are fully paid and nonassessable. As of
the Closing Date, there are no options, warrants or other rights outstanding to
purchase any such shares except as indicated on Schedule 5.1.2.
--------------
(ii) As of the Closing Date, the authorized capital stock of
ICG Operations consists of One Thousand (1,000) shares of common stock, of which
One Hundred (100) shares (referred to herein as the "ICG Operations Shares") are
issued and outstanding, all as more particularly described on Schedule 5.1.2.
--------------
All of the ICG Operations Shares have been validly issued and are fully paid and
nonassessable. As of the Closing Date, there are no options, warrants or other
rights outstanding to purchase any such shares except as indicated on Schedule
--------
5.1.2.
- -----
5.1.3 Subsidiaries.
------------
Schedule 5.1.3 states the name of each of ICG's Subsidiaries, its
--------------
jurisdiction of incorporation, its authorized capital stock, the issued and
outstanding shares (referred to herein as the "Subsidiary Shares") and the
owners thereof. ICG Operations has no Subsidiaries. ICG has good and marketable
title to all of the Subsidiary Shares it purports to own, free and clear in each
case of any Lien, except for Permitted Liens. All Subsidiary Shares have been
validly issued, and all Subsidiary Shares are fully paid and nonassessable.
There are no options, warrants or other rights outstanding to purchase any such
Subsidiary Shares except as indicated on Schedule 5.1.3.
--------------
5.1.4 Power and Authority.
-------------------
Each Loan Party has full corporate power to enter into, execute,
deliver and carry out this Agreement and the other Loan Documents to which it is
a party, to incur the Indebtedness contemplated by the Loan Documents and to
perform its Obligations under the Loan Documents to which it is a party, and all
such actions have been duly authorized by all necessary proceedings on its part.
5.1.5 Validity and Binding Effect.
---------------------------
This Agreement has been duly and validly executed and delivered
by each Loan Party, and each other Loan Document which any Loan Party is
required to execute and deliver on or after the date hereof will have been duly
executed and delivered by such Loan Party on the required date of delivery of
such Loan Document. This Agreement and each other Loan Document constitutes, or
will constitute, legal, valid and binding obligations of each Loan Party
-40-
<PAGE>
which is or will be a party thereto on and after its date of delivery thereof,
enforceable against such Loan Party in accordance with its terms, except to the
extent that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
5.1.6 No Conflict.
-----------
Neither the execution and delivery of this Agreement or the other
Loan Documents by any Loan Party nor the consummation of the transactions herein
or therein contemplated or compliance with the terms and provisions hereof or
thereof by any of them will conflict with, constitute a default under or result
in any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of any Loan Party or (ii) any Law or any material
agreement or instrument or order, writ, judgment, injunction or decree to which
any Loan Party or any of its Subsidiaries is a party or by which it or any of
its Subsidiaries is bound or to which it is subject, or result in the creation
or enforcement of any Lien upon any property (now or hereafter acquired) of any
Loan Party or any of its Subsidiaries (other than Liens granted under the Loan
Documents).
5.1.7 Litigation.
----------
There are no actions, suits, proceedings or investigations
pending or, to the knowledge of any Loan Party, threatened against such Loan
Party or any Subsidiary of such Loan Party at law or equity before any Official
Body which individually or in the aggregate could reasonably be expected to
result in any Material Adverse Change. None of the Loan Parties or any
Subsidiaries of any Loan Party is in violation of any order, writ, injunction or
any decree of any Official Body which could reasonably be expected to result in
any Material Adverse Change.
5.1.8 Title to Properties.
-------------------
The real property owned or leased by each Loan Party and each
Subsidiary of each Loan Party is described on Schedule 5.1.8. Each Loan Party
--------------
and each Subsidiary of each Loan Party has good and marketable title to or valid
leasehold interest in all properties, assets and other rights which it purports
to own or lease or which are reflected as owned or leased on its books and
records, free and clear of all Liens and encumbrances except Permitted Liens,
and subject to the terms and conditions of the applicable leases. To the best of
the Borrowers' knowledge after diligent inquiry and investigation, all leases of
real property are in full force and effect without the necessity for any consent
which has not previously been obtained upon consummation of the transactions
contemplated hereby, except where the failure to obtain such consent could not
reasonably result in a Material Adverse Change.
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5.1.9 Financial Statements.
--------------------
(i) Historical Statements. The Administrative
---------------------
Borrower has delivered to the Agent (x) a copy of ICG's audited consolidated
year-end financial statement for and as of the end of the fiscal year ended
December 31, 1997 (the "1997 Annual Statements") and (y) a copy of ICG's
unaudited consolidated year-end financial statements for and as of the end of
the fiscal year ended December 31, 1998 (the "1998 Annual Statements") (the 1997
Annual Statements and the 1998 Annual Statements being collectively referred to
as the "Historical Statements"). The Historical Statements were compiled from
the books and records maintained by the Borrowers' management, are correct and
complete and fairly represent the consolidated financial condition of the
Borrowers and their respective Subsidiaries as of their dates and the results of
operations for the fiscal periods then ended and have been prepared in
accordance with GAAP consistently applied, subject (in the case of the 1998
Annual Statements) to normal year-end audit adjustments.
(ii) Accuracy of Financial Statements. No Borrower
--------------------------------
nor any Subsidiary of any Borrower has any liabilities, contingent or otherwise,
or forward or long-term commitments that are not disclosed in the Historical
Statements or in the notes thereto, and except as disclosed therein there are no
unrealized or anticipated losses from any commitments of any Borrower or any
Subsidiary of any Borrower which could reasonably be expected to cause a
Material Adverse Change. Since December 31, 1997, no Material Adverse Change has
occurred.
5.1.10 Use of Proceeds; Margin Stock.
-----------------------------
5.1.10.1 General.
-------
The proceeds of the Loans shall be used to make Investments
(subject to the limitations set forth in Section 7.1.15 [Investments] hereof),
for general working capital purposes and capital expenditures. The Letters of
Credit will be used as credit support for the Borrowers and their Subsidiaries
to make Investments (subject to the limitations set forth in Section 7.1.15
[Investments]).
5.1.10.2 Margin Stock.
------------
None of the Loan Parties or any Subsidiaries of any Loan
Party engages or intends to engage principally, or as one of its important
activities, in the business of extending credit for the purpose, immediately,
incidentally or ultimately, of purchasing or carrying margin stock (within the
meaning of Regulation U). No part of the proceeds of any Loan has been or will
be used, immediately, incidentally or ultimately, to extend credit to others for
the purpose of purchasing or carrying any margin stock or to refund Indebtedness
originally incurred for such purpose, or for any purpose which entails a
violation of or which is inconsistent with the provisions of the regulations of
the Board of Governors of the Federal Reserve System. The
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Borrowers will furnish to the Agent and each Bank a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to in
Regulation U.
5.1.11 Full Disclosure.
---------------
Neither this Agreement, nor the Schedules hereto, nor any
other Loan Document, nor any certificate, statement, agreement or other
documents furnished to the Agent or any Bank in connection herewith or
therewith, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which they were made, not
misleading, as of the date such statement was made. There is no fact known to
any Loan Party which materially adversely affects the business, property,
assets, condition (financial or otherwise), results of operations or prospects
of the Loan Parties taken as a whole which has not been set forth in this
Agreement or in the certificates, statements, agreements or other documents
furnished in writing to the Agent and the Banks prior to or at the date hereof
in connection with the transactions contemplated hereby except for normal market
fluctuations.
5.1.12 Taxes.
-----
All federal, state, local and other tax returns required to have
been filed with respect to each Loan Party and each Subsidiary of each Loan
Party have been filed, and payment or adequate provision has been made for the
payment of all taxes, fees, assessments and other governmental charges which
have or may become due pursuant to said returns or to assessments received,
except to the extent that (i) such taxes, fees, assessments and other charges
are being contested in good faith by appropriate proceedings, for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made and (ii) failure to file any such federal, state, local and
other tax return could not reasonably be expected to result in a Material
Adverse Change. There are no agreements or waivers extending the statutory
period of limitations applicable to any federal income tax return of any Loan
Party or Subsidiary of any Loan Party for any period.
5.1.13 Consents and Approvals.
----------------------
Except for the filing of financing statements in the state and
county filing offices, no consent, approval, exemption, order or authorization
of, or a registration or filing with, any Official Body or any other Person is
required by any Law or any agreement in connection with the execution, delivery
and carrying out of this Agreement and the other Loan Documents by any Loan
Party, except as described on Annex A to the Letter Agreement, all of which
shall have been obtained or made on or prior to the Closing Date except as
otherwise indicated on Annex A to the Letter Agreement.
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5.1.14 No Event of Default; Compliance with Instruments.
------------------------------------------------
No event has occurred and is continuing and no condition exists
or will exist after giving effect to the borrowings or other extensions of
credit to be made on the Closing Date under or pursuant to the Loan Documents
which constitutes an Event of Default or Potential Default. None of the Loan
Parties or any Subsidiaries of any Loan Party is in violation of (i) any term of
its certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents or (ii) any agreement or instrument
to which it is a party or by which it or any of its properties may be subject or
bound where such violation would constitute a Material Adverse Change.
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
----------------------------------------------
Each Loan Party and each Subsidiary of each Loan Party owns or
possesses all the patents, trademarks, service marks, trade names, copyrights,
licenses, registrations, franchises, permits and rights necessary to own and
operate its properties and to carry on its business as presently conducted by
such Loan Party or Subsidiary, except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Change,
without known possible, alleged or actual conflict with the rights of others.
All material patents, trademarks, service marks, trade names, copyrights,
licenses, registrations, franchises and permits of each Loan Party and each
Subsidiary of each Loan Party are listed and described on Schedule 5.1.15.
---------------
5.1.16 Security Interests.
------------------
The Liens and security interests granted to the Agent for the
benefit of the Banks pursuant to the Patent, Trademark and Copyright Assignment,
the Pledge Agreement and the Security Agreement in the Collateral (other than
the Property) constitute and will continue to constitute Prior Security
Interests under the Uniform Commercial Code as in effect in each applicable
jurisdiction (the "Uniform Commercial Code") or other applicable Law entitled to
all the rights, benefits and priorities provided by the Uniform Commercial Code
or such Law. Upon the filing of financing statements relating to said security
interests in each office and in each jurisdiction where required in order to
perfect the security interests described above, taking possession of any stock
certificates or other certificates evidencing the Pledged Collateral and
recordation of the Patent, Trademark and Copyright Assignment in the United
States Patent and Trademark Office and United States Copyright Office, as
applicable, all such action as is necessary or advisable to establish such
rights of the Agent will have been taken, and there will be upon execution and
delivery of the Patent, Trademark and Copyright Assignment, the Pledge Agreement
and the Security Agreement, such filings and such taking of possession, no
necessity for any further action in order to preserve, protect and continue such
rights, except the filing of continuation statements with respect to such
financing statements within six (6) months prior to each five-year anniversary
of the filing of such financing
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statements in compliance with all statutory requirements necessary to keep
perfected the Liens and security interests in the event the Collateral is moved.
All filing fees and other expenses in connection with each such action have been
or will be paid by the Borrowers.
5.1.17 Status of the Pledged Collateral.
--------------------------------
All the securities included in the Pledged Collateral to be
pledged pursuant to the Pledge Agreement are, or will be (in the case of
convertible securities, upon issuance in accordance with the terms of such
convertible securities), validly issued and nonassessable and owned beneficially
and of record by the pledgor of such Pledged Collateral free and clear of any
Lien or restriction on transfer, except (i) as otherwise provided by the Pledge
Agreement or the Letter Agreement, (ii) for Permitted Liens and (iii) as the
right of the Banks to dispose of such shares may be restricted by the Securities
Act of 1933, as amended, and the regulations promulgated by the Securities and
Exchange Commission thereunder and by applicable state securities laws.
5.1.18 Insurance.
---------
Schedule 5.1.18 lists all material insurance policies and
---------------
other bonds to which any Loan Party or Subsidiary of any Loan Party is a party,
all of which are valid and in full force and effect. No notice has been given or
claim made and, to the knowledge of each Loan Party, no grounds exist to cancel
or avoid any of such policies or bonds or to reduce the coverage provided
thereby, except where any such cancellation or avoidance of such policies or
bonds or reduction in coverage could not reasonably be expected to result in a
Material Adverse Change. Such policies and bonds provide adequate coverage from
reputable and financially sound insurers in amounts sufficient to insure the
assets and risks of the Loan Parties taken as a whole in accordance with prudent
business practice in the industry of the Loan Parties and their Subsidiaries.
5.1.19 Compliance with Laws.
--------------------
The Loan Parties and their Subsidiaries are in compliance in
all material respects with all applicable Laws (other than Environmental Laws
which are specifically addressed in Section 5.1.24 [Environmental Matters]) in
all jurisdictions in which any Loan Party or Subsidiary of any Loan Party is
presently or will be doing business except where the failure to do so would not
constitute a Material Adverse Change.
5.1.20 Material Contracts; Burdensome Restrictions.
-------------------------------------------
Schedule 5.1.20 lists all Material Contracts, including all
---------------
Material Contracts relating to each Loan Party's Investment in VerticalNet. All
such Material Contracts are valid, binding and enforceable upon such Loan Party
or Subsidiary and each of the other parties thereto in accordance with their
respective terms, and there is no default thereunder, to the Loan Parties'
knowledge, with respect to parties other than such Loan Party or Subsidiary.
None
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<PAGE>
of the Loan Parties or their Subsidiaries is bound by any contractual
obligation, or subject to any restriction in any organization document, or any
requirement of Law which could result in a Material Adverse Change.
5.1.21 Investment Companies; Regulated Entities.
----------------------------------------
None of the Loan Parties or any Subsidiaries of any Loan
Party is an "investment company" registered or required to be registered under
the Investment Company Act of 1940 or under the "control" of an "investment
company" as such terms are defined in the Investment Company Act of 1940 and
shall not become such an "investment company" or under such "control." None of
the Loan Parties or any Subsidiaries of any Loan Party is subject to any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness for borrowed money.
5.1.22 Plans and Benefit Arrangements.
------------------------------
(a) No Loan Party has any pension or other
employee benefit plans which are subject to the provisions of Title IV of ERISA
(any such plans which have been or may hereafter be adopted or assumed by any
Loan Party are hereinafter referred to individually as a "Plan" and,
collectively, as the "Plans"), the application of which could give rise to
direct or contingent liabilities of any Loan Party to the PBCG, the Department
of Labor or the Internal Revenue Service ("IRS"). No Loan Party is a
participating employer in any Multiple Employer Plan. No Loan Party has
withdrawal liability to any Multiemployer Plan and no withdrawal from any
Multiemployer Plan is contemplated or pending by any Loan Party.
(b) Each Loan Party is and has at all times
been in full compliance with all applicable provisions of ERISA. Each Loan
Party's Plans and other employee benefit plans subject to the qualification
requirements of Sections 401 et. seq. of the Internal Revenue Code are and have
at all times been in material compliance with such requirements.
(c) With respect to any of the Plans, no
Loan Party has knowledge of any Reportable Event, as described in Section 4043
of ERISA, except that there has or may have occurred (1) a reduction in the
number of active participants as described in Section 4043(b)(3) of ERISA; (2) a
termination or partial termination; or (3) a merger or consolidation with, or
transfer of assets to, another plan. No Loan Party has any, outstanding
liability to the PBGC by reason of any such Reportable Event, and no Loan Party
has received any notice from the PBGC that any of the Plans should be terminated
or from the Secretary of the Treasury that any partial or full termination of
any of the Plans has occurred.
(d) No termination proceedings with respect
to any of the Plans have been commenced and have not yet been concluded.
(e) With respect to any of the Plans and any
other employee benefit plans subject to ERISA, there has not occurred any
prohibited transaction (as
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defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code)
for which a prohibited transaction exemption has not been provided by statute or
regulation , ruling or opinion issued by the Department of Labor or Internal
Revenue Service and which may result in the imposition upon any Loan Party of
any prohibited transaction excise tax or civil liability under Section 502(i) or
ERISA.
(f) Each Loan Party has made all required
contributions under the Plans and any other employee benefit plans subject to
ERISA for all periods through and including the date hereof or adequate accruals
therefor have been provided for as shown in the Financial Statements. No
"accumulated funding deficiency" (as defined in Section 302 of ERISA) has
occurred with respect to any of the Plans.
For purposes of this Agreement, all references to "ERISA" shall be deemed to
refer to the Employee Retirement Income Security Act of 1974 (including any
sections of the Internal Revenue Code of 1986 amended by it), as heretofore
amended and as it may hereafter be amended or modified, and all regulations
promulgated thereunder, and all references to any Loan Party in this Section
5.1.22, or in any other Section of this Agreement relating to ERISA, shall be
deemed to refer to each Loan Party and all other entities which are part of a
controlled or affiliated group or under common control with each Loan Party
within the meaning of Sections 414(b), 414(c) and 415(h) of the Internal Revenue
Code of 1986, as amended, and Section 4001(a)(2) of ERISA.
5.1.23 Employment Matters.
------------------
There are no actions or proceedings pending or, to the best
of any Loan Party's knowledge, threatened against any Loan Party, by or on
behalf of or with respect to its employees, which could reasonably be expected
to have a Material Adverse Change.
5.1.24 Environmental Matters.
---------------------
Each Loan Party has accrued or otherwise
provided, in accordance with GAAP, consistently applied, for all damages,
liabilities, penalties or costs that it may incur in connection with any claim
pending or threatened against it, or any requirement that is or may be
applicable to it, under any Environmental Laws, and such accrual or other
provision is reflected in the Borrowers' Historical Statements, which disclosed
items could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Change:
(i) Each Loan Party is in compliance with
all applicable laws, rules, regulations, ordinances, orders decrees and common
law relating to contamination, pollution or the protection of human health or
the environment ("Environmental Laws"), and each Loan Party has all permits,
------------------
licenses, registrations and other governmental authorizations required under
such laws ("Environmental Permits") for its operations, and there are no
---------------------
violations, investigations or proceedings pending or, to the knowledge of any
Loan Party, threatened with respect to Environmental Laws or such Environmental
Permits except where the failure to have
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such Environmental Permits or where the violation, investigation or proceeding
relating thereto could not, individually or in the aggregate, result in a
Material Adverse Change.
(ii) No notice, notification, demand,
request for information, citation, summons, complaint or order is pending or has
been received by or, to the knowledge of any Loan Party, is threatened by any
person against any Loan Party under any Environmental Laws or in respect of any
of the properties or facilities now or previously owned, leased or operated by
any such Loan Party. No penalty has been assessed against any Loan Party, and no
liability has been imposed upon any Loan Party, under Environmental Law with
respect to any alleged notification, demand, request for information, citation,
summons, complaint or order except where such matters have been fully resolved,
or where resolution could not, individually or in the aggregate, result in a
Material Adverse Change or prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
(iii) No hazardous, toxic or regulated
substance, waste, materials or chemical ("Hazardous Substance") has been
-------------------
discharged, generated, treated, manufactured, handled, stored, transported,
emitted, released or is present at any property now or previously owned, leased
or operated by any Loan Party in violation of any Environmental Law or under
circumstances which, individually or in the aggregate, could result in a
Material Adverse Change.
5.1.25 Senior Debt Status.
------------------
The Obligations of each Loan Party under this Agreement, the
Notes, the Guaranty Agreement and each of the other Loan Documents to which it
is a party do rank and will rank at least pari passu in priority of payment with
---- -----
all other Indebtedness of such Loan Party except Indebtedness of such Loan Party
to the extent secured by Permitted Liens. There is no Lien upon or with respect
to any of the properties or income of any Loan Party or Subsidiary of any Loan
Party which secures indebtedness or other obligations of any Person except for
Permitted Liens.
5.1.26 Year 2000.
---------
The Borrowers and their respective Subsidiaries have reviewed the
areas within their business and operations which could be adversely affected by,
and have developed or are developing a program to address on a timely basis, the
risk that certain computer applications used by the Borrowers or their
respective Subsidiaries (or any of their respective material suppliers,
customers or vendors) may be unable to recognize and perform properly date-
sensitive functions involving dates prior to and after December 31, 1999 (the
"Year 2000 Problem"). To the knowledge of the Loan Parties, the Year 2000
Problem could not reasonably be expected to result in any Material Adverse
Change.
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5.1.27 Validity and Binding Effect.
---------------------------
The Subordinated Loan Documents have been, or will be, duly and
validly executed and delivered by the parties thereto and constitute, or will
constitute, the legal, valid and binding obligations of the parties thereto,
enforceable against them in accordance with their respective terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforceability of
creditors' rights generally or by laws or judicial decisions limiting the right
of specific performance. All representations and warranties of any Loan Party
contained in the Subordinated Loan Documents will be true and correct in all
material respects as of the date made. There exists no default, nor any
circumstance which, after notice or lapse of time or both would cause or permit
the acceleration of any Subordinated Debt under any Subordinated Loan Documents
and there exists no lien, set-off, claim or, to the knowledge of any Loan Party
after due inquiry, other impairment of the validity or enforceability of such
documents. The Subordinated Loan Documents constitute the entire agreement
between each Borrower and the holders of the Subordinated Debt and there are no
other agreements with respect to the Subordinated Debt.
5.1.28 Solvency.
--------
After giving effect to the transactions contemplated by the Loan
Documents and the Subordinated Loan Documents, including all Indebtedness
incurred thereby, the Liens granted by any Borrower in connection therewith and
the payment of all fees related thereto, the Borrowers, taken as a whole, will
be Solvent, determined as of the Closing Date.
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
-------------------------------------------------------
The obligation of each Bank to make Loans and of the Agent to issue Letters
of Credit hereunder is subject to the performance by each of the Loan Parties of
its Obligations to be performed hereunder at or prior to the making of any such
Loans or issuance of such Letters of Credit and to the satisfaction of the
following further conditions:
6.1 First Loans and Letters of Credit.
---------------------------------
On the Closing Date:
6.1.1 Officer's Certificate.
---------------------
The representations and warranties of each of the Loan Parties
contained in Section 5 and in each of the other Loan Documents shall be true and
accurate in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which relate solely to an
earlier date or time, which representations and warranties shall be true and
correct on and as of the specific dates or times referred to therein), and each
of the Loan Parties
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shall have performed and complied with all covenants and conditions hereof and
thereof, no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; and there shall be delivered to the Agent for the
benefit of each Bank a certificate of each of the Loan Parties, dated the
Closing Date and signed by an Authorized Officer of each of the Loan Parties, to
each such effect.
6.1.2 Secretary's Certificate.
-----------------------
There shall be delivered to the Agent for the benefit of each
Bank a certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary of each of the Loan Parties, certifying as appropriate as
to:
(i) all action (including resolutions) taken by
each Loan Party in connection with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers
authorized to sign this Agreement and the other Loan Documents and the true
signatures of such officer or officers and specifying the Authorized Officers
permitted to act on behalf of each Loan Party for purposes of this Agreement and
the true signatures of such officers, on which the Agent and each Bank may
conclusively rely; and
(iii) copies of its organizational documents,
including its certificate of incorporation, bylaws, certificate of limited
partnership, partnership agreement, certificate of formation, and limited
liability company agreement as in effect on the Closing Date certified by the
appropriate state official where such documents are filed in a state office
together with certificates from the appropriate state officials as to the
continued existence and good standing of each Loan Party in each state where
organized or qualified to do business and a bring-down certificate by facsimile
dated the Closing Date.
6.1.3 Delivery of Loan Documents.
--------------------------
The Notes, the Patent, Trademark and Copyright Assignment, the
Pledge Agreement, the Intercompany Subordination Agreement, the Security
Agreement, the Letter Agreement, the Collateral Assignment of Contract Rights
and the Warrant shall have been duly executed and delivered to the Agent for the
benefit of the Banks.
6.1.4 Delivery of Material Contracts, Consents,
----------------------------------------
Certificates and Powers relating to VerticalNet; Delivery
---------------------------------------------------------
of Warrant; Closing Date Compliance Certificate.
-----------------------------------------------
(a) There shall be delivered to the Agent (i) the Material
Contracts, the Consents, the Certificates and the Powers relating to ICG's
Investment in VerticalNet and (ii) the Warrants duly registered in the name of
each Bank.
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(b) The Borrowers shall deliver a Compliance Certificate (the
"Closing Date Compliance Certificate") showing Indebtedness and other balance
sheet items as of the Closing Date. Such Compliance Certificate shall be in the
form of Exhibit 6.1.4 hereto.
6.1.5 Warrant Agreement.
-----------------
The Warrant Agreement shall have been duly executed and delivered
by ICG, in substantially the form of Exhibit 6.1.5 hereto.
-------------
6.1.6 Collateral Assignment of Contract Rights.
----------------------------------------
The Collateral Assignment of Contract Rights shall have been duly
executed and delivered by the Borrowers, in substantially the form of Exhibit
-------
6.1.6 hereto.
- -----
6.1.7 Opinion of Counsel.
------------------
There shall be delivered to the Agent for the benefit of each
Bank a written opinion of Dechert Price & Rhoads, counsel for the Loan Parties,
dated the Closing Date and in form and substance satisfactory to the Agent and
its counsel:
(i) as to the matters set forth in Exhibit 6.1.7;
-------------
and
(ii) as to such other matters incident to the
transactions contemplated herein as the Agent may reasonably request.
6.1.8 Legal Details.
-------------
All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be in form and
substance satisfactory to the Agent, counsel for the Agent and the Banks, and
the Agent shall have received all such other counterpart originals or certified
or other copies of such documents and legal opinions in connection with such
transactions, as the Agent or said counsel may reasonably request.
6.1.9 Payment of Fees.
---------------
The Borrowers shall have paid or caused to be paid to the Agent
for itself and for the account of the Banks to the extent not previously paid
the Facility Fees, all other commitment and other fees accrued through the
Closing Date and the costs and expenses for which the Agent and the Banks are
entitled to be reimbursed hereunder.
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6.1.10 Consents.
--------
All material consents required to effectuate the
transactions contemplated hereby as set forth on Schedule 5.1.13 shall have been
---------------
obtained, including the consent of the underwriters to the pledge of the Pledged
Collateral contemplated under the Pledge Agreement.
6.1.11 Officer's Certificate Regarding MACs.
------------------------------------
Since December 31, 1997, no Material Adverse Change shall
have occurred; prior to the Closing Date, there shall have been no material
change in the management of any Loan Party or Subsidiary of any Loan Party; and
there shall have been delivered to the Agent for the benefit of each Bank a
certificate dated the Closing Date and signed by an Authorized Officer of each
Loan Party to each such effect.
6.1.12 No Violation of Laws.
--------------------
The making of the Loans and the issuance of the Letters of
Credit shall not contravene, in any material respect, any Law applicable to any
Loan Party or any of the Banks.
6.1.13 No Actions or Proceedings.
-------------------------
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which could
reasonably be expected to result in a Material Adverse Change.
6.1.14 Insurance Policies; Certificates of
-----------------------------------
Insurance; Endorsements.
-----------------------
The Loan Parties shall have delivered evidence acceptable to
the Agent that adequate insurance in compliance with Section 7.1.3 [Maintenance
of Insurance] is in full force and effect and that all premiums then due thereon
have been paid.
6.1.15 Actions to Perfect Liens; Lien Searches.
---------------------------------------
The Agent shall have received evidence in form and substance
satisfactory to it that all filings, recordings, registrations and other
actions, including, without limitation, the filing of duly executed financing
statements on form UCC-1, necessary or, in the opinion of the Agent and the
Banks, desirable to perfect the Liens created by the Loan Documents shall have
been completed or will be completed promptly following the making of the initial
Loans hereunder. The Agent shall have received the results of a recent search by
a Person satisfactory to the Agent, of the Uniform Commercial Code, judgment and
tax lien filings which may have been filed with respect to personal property of
each Borrower, and the results of such search shall be satisfactory to the Agent
and the Banks.
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6.1.16 Administrative Questionnaire.
----------------------------
Each of the Banks and the Borrowers shall have completed and
delivered to the Agent the Agent's form of administrative questionnaire.
6.1.17 Borrowing Base Certificate.
--------------------------
On or prior to the Closing Date, the Agent and the Banks
shall have received and the Agent and the Banks shall be satisfied (both as to
form and substance) with a pro forma Borrowing Base Certificate in the form as
set forth in Exhibit 1.1(B) which shall be prepared as of a date prior to the
--------------
Closing Date.
6.1.18 Comfort Letter from Safeguard Scientifics, Inc.
----------------------------------------------
The Agent shall have received a comfort letter, in the form
of Exhibit 6.1.18, from Safeguard Scientifics, Inc. (the "Investor") confirming
--------------
the Investor's intention to cure any Event of Default hereunder.
6.1.19 Minimum Commitments.
-------------------
The Agent shall have received a minimum of $35,000,000 in
total Commitments by the Banks hereunder.
6.2 Each Additional Loan or Letter of Credit.
----------------------------------------
At the time of making any Loans or issuing any Letters of Credit other
than Loans made or Letters of Credit issued on the Closing Date and after giving
effect to the proposed extensions of credit: (a) the representations and
warranties of the Loan Parties contained in Section 5 and in the other Loan
Documents shall be true on and as of the date of such additional Loan or Letter
of Credit, in all material respects, with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time, which representations and warranties shall be true and correct on and
as of the specific dates or times referred to therein) and the Loan Parties
shall have performed and complied with all covenants and conditions hereof in
all material respects; no Event of Default or Potential Default shall have
occurred and be continuing or shall exist; the making of the Loans or issuance
of such Letter of Credit shall not contravene any Law applicable to any Loan
Party or Subsidiary of any Loan Party or any of the Banks in any material
respect; and the Borrowers shall have delivered to the Agent a duly executed and
completed Loan Request or application for a Letter of Credit as the case may be,
(b) the Agent shall have received such other documentation concerning such
matters as reasonably requested by, and be in form and substance reasonably
satisfactory to, the Agent; and (c) the Agent and the Banks shall have received
and shall be reasonably satisfied (both as to form and substance) with the
Borrowing Base Certificate last delivered to the Banks.
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<PAGE>
The acceptance of the proceeds of each borrowing of Loans shall
constitute a representation and warranty by each Loan Party to each of the Banks
that all of the applicable conditions specified in Section 6.2 (in each case
disregarding any reference therein that such condition be deemed satisfactory by
the Agent and/or the Banks) have been satisfied or waived.
All of the certificates and other documents and papers referred to in
this Section 6.2, unless otherwise specified, shall be delivered to the Agent at
the Principal Office (or such other location as may be specified by the Agent)
for the account of each of the Banks and in sufficient counterparts for each of
the Banks and shall be satisfactory in form and substance to the Agent.
7. COVENANTS
7.1 Affirmative Covenants.
---------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings, and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations under the
Loan Documents and termination of the Commitments, the Loan Parties shall, and
shall cause each of its Subsidiaries to, comply with the following affirmative
covenants:
7.1.1 Preservation of Existence, Etc.
------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, maintain its legal existence as a corporation, limited partnership or
limited liability company and its license or qualification and good standing in
each jurisdiction in which its ownership or lease of property or the nature of
its business makes such license or qualification necessary for the proper
conduct of its business, except as otherwise expressly permitted in Section
7.2.6 [Liquidations, Mergers, Etc.].
7.1.2 Payment of Liabilities, Including Taxes, Etc.
--------------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, duly pay and discharge all liabilities to which it is subject or which are
asserted against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which penalties
attach thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good faith by appropriate
proceedings and for which such reserve or other appropriate provisions, if any,
as shall be required by GAAP shall have been made.
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7.1.3 Maintenance of Insurance.
------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to maintain with financially sound and reputable insurance companies insurance
on all its real or personal property in at least such amounts and against at
least such risks (but including in any event public liability, product liability
and business interruption) as are usually insured against in the same general
area by companies engaged in the same or a similar business, which insurance
shall name the Agent as lender loss payee, in the case of property or casualty
insurance, and as an additional insured, in the case of the liability insurance,
except where the failure to maintain any such insurance could not reasonably be
expected to result in a Material Adverse Change; and furnish to each Bank, upon
written request, copies of any such insurance policies.
7.1.4 Maintenance of Properties and Leases.
------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, maintain in good repair, working order and condition (ordinary wear and tear
excepted) all of those properties useful or necessary to its business.
7.1.5 Maintenance of Patents, Trademarks, Etc.
---------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, maintain in full force and effect all patents, trademarks, service marks,
trade names, copyrights, licenses, franchises, permits and other authorizations
necessary for the ownership and operation of its properties and business if the
failure so to maintain the same would constitute a Material Adverse Change.
7.1.6 Visitation Rights.
-----------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, permit any of the officers or authorized employees or representatives of the
Agent or any of the Banks to visit and inspect any of its properties during such
Loan Party's normal business hours and to examine and make excerpts from its
books and records and discuss its business affairs, finances and accounts with
its officers, all in such detail and at such times and as often as any of the
Banks may reasonably request, provided that each Bank shall provide the
--------
Administrative Borrower and the Agent with reasonable notice prior to any visit
or inspection. In the event any Bank desires to conduct an audit of any Loan
Party, such Bank shall make a reasonable effort to conduct such audit
contemporaneously with any audit to be performed by the Agent.
7.1.7 Keeping of Records and Books of Account.
---------------------------------------
Each Borrower shall, and shall cause each Subsidiary of any
Borrower to, maintain and keep proper books of record and account in conformity
with GAAP and as otherwise required by applicable Laws of any Official Body
having jurisdiction over any Borrower
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<PAGE>
or any Subsidiary of any Borrower, and in which full, true and correct entries
shall be made in all material respects of all its dealings and business and
financial affairs.
7.1.8 Plans and Benefit Arrangements.
------------------------------
Each Loan Party shall, and shall cause each other member of the ERISA
Group to, comply in all material respects with all applicable provisions of
ERISA, promptly notify the Agent in writing of the occurrence of any Reportable
Event, as defined in ERISA together with a description of such Reportable Event
and a statement of the action that any such Loan Party intends to take with
respect thereto, together with a copy of the notice (if any) thereof given to
the PBGC, and promptly notify Agent in writing of any proposed withdrawal from a
Multiemployer Plan or Multiple Employer Plan.
7.1.9 Compliance with Laws.
--------------------
Each Loan Party shall, and shall cause each of its Subsidiaries to,
comply with all applicable Laws, including all Environmental Laws and Regulation
U, in all respects, provided that it shall not be deemed to be a violation of
--------
this Section 7.1.9 if any failure to comply with any Law would not result in
fines, penalties, remediation costs, other similar liabilities or injunctive
relief which in the aggregate would constitute a Material Adverse Change.
7.1.10 Use of Proceeds.
---------------
The Loan Parties will use the Letters of Credit only for credit
support for the Borrowers, their respective Subsidiaries and Investment
Entities. The Loan Parties will use the proceeds of the Loans only for (i)
Investments (subject to the limitations set forth in Section 7.1.15 hereof),
(ii) working capital purposes or (iii) capital expenditures. The Loan Parties
shall not use the Letters of Credit or the proceeds of the Loans for any
purposes which contravenes any applicable Law or any provision hereof.
7.1.11 Further Assurances.
------------------
Each Loan Party shall, from time to time, at its expense, faithfully
preserve and protect the Agent's Lien on and Prior Security Interest in the
Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as the Agent and the
Banks in their sole discretion may deem necessary or advisable from time to time
in order to preserve, perfect and protect the Liens granted under the Loan
Documents and to exercise and enforce its rights and remedies thereunder with
respect to the Collateral.
7.1.12 Subordination of Intercompany Loans.
-----------------------------------
Each Loan Party shall cause any intercompany Indebtedness, loans or
advances owed by any Loan Party to any other Loan Party to be subordinated
pursuant to the terms of the Intercompany Subordination Agreement.
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7.1.13 Dispositions.
------------
The Administrative Borrower shall notify the Agent of the
disposition of any Investment in any Investment Entity by telephone at the
latest contemporaneously therewith followed promptly by written notice and
within five (5) Business Days of any such notification shall provide to the
Agent and the Banks an updated Annex A to the Letter Agreement reflecting any
such disposition. In the event of the disposition of Pledged Securities written
notice shall not be later than twenty-four (24) hours after the time when Agent
is to deliver such Pledged Securities. The proceeds of the sale of any Pledged
Collateral shall be applied as set forth in Section 5(c) of the Pledge
Agreement.
7.1.14 Amendments of Purpose Statements.
--------------------------------
In accordance with the terms of Section 221.3(c)(2)(iv) of
the Federal Reserve Board Regulations, the Borrowers shall provide the Agent
with a current list of Pledged Collateral which adequately supports all credit
extended under this Agreement with respect to margin stock which the Agent shall
attach to the executed Form FR U-1 referred to in Regulation U.
7.1.15 Investments.
-----------
The Borrowers may make Investments in other Persons, in
addition to Investments existing on the Closing Date and disclosed in Schedules
1.1(A-1), 1.1(A-2) and 1.1(A-3) attached hereto; provided, however, that (a) the
-------- -------
Borrowers may only invest a maximum of $25,000,000 in Cash and Cash Equivalents
per year in any Investment Entity and (b) the Borrowers will promptly, and in
any event within five (5) Business Days of the making of any such Investment
provide to the Agent and the Banks an updated Annex A to the Letter Agreement
reflecting any such additional Investment.
7.1.16 Minimum Margin Value.
--------------------
The Borrowers shall maintain Pledged Collateral having a
Minimum Margin Value and shall provide additional Pledged Collateral to the
Agent immediately upon the Agent's request if the Minimum Margin Value is not
maintained.
7.1.17 Delivery of Material Contracts.
------------------------------
The Borrowers shall deliver copies of all Material Contracts
relating to each Borrower's Investment in Investment Entities as follows:
(i) for Investments made by any Borrower on or prior to
the Closing Date in any Investment Entity other than VerticalNet, the Borrowers
shall deliver copies of all Material Contracts relating to such Investment
within thirty (30) calendar days of the Closing Date;
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(ii) for Investments made by any Borrower on or prior to
the Closing Date in VerticalNet, the Borrowers shall deliver copies of all
Material Contracts relating to such Investment on the Closing Date; and
(iii) for Investments made by any Borrower after the Closing
Date, the Borrowers shall deliver copies of all Material Contracts relating to
such Investment within sixty (60) calendar days of the closing date for any such
Investment.
7.1.18 Delivery of Consents.
--------------------
The Borrowers shall deliver copies of all Consents relating
to each Borrower's Investment in Investment Entities as follows:
(i) for Investments made by any Borrower on or prior to
the Closing Date in any Investment Entity other than VerticalNet, the Borrowers
shall deliver copies of all Consents relating to such Investment within thirty
(30) calendar days of the Closing Date;
(ii) for Investments made by any Borrower on or prior to
the Closing Date in VerticalNet, the Borrowers shall deliver copies of all
Consents relating to such Investment on the Closing Date; and
(iii) for Investments made by any Borrower after the Closing
Date, the Borrowers shall deliver copies of all Consents relating to such
Investment within sixty (60) calendar days of the closing date for any such
Investment.
7.1.19 Delivery of Certificates and Powers.
-----------------------------------
The Borrowers shall deliver all Certificates and Powers
relating to each Borrower's Investment in Investment Entities as follows:
(i) for Investments made by any Borrower on or prior to
the Closing Date in any Investment Entity other than VerticalNet, the Borrowers
shall deliver all Certificates and Powers relating to such Investment within
thirty (30) calendar days of the Closing Date;
(ii) for Investments made by any Borrower on or prior to
the Closing Date in VerticalNet, the Borrowers shall deliver all Certificates
and Powers relating to such Investment on the Closing Date; and
(iii) for Investments made by any Borrower after the Closing
Date, the Borrowers shall deliver all Certificates and Powers relating to such
Investment within sixty (60) calendar days of the closing date for any such
Investment.
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7.1.20 Periodic Review of Cost Basis Determinations.
--------------------------------------------
ICG shall perform an analysis of the cost basis
determinations of Private Company Restricted Securities made in accordance with
the terms hereof at the end of each fiscal quarter of the Borrowers, or earlier
in the event that (i) a subsequent round of financing evidences a lower
valuation of an Investment Entity whose Private Company Restricted Securities
are then included in the Borrowing Base then the value included in the Borrowing
Base prior to such financing or (ii) a material adverse change occurs in the
business, properties, assets, condition (financial or otherwise), results of
operations or prospects of any Investment Entity whose Private Company
Restricted Securities are then included in the Borrowing Base, and ICG shall
promptly, and in any event within five (5) Business Days of such analysis,
deliver a summary of such analysis to the Agent and the Banks. Such analysis of
such cost basis determinations shall be performed in accordance with GAAP. Based
upon such periodic review, the cost basis of Private Company Restricted
Securities which are then included in the Borrowing Base shall be adjusted
accordingly within five (5) days of the delivery of the analysis provided for
hereunder.
7.1.21 Year 2000 Compliance.
--------------------
Each Borrower shall perform all acts reasonably necessary to
ensure that such Borrower and its Subsidiaries become Year 2000 Compliant in a
timely manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all such Borrower's and its Subsidiaries
systems and adopting a detailed plan for the remediation, monitoring and testing
of such systems. Each Borrower will also take all reasonable steps to ensure
that it will not be materially adversely affected by, or as a result of, any
customer's, supplier's or vendor's failure to become Year 2000 compliant. As
used in this paragraph, "Year 2000 Compliant" shall mean, in regard to any
entity, that all Information Technology and Non-Information Technology (as
defined in SEC Release 33-7558, dated July 29, 1998) systems utilized by any
Borrower to the extent that they are material to the business operations or
financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Each Borrower shall,
immediately upon request, provide to Agent such certifications or other evidence
of such Borrower's compliance with the terms of this paragraph as the Agent may
from time to time reasonably require.
7.1.22 Subordinated Loan Documents.
---------------------------
The Administrative Borrower shall deliver to the Agent for
delivery to the Banks a true and correct copy of the Subordinated Loan Documents
and any amendments, waivers and other documents executed in connection therewith
(including all exhibits and schedules to such documents) within sixty (60)
calendar days of the execution thereof by the parties thereto.
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7.2 Negative Covenants.
------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and
termination of the Commitments, the Loan Parties shall, and shall cause each of
its Subsidiaries to, comply with the following negative covenants:
7.2.1 Indebtedness.
------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule
--------
7.2.1 (including any extensions or renewals thereof), provided there is no
- -----
increase in the amount thereof or other significant change in the terms thereof
unless otherwise specified on Schedule 7.2.1;
--------------
(iii) Indebtedness secured by Purchase Money Security
Interests not exceeding $2,000,000;
(iv) Indebtedness of a Loan Party to another Loan
Party which is subordinated in accordance with the provisions of Section 7.1.12
[Subordination of Intercompany Loans]; and
(v) Subordinated Debt in an aggregate principal
amount not to exceed $100,000,000 at any one time outstanding; provided,
--------
however, that no more than $30,000,000 in aggregate principal amount of such
Subordinated Debt shall be issued in favor of Persons who are not Company
Insiders.
7.2.2 Liens.
-----
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens.
7.2.3 Guaranties.
----------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person,
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except for (a) subject to Section 7.2.3(b) hereof, Guaranties of Indebtedness in
existence as of the date hereof and listed on Schedule 7.2.3, (b) Guaranties of
--------------
Indebtedness incurred after the date hereof (provided, however, that
notwithstanding anything to the contrary, in no event shall the aggregate amount
of such Guaranties of Indebtedness permitted under clauses (a) and (b) of this
Section 7.2.3 exceed $8,000,000 at any one time outstanding for the Loan Parties
and their respective Subsidiaries) and (c) Guaranties of Indebtedness of the
Loan Parties otherwise permitted hereunder.
7.2.4 Loans and Investments.
---------------------
(a) Each of the Loan Parties shall not, and shall not
permit any of its Subsidiaries to, at any time make or suffer to remain
outstanding any loan or advance to, or purchase, acquire or own any stock,
bonds, notes or securities of, or any partnership interest (whether general or
limited) or limited liability company interest in, or any other investment or
interest in, or make any capital contribution to, any other Person, or agree,
become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary
terms in the ordinary course of business;
(ii) advances to employees to (a) meet expenses
incurred by such employees in the ordinary course of business, (b) purchase
equity securities of the Loan Parties and (c) to pay tax liabilities of the
employees to the extent the aggregate amount of such advances in respect of
taxes does not exceed $10,000,000;
(iii) Permitted Investments;
(iv) loans, advances and investments in other Loan
Parties permitted pursuant to Section 7.2.1(iv); and
(v) Investments permitted under Section 7.1.15.
7.2.5 Dividends and Related Distributions.
-----------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests, except dividends or other distributions
payable to another Loan Party.
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7.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
---------------------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person,
provided that any Subsidiary of any Borrower may be merged into or consolidated
- --------
with (i) any Borrower (provided that such Borrower shall be the continuing or
--------
surviving corporation) or (ii) any one or more wholly owned Subsidiaries of any
Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the
continuing or surviving corporation).
7.2.7 Dispositions of Assets or Subsidiaries.
--------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of such Loan Party), except:
(i) transactions involving the sale of inventory in
the ordinary course of business;
(ii) any sale, transfer or lease of assets in the
ordinary course of business which are no longer necessary or required in the
conduct of such Loan Party's or such Subsidiary's business;
(iii) any sale, transfer or lease of assets by any
wholly owned Subsidiary of such Loan Party to another Loan Party;
(iv) any sale, transfer or lease of assets, other
than those specifically excepted pursuant to clauses (i) through (iii) above,
which is approved by the Required Banks prior to such sale, transfer or lease of
assets which approval shall not be unreasonably withheld; or
(v) any sale or disposition of assets not in the
ordinary course of business, provided that all such sales or other dispositions
--------
do not exceed, in the aggregate, $5,000,000;
provided, however, that nothing contained in this Section 7.2.7 shall prohibit
- -------- -------
(i) the sale of any Investment, the stock of which Investment is not part of the
Pledged Collateral, so long as the Borrower gives contemporaneous notice of such
sale to the Agent, or (ii) the making of any Investment permitted under Section
7.1.15 hereof, or (iii) sales of Pledged Collateral in the
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ordinary course of Borrower's business provided that Borrower is at all times in
compliance with the Borrowing Base and subject to the terms of Section 5(c) of
the Pledge Agreement.
7.2.8 Affiliate Transactions.
----------------------
Except for transactions in connection with any registered offering of
ICG's securities and Indebtedness permitted under Section 7.2.1(v), each of the
Loan Parties shall not, and shall not permit any of its Subsidiaries to, enter
into or carry out any transaction with an Affiliate (including purchasing
property or services from or selling property or services to any Affiliate of
any Loan Party or other Person) unless such transaction is (a) not otherwise
prohibited by this Agreement, (b) entered into in the ordinary course of
business and (c) upon fair and reasonable arm's-length terms and conditions no
less favorable to such Loan Party or such Subsidiary, as the case may be, than
it would obtain in a comparable arm's length transaction with a Person which is
not an Affiliate.
7.2.9 Subsidiaries, Partnerships and Joint Ventures.
---------------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, own or create directly or indirectly any Subsidiaries other
than (i) any Subsidiary which has joined this Agreement as Guarantor on the
Closing Date; and (ii) any Subsidiary formed after the Closing Date which joins
this Agreement as a Guarantor pursuant to Section 10.19 [Joinder of Guarantors],
provided that the Required Banks shall have consented to such formation and
joinder and that such Subsidiary and the Loan Parties, as applicable, shall
grant and cause to be perfected first priority Liens to the Agent for the
benefit of the Banks in the assets held by, and stock of or other ownership
interests in, such Subsidiary. Each of the Loan Parties shall not become or
agree to (1) become a general or limited partner in any general or limited
partnership, except that the Loan Parties may be general or limited partners in
other Loan Parties, (2) become a member or manager of, or hold a limited
liability company interest in, a limited liability company, except that the Loan
Parties may be members or managers of, or hold limited liability company
interests in, other Loan Parties, or (3) become a joint venturer or hold a joint
venture interest in any joint venture, provided, however, that the restrictions
-------- -------
of the last sentence of this Section 7.2.9 shall not be applicable to the extent
any such Loan Party shall not be liable for Indebtedness of any such general or
limited partnership, limited liability company or joint venture of which any
Loan Party may be a general or limited partner, a member or manager of, or a
joint venturer or hold a joint venture interest in, as the case may be.
7.2.10 Continuation of or Change in Business.
-------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than the business of the Loan
Parties substantially as conducted and operated by such Loan Party or Subsidiary
during the present fiscal year, and such Loan Party or Subsidiary shall not
permit any material change in such business.
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7.2.11 Plans and Benefit Arrangements.
------------------------------
Each Loan Party and each other member of the ERISA Group shall not:
(i) be or become obligated to the PBGC, any
Multiemployer Plan which is an "Employee Pension" Plan within the meaning of
Section 3(2) of ERISA or any Multiple Employer Plan in excess of $500,000; or
(ii) be or become obligated to the Internal Revenue
Service in excess of $500,000 with respect to excise or other penalty taxes
provided for in those provisions of the Internal Revenue Code, as now in effect
or hereafter amended or supplemented, applicable to employee benefit plans
subject to ERISA.
7.2.12 Fiscal Year.
-----------
No Borrower shall, and neither Borrower shall permit any Subsidiary of
any such Borrower to, change its fiscal year from the twelve-month period
beginning January 1 and ending December 31.
7.2.13 Changes in Organizational Documents.
-----------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, amend in any respect its certificate of incorporation
(including any provisions or resolutions relating to capital stock), by-laws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company agreement or other organizational documents
without providing written notice to the Agent and the Banks within 10 days of
any such amendment.
7.2.14 Negative Pledges.
----------------
Each of the Loan Parties covenants and agrees that it shall not, and
shall not permit any of its Subsidiaries to, enter into any agreement with any
Person which prohibits any of the Loan Parties from granting any Liens to the
Agent or the Banks except for Permitted Liens.
7.2.15 Amendment or Waiver of Subordinated Debt;
----------------------------------------
Prepayment of Subordinated Debt.
-------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to:
(i) without the prior written consent of the
Required Banks, agree to any amendment or other change to, or waiver of any of
its rights under, the Subordinated Debt, the Subordinated Loan Documents or any
other evidences of such Subordinated Debt which shall cause:
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(A) any payment by any of the Loan Parties to
become due prior to the date such payment is due consistent with the terms and
conditions set forth on Schedule 1.1(D) hereto;
(B) any advancement of the maturity date
under any Subordinated Loan Document;
(C) any increase in the aggregate principal
amount outstanding under Subordinated Loans to an amount which exceeds
$100,000,000; or
(D) any increase in the interest rate
applicable to any Subordinated Debt; or
(ii) amend, change, waive or otherwise modify any of
the terms and provisions set forth in Exhibit 1.1(D); or
--------------
(iii) directly or indirectly, by deposit of monies or
otherwise, prepay, purchase, redeem, retire, defease or otherwise acquire, or
make any payment on account of any principal of, premium or interest payable in
connection with the payment, prepayment, redemption, defeasance or retirement of
any Subordinated Debt.
7.2.16 Minimum Liquidity.
-----------------
The Loan Parties shall not permit the sum of the Borrowers' Cash, Cash
Equivalents, Borrowing Base Availability and Committed Subscriptions to be less
than the following amounts as of the last day of any fiscal quarter of the
Borrowers as set forth below:
Period Amount
------ ------
6/30/99 $6,000,000
09/30/99 $4,000,000
12/31/99 $2,000,000
7.2.17 Maximum Leverage Ratio.
----------------------
The Loan Parties shall not at any time permit the ratio of
consolidated total liabilities (excluding Subordinated Debt) of the Borrowers
and their respective Subsidiaries to Consolidated Tangible Net Worth to exceed
the ratio as set forth below:
Period Ratio
------ -----
Closing Date and thereafter .50 to 1.0
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7.3 Reporting Requirements.
----------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and
under the other Loan Documents and termination of the Commitments, the Loan
Parties will furnish or cause to be furnished to the Agent and each of the
Banks:
7.3.1 Quarterly Financial Statements.
------------------------------
As soon as available and in any event within sixty (60) calendar days
after the end of each of the first three fiscal quarters in each fiscal year,
unaudited financial statements of the Borrowers, consisting of a consolidated
and consolidating balance sheet as of the end of such fiscal quarter and related
consolidated and consolidating statements of income, consolidated stockholders'
equity and consolidated cash flows for the fiscal quarter then ended and, with
respect to the second and third fiscal quarters in any given fiscal year, the
fiscal year through that date from the commencement of the then current fiscal
year, all in reasonable detail and certified by an Authorized Officer of the
Administrative Borrower as having been prepared in accordance with GAAP,
consistently applied (subject to normal year end audit adjustments), and setting
forth in comparative form the respective financial statements for the
corresponding date and period in the previous fiscal year.
7.3.2 Annual Financial Statements.
---------------------------
As soon as available and in any event within one hundred (100)
calendar days after the end of each fiscal year of the Borrowers, financial
statements of the Borrowers consisting of a consolidated and consolidating
balance sheet as of the end of such fiscal year, and related consolidated and
consolidating statements of income, consolidated stockholders' equity and
consolidated cash flows for the fiscal year then ended, all in reasonable detail
and setting forth in comparative form the financial statements as of the end of
and for the preceding fiscal year, and certified by independent certified public
accountants of nationally recognized standing satisfactory to the Agent. The
certificate or report of accountants shall be free of qualifications (other than
any consistency qualification that may result from a change in the method used
to prepare the financial statements as to which such accountants concur) and
shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or performance
of any covenant, agreement or duty of any Loan Party under any of the Loan
Documents.
7.3.3 Quarterly Performance and Financial Information.
-----------------------------------------------
As soon as available and in any event within sixty (60) calendar days
after the end of each fiscal quarter in each fiscal year, a report of the
Borrowers of the performance of each company whose Pledged Collateral is then
included in the Borrowing Base, such report to be
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substantially in the form of Exhibit 7.3.3 hereto, together with such other
-------------
information as the Agent may request.
7.3.4 Borrowing Base Certificate.
--------------------------
On or before the last Business Day of each week, the Borrowers
shall execute and deliver to the Agent a Borrowing Base Certificate prepared by
the Borrowers and certified by an Authorized Officer of the Administrative
Borrower, setting forth the cost basis of Private Company Restricted Securities
determined in accordance with Sections 2.9 and 7.1.20 hereof and the value of
all Public Company Restricted Securities and Public Company Unrestricted
Securities determined in accordance with the provisions of the first paragraph
of the definition of "Borrowing Base" provided for herein, and a comparison of
such number to the Commitment and to the amount of outstanding Obligations.
7.3.5 Certificate of the Borrower.
---------------------------
Concurrently with the financial statements of the Borrowers
furnished to the Agent and to the Banks pursuant to Sections 7.3.1 [Quarterly
Financial Statements] and 7.3.2 [Annual Financial Statements], a certificate of
the Administrative Borrower signed by an Authorized Officer of the
Administrative Borrower, in the form of Exhibit 7.3.5, to the effect that,
-------------
except as described pursuant to Section 7.3.7 [Notice of Default], (i) the
representations and warranties of the Borrowers contained in Section 5 and in
the other Loan Documents are true on and as of the date of such certificate with
the same effect as though such representations and warranties had been made on
and as of such date (except representations and warranties which expressly
relate solely to an earlier date or time) and the Loan Parties have performed
and complied with all covenants and conditions hereof in all material respects,
(ii) no Event of Default or Potential Default exists and is continuing on the
date of such certificate and (iii) containing calculations in sufficient detail
to demonstrate compliance as of the date of such financial statements with all
financial covenants contained in Section 7.3 [Reporting Requirements].
7.3.6 1998 Audited Annual Statements.
------------------------------
As soon as available and in any event within sixty (60) calendar
days after the Closing Date, audited 1998 Annual Statements consisting of a
consolidated balance sheet as of the end of such fiscal year, and related
consolidated statements of income, consolidated stockholders' equity and
consolidated cash flows for the 1998 fiscal year, all in reasonable detail and
setting forth in comparative form the financial statements as of the end of and
for the 1998 fiscal year, and certified by independent certified public
accountants of nationally recognized standing satisfactory to the Agent. The
certificate or report of accountants shall be free of qualifications (other than
any consistency qualification that may result from a change in the method used
to prepare the financial statements as to which such accountants concur) and
shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or performance
of any covenant, agreement or duty of any Loan Party under any of the Loan
Documents.
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7.3.7 Notice of Default.
-----------------
Promptly after any Authorized Officer of any Loan Party has
acquired knowledge of the occurrence of an Event of Default or Potential
Default, a certificate signed by the Authorized Officer of such Loan Party
setting forth the details of such Event of Default or Potential Default and the
action which the such Loan Party proposes to take with respect thereto.
7.3.8 Notice of Litigation.
--------------------
Promptly after the commencement thereof, notice of all actions,
suits, proceedings or investigations before or by any Official Body or any other
Person against any Loan Party or Subsidiary of any Loan Party which relate to
the Collateral, involve a claim or series of claims in excess of $1,000,000 or
which if adversely determined would constitute a Material Adverse Change.
7.3.9 Certain Events.
--------------
Written notice to the Agent:
(i) within the time limits set forth in Section
7.2.13 [Changes in Organizational Documents], of any amendment to the
organizational documents of any Loan Party; and
(ii) at least thirty (30) calendar days prior
thereto, with respect to any change in any Loan Party's locations from the
locations set forth in Schedule A to the Security Agreement.
7.3.10 Budgets, Forecasts, Other Reports and Information.
-------------------------------------------------
Promptly upon their becoming available to any Borrower:
(i) the annual budget and any forecasts or
projections of any Borrower, from time to time as reasonably requested,
(ii) any reports including management letters
submitted to any Borrower by independent accountants in connection with any
annual, interim or special audit,
(iii) any reports, notices or proxy statements
generally distributed by any Borrower to its stockholders on a date no later
than the date supplied to such stockholders,
(iv) regular or periodic reports, including Forms
10-K, 10-Q and 8-K, registration statements and prospectuses, filed by any
Borrower with the Securities and Exchange Commission,
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(v) a copy of any order in any proceeding to
which any Borrower or any of its respective Subsidiaries is a party issued by
any Official Body which relates to the Collateral, involves a claim or series of
claims in excess of $1,000,000 or which if adversely determined would constitute
a Material Adverse Change, and
(vi) such other reports and information as any of
the Banks may from time to time reasonably request. The Borrowers shall also
notify the Banks promptly upon acquiring knowledge of the enactment or adoption
of any Law which could reasonably be expected to result in a Material Adverse
Change.
7.3.11 Notices Regarding Plans and Benefit Arrangements.
------------------------------------------------
The Borrowers shall:
(a) Concurrently with such filing, provide a copy
of each annual report which is filed with respect to each Plan with the
Secretary of Labor or the PBGC; and
(b) Promptly, upon their becoming available,
provide copies of: (i) all non-routine correspondence with the PBGC, the
Secretary of Labor or any representative of the IRS with respect to any Plan;
(ii) copies of all reports received by any Borrower from its actuary with
respect to any Plan; (iii) copies of any notices of Plan termination filed by
any Plan Administrator (as those terms are used in ERISA) with the PBGC and of
any notices from the PBGC to any Borrower with respect to the intent of the PBGC
to institute involuntary termination proceedings; and (iv) copies of all non-
routine correspondence with the plan sponsor with respect to any Multiemployer
Plan or Multiple Employer Plan.
8. DEFAULT
-------
8.1 Events of Default.
-----------------
An Event of Default shall mean the occurrence or existence of any one
or more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
8.1.1 Payments Under Loan Documents.
-----------------------------
Any Borrower shall fail to pay (i) any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity), Reimbursement Obligation or Letter of Credit Borrowing when due or
(ii) any interest on any Loan, Reimbursement Obligation or Letter of Credit
Borrowing or any other amount owing hereunder or under the other Loan Documents
within three (3) Business Days after such interest or other amount becomes due
in accordance with the terms hereof or thereof;
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8.1.2 Breach of Warranty.
------------------
Any representation or warranty made at any time by any of the
Loan Parties herein or by any of the Loan Parties in any other Loan Document, or
in any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
8.1.3 Breach of Negative Covenants or Visitation Rights.
-------------------------------------------------
Any of the Loan Parties shall default in the observance or
performance of any covenant contained in Section 7.1.6 [Visitation Rights] or
Section 7.2 [Negative Covenants] except Sections 7.2.11, 7.2.16 and 7.2.17;
8.1.4 Breach of Other Covenants.
-------------------------
Any of the Loan Parties shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document (other than as provided in Sections 8.1.1, 8.1.2 or 8.1.3 hereof)
and such default shall continue unremedied for a period of ten (10) Business
Days after any Authorized Officer of any Loan Party acquires knowledge of the
occurrence thereof (such grace period to be applicable only in the event such
default can be remedied by corrective action of the Loan Parties);
8.1.5 Defaults in Other Agreements or Indebtedness.
--------------------------------------------
A default or event of default shall occur at any time under the
terms of any other agreement involving borrowed money or the extension of credit
or any other Indebtedness under which any Loan Party or Subsidiary of any Loan
Party may be obligated as a borrower or guarantor in excess of $1,000,000 in the
aggregate, and such breach, default or event of default consists of the failure
to pay (beyond any period of grace permitted with respect thereto, whether
waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or causes the
acceleration of any indebtedness (whether or not such right shall have been
waived) or the termination of any commitment to lend;
8.1.6 Final Judgments or Orders.
-------------------------
Any final judgments or orders for the payment of money in excess
of $1,000,000 in the aggregate shall be entered against any Loan Party by a
court having jurisdiction in the premises, which judgment is not discharged,
vacated, bonded or stayed pending appeal within a period of forty-five (45)
calendar days from the date of entry;
8.1.7 Loan Document Unenforceable.
---------------------------
Any of the Loan Documents, any Guaranty or any Guaranty Joinder
shall cease to be legal, valid and binding agreements enforceable against the
party executing the same
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or such party's successors and assigns (as permitted under the Loan Documents)
in accordance with the respective terms thereof or shall in any way be
terminated (except in accordance with its terms) or become or be declared
ineffective or inoperative or shall in any way be challenged or contested or
cease to give or provide the respective Liens, security interests, rights,
titles, interests, remedies, powers or privileges intended to be created
thereby;
8.1.8 Uninsured Losses; Proceedings Against Assets.
--------------------------------------------
There shall occur any material uninsured damage to or loss, theft
or destruction of any of the Collateral in excess of $1,000,000 or the
Collateral or any other of the Loan Parties' or any of their Subsidiaries'
assets are attached, seized, levied upon or subjected to a writ or distress
warrant; or such come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors and the same is not cured within forty-
five (45) calendar days thereafter;
8.1.9 Notice of Lien or Assessment.
----------------------------
A notice of Lien or assessment in excess of $1,000,000 which is
not a Permitted Lien is filed of record with respect to all or any part of any
of the Loan Parties' or any of their Subsidiaries' assets by the United States,
or any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, including the PBGC, or any taxes or
debts owing at any time or times hereafter to any one of these becomes payable
and the same is not paid or discharged within forty-five (45) calendar days
after the same becomes payable;
8.1.10 Events Relating to Plans and Benefit Arrangements.
-------------------------------------------------
Any of the following occurs: (a) the termination of any Plan or
the institution by the PBGC of proceedings for the involuntary termination of
any Plan, in either case, with a vested unfunded liability in excess of
$500,000; or (b) failure by any Borrower to fund, in accordance with the
applicable provisions of ERISA, each of the Plans hereafter established or
assumed by it, provided that such failure to fund shall not constitute an Event
of Default hereunder unless such failure shall continue for five (5) days after
the date on which such funding was required; or (c) the withdrawal by any Loan
Party from any Multiemployer Plan or Multiple Employer Plan giving rise to a
withdrawal liability in excess of $500,000).
8.1.11 Cessation of Business.
---------------------
Any Loan Party or Subsidiary of a Loan Party ceases to conduct
its business as contemplated, except as expressly permitted under Section 7.2.6
[Liquidations, Mergers, Etc.] or 7.2.7 [Disposition of Assets or Subsidiaries],
or any Loan Party or Subsidiary of a Loan Party is enjoined, restrained or in
any way prevented by court order from conducting all or any material part of its
business and such injunction, restraint or other preventive order is not
dismissed within forty-five (45) calendar days after the entry thereof;
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8.1.12 Change of Control.
-----------------
Any Person (other than existing shareholders of any Loan Party
who would be considered an Affiliate, the parent of any such shareholders or any
wholly-owned Subsidiary of any of them) shall acquire more than thirty percent
(30%) of the issued and outstanding capital stock of Internet Capital Group,
Inc.
8.1.13 Breach of Subordination Terms.
-----------------------------
Any agreement to subordinate the right of payment in respect of
the Subordinated Debt to the Indebtedness arising out of or under the Loan
Documents, at any time and for any reason, ceases to be in full force and effect
or is declared to be null and void; or any holder of such Subordinated Debt
repudiates or disavows such subordination or denies that it has further
liability or obligation under such subordination agreement or gives notice to
such effect.
8.1.14 Bankruptcy, Insolvency or Reorganization
----------------------------------------
Proceedings.
-----------
(a) Any Loan Party or any Subsidiary of a Loan Party shall make
an assignment for the benefit of creditors, file a petition for an Insolvency
Proceeding in favor of such Loan Party or such Subsidiary of such Loan Party, be
adjudicated insolvent or bankrupt, suffer an order for relief under any federal
bankruptcy law, petition or apply to any tribunal for the appointment of a
receiver, custodian, or any trustee for it or a substantial part of its assets,
or shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or there shall have been
filed any such petition or application, or any such proceeding shall have been
commenced against it, which remains undismissed for a period of sixty (60)
calendar days or more; or any order for relief shall be entered in any such
proceeding; or any Loan Party by any act or omission shall indicate its consent
to, approval of or acquiescence in any such petition, application or proceedings
or the appointment of a custodian, receiver or any trustee for it or any
substantial part of any of its properties, or shall suffer any custodianship,
receivership or trusteeship to continue undischarged for a period of sixty (60)
calendar days or more; or
(b) Any Loan Party or any Subsidiary of a Loan Party shall
generally not pay its debts as such debts become due; or
(c) Any Loan Party or any Subsidiary of a Loan Party shall have
concealed, removed, or permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its creditors or any of them,
or made or suffered a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall have made
any transfer of its property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or shall have suffered or
permitted, while insolvent, any creditor to obtain a lien upon any of its
property through legal proceedings or distraint which is not vacated within
sixty (60) calendar days from the date thereof.
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8.1.15 Investment Company Status.
-------------------------
Any Loan Party or any Subsidiary of any Loan Party shall be
registered or required to be registered under the Investment Company Act of 1940
or under the "control" of an "investment company" (as such terms are defined in
the Investment Company Act of 1940).
8.2 Consequences of Event of Default.
--------------------------------
8.2.1 Events of Default Other Than Bankruptcy, Insolvency
---------------------------------------------------
or Reorganization Proceedings.
-----------------------------
If an Event of Default specified under Sections 8.1.1 through
8.1.13 or Section 8.1.15 shall occur and be continuing, the Banks and the Agent
shall be under no further obligation to make Loans or issue Letters of Credit,
as the case may be, and the Agent may, and upon the request of the Required
Banks, shall (i) by written notice to the Administrative Borrower, declare the
unpaid principal amount of the Notes then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness of the Borrowers to the
Banks hereunder and thereunder to be forthwith due and payable, and the same
shall thereupon become and be immediately due and payable to the Agent for the
benefit of each Bank without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived, and (ii) require the
Borrowers to, and the Borrowers shall thereupon, deposit in a non-interest-
bearing account with the Agent, as cash collateral for its Obligations under the
Loan Documents, an amount equal to the maximum amount currently or at any time
thereafter available to be drawn on all outstanding Letters of Credit, and the
Borrowers hereby pledge to the Agent and the Banks, and grant to the Agent and
the Banks a security interest in, all such cash as security for such
Obligations. Upon the curing of all existing Events of Default to the
satisfaction of the Required Banks, the Agent shall return such cash collateral
to the Borrowers; and
8.2.2 Bankruptcy, Insolvency or Reorganization
----------------------------------------
Proceedings.
-----------
If an Event of Default specified under Section 8.1.14
[Bankruptcy, etc.] shall occur, the Banks shall be under no further obligations
to make Loans hereunder and the unpaid principal amount of the Loans then
outstanding and all interest accrued thereon, any unpaid fees and all other
Indebtedness of the Borrowers to the Banks hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; and
8.2.3 Set-off.
-------
If an Event of Default shall occur and be continuing, any Bank to
whom any Obligation is owed by any Loan Party hereunder or under any other Loan
Document or any participant of such Bank which has agreed in writing to be bound
by the provisions of Section 9.13 [Equalization of Banks] and any branch,
Subsidiary or Affiliate of such Bank or participant anywhere in the world shall
have the right, in addition to all other rights and remedies
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available to it, without notice to such Loan Party, to set-off against and apply
to the then unpaid balance of all the Loans and all other Obligations of any
Borrower and the other Loan Parties hereunder or under any other Loan Document
any debt owing to, and any other funds held in any manner for the account of,
any Borrower or any such other Loan Party by such Bank or participant or by such
branch, Subsidiary or Affiliate, including all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by any Borrower or any such
other Loan Party for its own account (but not including funds held in custodian
or trust accounts) with such Bank or participant or such branch, Subsidiary or
Affiliate. Such right shall exist whether or not any Bank or the Agent shall
have made any demand under this Agreement or any other Loan Document, whether or
not such debt owing to or funds held for the account of any Borrower or any such
other Loan Party is or are matured or unmatured and regardless of the existence
or adequacy of any Collateral, Guaranty or any other security, right or remedy
available to any Bank or the Agent; and
8.2.4 Suits, Actions, Proceedings.
---------------------------
If an Event of Default shall occur and be continuing, and whether
or not the Agent shall have accelerated the maturity of Loans pursuant to any of
the foregoing provisions of this Section 8.2, the Agent or any Bank, if owed any
amount with respect to the Loans, may proceed to protect and enforce its rights
by suit in equity, action at law and/or other appropriate proceeding, whether
for the specific performance of any covenant or agreement contained in this
Agreement or the other Loan Documents, including as permitted by applicable Law
the obtaining of the ex parte appointment of a receiver, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of the Agent or such Bank;
and
8.2.5 Application of Proceeds.
-----------------------
From and after the date on which the Agent has taken any action
pursuant to this Section 8.2 and until all Obligations of the Loan Parties have
been paid in full, any and all proceeds received by the Agent from any sale or
other disposition of the Collateral, or any part thereof, or the exercise of any
other remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the Banks
for out-of-pocket costs, expenses and disbursements, including reasonable
attorneys' and paralegals' fees and legal expenses, incurred by the Agent or the
Banks in connection with realizing on the Collateral or collection of any
Obligations of any of the Loan Parties under any of the Loan Documents,
including advances made by the Banks or any one of them or the Agent for the
reasonable maintenance, preservation, protection or enforcement of, or
realization upon, the Collateral, including advances for taxes, insurance,
repairs and the like and reasonable expenses incurred to sell or otherwise
realize on, or prepare for sale or other realization on, any of the Collateral;
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(ii) second, to the repayment of all Indebtedness
then due and unpaid of the Loan Parties to the Banks incurred under this
Agreement or the Guaranty Agreement or any of the other Loan Documents, whether
of principal, interest, fees, expenses or otherwise, in such manner as the Agent
may determine in its discretion; and
(iii) the balance, if any, as required by Law.
8.2.6 Other Rights and Remedies.
-------------------------
In addition to all of the rights and remedies contained in this
Agreement or in any of the other Loan Documents, the Agent and the Banks shall
have all of the rights and remedies of a secured party under the Uniform
Commercial Code or other applicable Law, all of which rights and remedies shall
be cumulative and non-exclusive, to the extent permitted by Law. The Agent may,
and upon the request of the Required Banks shall, exercise all post-default
rights granted to the Agent and the Banks under the Loan Documents or applicable
Law.
8.3 Notice of Sale.
--------------
(i) Any notice required to be given by the Agent of a sale, lease,
or other disposition of any Public Company Restricted Securities or any Public
Company Unrestricted Securities or any other intended action by the Agent
relating thereto, if given ten (10) calendar days prior to such proposed action,
shall constitute commercially reasonable and fair notice thereof to the Loan
Parties.
(ii) Any notice required to be given by the Agent of a sale, lease
or other disposition of any Private Company Restricted Securities or any other
intended action by the Agent relating thereto, if given ten (10) Business Days
prior to such proposed action, shall constitute commercially reasonable action
and fair notice thereof to the Loan Parties.
9. THE AGENT
---------
9.1 Appointment.
-----------
Each Bank hereby irrevocably designates, appoints and authorizes PNC
Bank to act as Agent for such Bank under this Agreement and to execute and
deliver or accept on behalf of each of the Banks the other Loan Documents. Each
Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and any other instruments and agreements referred to herein, and
to exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to act as the Agent
on behalf of the Banks to the extent provided in this Agreement.
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9.2 Delegation of Duties.
--------------------
The Agent may perform any of its duties hereunder by or through agents
or employees (provided such delegation does not constitute a relinquishment of
--------
its duties as Agent) and, subject to Sections 9.5 [Reimbursement of Agent by
Borrowers, Etc.] and 9.6 [Exculpatory Provisions; Limitations of Liability],
shall be entitled to engage and pay for the advice or services of any attorneys,
accountants or other experts concerning all matters pertaining to its duties
hereunder and to rely upon any advice so obtained.
9.3 Nature of Duties; Independent Credit Investigation.
--------------------------------------------------
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable Law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties. Each
Bank expressly acknowledges (i) that the Agent has not made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any of the Loan Parties, shall be deemed to constitute
any representation or warranty by the Agent to any Bank; (ii) that it has made
and will continue to make, without reliance upon the Agent, its own independent
investigation of the financial condition and affairs and its own appraisal of
the creditworthiness of each of the Loan Parties in connection with this
Agreement and the making and continuance of the Loans hereunder; and (iii)
except as expressly provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto, whether coming into
its possession before the making of any Loan or at any time or times thereafter.
9.4 Actions in Discretion of Agent; Instructions From the Banks.
-----------------------------------------------------------
The Agent agrees, upon the written request of the Required
Banks, to take or refrain from taking any action of the type specified as being
within the Agent's rights, powers or discretion herein, provided that the Agent
--------
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or any other Loan Document or
applicable Law. In the absence of a request by the Required Banks, the Agent
shall have authority, in its sole discretion, to take or not to take any such
action, unless this Agreement specifically requires the consent of the Required
Banks or all of the Banks. Any action taken or
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failure to act pursuant to such instructions or discretion shall be binding on
the Banks, subject to Section 9.6 [Exculpatory Provisions, Etc.]. Subject to the
provisions of Section 9.6, no Bank shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
hereunder in accordance with the instructions of the Required Banks, or in the
absence of such instructions, in the absolute discretion of the Agent.
9.5 Reimbursement and Indemnification of Agent by the Borrowers.
-----------------------------------------------------------
The Borrowers unconditionally agree to pay or reimburse the Agent and
hold the Agent harmless against (a) liability for the payment of all reasonable
out-of-pocket costs, expenses and disbursements, including fees and expenses of
counsel (including the allocated costs of staff counsel), appraisers and
environmental consultants, incurred by the Agent (i) in connection with the
development, negotiation, preparation, printing, execution, administration,
syndication, interpretation and performance of this Agreement and the other Loan
Documents, (ii) relating to any requested amendments, waivers or consents
pursuant to the provisions hereof, (iii) in connection with the enforcement of
this Agreement or any other Loan Document or collection of amounts due hereunder
or thereunder or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (iv) in any workout or restructuring or in
connection with the protection, preservation, exercise or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document or
in connection with any foreclosure, collection or bankruptcy proceedings, and
(b) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by the Agent
hereunder or thereunder, provided that the Borrowers shall not be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements if the same results from the
Agent's gross negligence or willful misconduct, or if the Administrative
Borrower was not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the Borrowers
shall remain liable to the extent such failure to give notice does not result in
a loss to the Borrowers), or if the same results from a compromise or settlement
agreement entered into without the consent of the Administrative Borrower, which
shall not be unreasonably withheld. In addition, upon the happening of an Event
of Default and during the continuance thereof, the Borrowers agree to reimburse
and pay all reasonable out-of-pocket expenses of the Agent's regular employees
and agents engaged to perform audits of the Loan Parties' books, records and
business properties.
9.6 Exculpatory Provisions; Limitation of Liability.
-----------------------------------------------
Neither the Agent nor any of its directors, officers,
employees, agents, attorneys or Affiliates shall (a) be liable to any Bank for
any action taken or omitted to be taken by it or them hereunder, or in
connection herewith including pursuant to any Loan Document, unless caused by
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its or their own gross negligence or willful misconduct, (b) be responsible in
any manner to any of the Banks for the effectiveness, enforceability,
genuineness, validity or the due execution of this Agreement or any other Loan
Documents or for any recital, representation, warranty, document, certificate,
report or statement herein or made or furnished under or in connection with this
Agreement or any other Loan Documents, or (c) be under any obligation to any of
the Banks to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions hereof or thereof on the part of the Loan
Parties, or the financial condition of the Loan Parties, or the existence or
possible existence of any Event of Default or Potential Default. No claim may be
made by any of the Loan Parties, any Bank, the Agent or any of their respective
Subsidiaries against the Agent, any Bank or any of their respective directors,
officers, employees, agents, attorneys or Affiliates, or any of them, for any
special, indirect or consequential damages or, to the fullest extent permitted
by Law, for any punitive damages in respect of any claim or cause of action
(whether based on contract, tort, statutory liability, or any other ground)
based on, arising out of or related to any Loan Document or the transactions
contemplated hereby or any act, omission or event occurring in connection
therewith, including the negotiation, documentation, administration or
collection of the Loans, and each of the Loan Parties (for itself and on behalf
of each of its Subsidiaries), the Agent and each Bank hereby waive, releases and
agree never to sue upon any claim for any such damages, whether such claim now
exists or hereafter arises and whether or not it is now known or suspected to
exist in its favor. Each Bank agrees that, except for notices, reports and other
documents expressly required to be furnished to the Banks by the Agent hereunder
or given to the Agent for the account of or with copies for the Banks, the Agent
and each of its directors, officers, employees, agents, attorneys or Affiliates
shall not have any duty or responsibility to provide any Bank with an credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Loan Parties
which may come into the possession of the Agent or any of its directors,
officers, employees, agents, attorneys or Affiliates.
9.7 Reimbursement and Indemnification of Agent by Banks.
---------------------------------------------------
Each Bank agrees to reimburse and indemnify the Agent (to the extent
not reimbursed by the Borrowers and without limiting the Obligation of the
Borrowers to do so) in proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements, including attorneys' fees and disbursements
(including the allocated costs of staff counsel), and costs of appraisers and
environmental consultants, of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, provided that
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (a) if the same results from the Agent's gross negligence or
willful misconduct, or (b) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that such Bank shall remain liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement
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agreement entered into without the consent of such Bank, which shall not be
unreasonably withheld. In addition, each Bank agrees promptly upon demand to
reimburse the Agent (to the extent not reimbursed by the Borrowers and without
limiting the Obligation of the Borrowers to do so) in proportion to its Ratable
Share for all amounts due and payable by the Borrowers to the Agent in
connection with the Agent's periodic audit of the Loan Parties' books, records
and business properties.
9.8 Reliance by Agent.
-----------------
The Agent shall be entitled to rely upon any writing, telegram, telex
or teletype message, resolution, notice, consent, certificate, letter,
cablegram, statement, order or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon the advice and opinions of
counsel and other professional advisers selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
9.9 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Potential Default or Event of Default unless the Agent has
received written notice from a Bank or the Administrative Borrower referring to
this Agreement, describing such Potential Default or Event of Default and
stating that such notice is a "notice of default."
9.10 Notices.
-------
The Agent shall promptly send to each Bank a copy of all notices
received from any Borrower pursuant to the provisions of this Agreement or the
other Loan Documents promptly upon receipt thereof. The Agent shall promptly
notify the Administrative Borrower and the other Banks of each change in the
Base Rate and the effective date thereof.
9.11 Banks in Their Individual Capacities; Agent in its Individual
-------------------------------------------------------------
Capacity.
- --------
With respect to its Revolving Credit Commitment, the Revolving Credit
Loans made by it and any other rights and powers given to it as a Bank hereunder
or under any of the other Loan Documents, the Agent shall have the same rights
and powers hereunder as any other Bank and may exercise the same as though it
were not the Agent, and the term "Bank" and "Banks" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. PNC Bank and
its Affiliates and each of the Banks and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to, issue
letters of credit for the account of, acquire equity interests in, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with, the Loan Parties and their Affiliates, in the case of
the Agent,
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as though it were not acting as Agent hereunder and in the case of each Bank, as
though such Bank were not a Bank hereunder, in each case without notice to or
consent of the other Banks. The Banks acknowledge that, pursuant to such
activities, the Agent or its Affiliates may (i) receive information regarding
the Loan Parties or any of their Subsidiaries or Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Loan Parties or such Subsidiary or Affiliate) and acknowledge that the Agent
shall be under no obligation to provide such information to them, and (ii)
accept fees and other consideration from the Loan Parties for services in
connection with this Agreement and otherwise without having to account for the
same to the Banks.
9.12 Holders of Notes.
----------------
The Agent may deem and treat any payee of any Note as the owner
thereof for all purposes hereof unless and until written notice of the
assignment or transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any Person who at the time of making such
request or giving such authority or consent is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
9.13 Equalization of Banks.
---------------------
The Banks and the holders of any participations in any Notes agree
among themselves that, with respect to all amounts received by any Bank or any
such holder for application on any Obligation hereunder or under any Note or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Section 3.4.3 [Agent's and Bank's Rights], 4.4.2
[Replacement of a Bank] or 4.5 [Additional Compensation in Certain
Circumstances]. The Banks or any such holder receiving any such amount shall
purchase for cash from each of the other Banks an interest in such Bank's Loans
in such amount as shall result in a ratable participation by the Banks and each
such holder in the aggregate unpaid amount under the Notes, provided that if all
or any portion of such excess amount is thereafter recovered from the Bank or
the holder making such purchase, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, together with interest
or other amounts, if any, required by law (including court order) to be paid by
the Bank or the holder making such purchase.
9.14 Successor Agent.
---------------
The Agent may resign as Agent by giving not less than thirty (30)
days' prior written notice to the Administrative Borrower. If the Agent shall
resign under this Agreement, then either (a) the Required Banks shall appoint
from among the Banks a successor agent for the Banks, subject to the consent of
the Administrative Borrower, such consent not to be
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unreasonably withheld, or (b) if a successor agent shall not be so appointed and
approved within the thirty (30) day period following the Agent's notice to the
Banks of its resignation, then the Agent shall appoint, with the consent of the
Administrative Borrower, such consent not to be unreasonably withheld, a
successor agent who shall serve as Agent until such time as the Required Banks
appoint and the Administrative Borrower consents to the appointment of a
successor agent. Upon its appointment pursuant to either clause (a) or (b)
above, such successor agent shall succeed to the rights, powers and duties of
the Agent, and the term "Agent" shall mean such successor agent, effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement. After the resignation of
any Agent hereunder, the provisions of this Section 9 shall inure to the benefit
of such former Agent and such former Agent shall not by reason of such
resignation be deemed to be released from liability for any actions taken or not
taken by it while it was an Agent under this Agreement.
9.15 Agent's Fee.
-----------
The Borrowers shall pay to the Agent a nonrefundable fee (the "Agent's
Fee") under the terms of a letter (the "Agent's Letter") between the Borrowers
and Agent, as amended from time to time.
9.16 Availability of Funds.
---------------------
The Agent may assume that each Bank has made or will make the proceeds
of a Loan available to the Agent unless the Agent shall have been notified by
such Bank on or before the later of (x) the close of Business on the Business
Day preceding the Borrowing Date with respect to such Loan or (y) two (2) hours
before the time on which the Agent actually funds the proceeds of such Loan to
any Borrower (whether using its own funds pursuant to this Section 9.16 or using
proceeds deposited with the Agent by the Banks and whether such funding occurs
before or after the time on which Banks are required to deposit the proceeds of
such Loan with the Agent). The Agent may, in reliance upon such assumption (but
shall not be required to), make available to the Borrowers a corresponding
amount. If such corresponding amount is not in fact made available to the Agent
by such Bank, the Agent shall be entitled to recover such amount on demand from
such Bank (or, if such Bank fails to pay such amount forthwith upon such demand
from the Administrative Borrower) together with interest thereon, in respect of
each day during the period commencing on the date such amount was made available
to any Borrower and ending on the date the Agent recovers such amount, at a rate
per annum equal to (i) the Federal Funds Effective Rate during the first three
(3) days after such interest shall begin to accrue and (ii) the applicable
interest rate in respect of such Loan after the end of such three-day period.
9.17 Calculations.
------------
In the absence of gross negligence or willful misconduct, the Agent
shall not be liable for any error in computing the amount payable to any Bank
whether in respect of the Loans, fees or any other amounts due to the Banks
under this Agreement. In the event an error in
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computing any amount payable to any Bank is made, the Agent, the Borrowers and
each affected Bank shall, forthwith upon discovery of such error, make such
adjustments as shall be required to correct such error, and any compensation
therefor will be calculated at the Federal Funds Effective Rate.
9.18 Beneficiaries.
-------------
Except as expressly provided herein, the provisions of this Section 9
are solely for the benefit of the Agent and the Banks, and the Loan Parties
shall not have any rights to rely on or enforce any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
of the Loan Parties.
10. MISCELLANEOUS
-------------
10.1 Modifications, Amendments or Waivers.
------------------------------------
With the written consent of the Required Banks, the Agent, acting on
behalf of all the Banks, and the Administrative Borrower, on behalf of the Loan
Parties, may from time to time enter into written agreements amending or
changing any provision of this Agreement or any other Loan Document or the
rights of the Banks or the Loan Parties hereunder or thereunder, or may grant
written waivers or consents to a departure from the due performance of the
Obligations of the Loan Parties hereunder or thereunder and any such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. Any such agreement, waiver or consent made with such written
consent shall be effective to bind all the Banks and the Loan Parties; provided,
that, without the written consent of all the Banks, no such agreement, waiver or
consent may be made which will:
10.1.1 Increase of Commitment; Extension of Expiration
-----------------------------------------------
Date.
- ----
Increase the amount of the Revolving Credit Commitment, the
Revolving Credit Commitment of any Bank hereunder or extend the Expiration Date;
10.1.2 Extension of Payment; Reduction of Principal,
--------------------------------------------
Interest or Fees; Modification of Terms of Payment.
- --------------------------------------------------
Whether or not any Loans are outstanding, extend the time for
payment of principal or interest of any Loan (excluding the due date of any
mandatory prepayment of a Loan or any mandatory Commitment reduction in
connection with such a mandatory prepayment hereunder except for mandatory
reductions of the Commitments on the Expiration Date), the Commitment Fee or any
other fee payable to any Bank, or reduce the principal amount of or the rate of
interest borne by any Loan or reduce the Commitment Fee or any other fee payable
to any
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Bank, or otherwise affect the terms of payment of the principal of or interest
of any Loan, the Commitment Fee or any other fee payable to any Bank;
10.1.3 Release of Collateral or Guarantor.
----------------------------------
Except for sales of assets permitted by Section 7.2.7
[Disposition of Assets or Subsidiaries], release (i) any Collateral consisting
of capital stock or other ownership interests of any Loan Party or its
Subsidiary or substantially all of the assets of any Loan Party, any Guarantor
from its Obligations under the Guaranty Agreement or any other security for any
of the Loan Parties' Obligations or (ii) any of the Pledged Collateral except
upon sale thereof by the Borrowers to the extent permitted by and subject to the
terms of the Pledge Agreement; or
10.1.4 Miscellaneous
-------------
Amend Section 4.2 [Pro Rata Treatment of Banks], 9.6 [Exculpatory
Provisions, Etc.] or 9.13 [Equalization of Banks] or this Section 10.1, alter
any provision regarding the pro rata treatment of the Banks, change the
definition of Required Banks, or change any requirement providing for the Banks
or the Required Banks to authorize the taking of any action hereunder;
provided, further, that no agreement, waiver or consent which would modify the
interests, rights or obligations of the Agent in its capacity as Agent or as the
issuer of Letters of Credit shall be effective without the written consent of
the Agent.
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.
---------------------------------------------------------
No course of dealing and no delay or failure of the Agent or any Bank
in exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Agent and the Banks under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
10.3 Reimbursement and Indemnification of Banks by the Borrower;
----------------------------------------------------------
Taxes.
- -----
The Borrowers, jointly and severally, agree unconditionally upon
demand to pay or reimburse to each Bank (other than the Agent, as to which the
Borrower's Obligations are set forth in Section 9.5 [Reimbursement of Agent By
Borrower, Etc.]) and to save such Bank harmless against (i) liability for the
payment of all reasonable out-of-pocket costs, expenses and
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disbursements (including fees and expenses of counsel (including allocated costs
of staff counsel) for each Bank except with respect to (a) and (b) below),
incurred by such Bank (a) in connection with the development, preparation and
execution of this Agreement and the other Loan Documents and any other documents
prepared in connection herewith and therewith, and the consummation of the
transactions contemplated hereby and thereby, (b) relating to any amendments,
waivers or consents pursuant to the provisions hereof, (c) in connection with
the enforcement of this Agreement or any other Loan Document, or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in bankruptcy
or receivership proceedings or otherwise, and (d) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Bank, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by such Bank hereunder or thereunder, provided that the Borrowers shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements (A) if
the same results from such Bank's gross negligence or willful misconduct, or (B)
if the Administrative Borrower was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense (except that
the Borrowers shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrowers), or (C) if the same results from a
compromise or settlement agreement entered into without the consent of the
Administrative Borrower, which shall not be unreasonably withheld. The Banks
will attempt to minimize the fees and expenses of legal counsel for the Banks
which are subject to reimbursement by the Borrowers hereunder by considering the
usage of one law firm to represent the Banks and the Agent if appropriate under
the circumstances. The Borrowers agree unconditionally to pay all stamp,
document, transfer, recording or filing taxes or fees and similar impositions
now or hereafter determined by the Agent or any Bank to be payable in connection
with this Agreement or any other Loan Document, and the Borrowers agree
unconditionally to save the Agent and the Banks harmless from and against any
and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions.
10.4 Holidays.
--------
Whenever payment of a Loan to be made or taken hereunder shall be due
on a day which is not a Business Day such payment shall be due on the next
Business Day and such extension of time shall be included in computing interest
and fees, except that the Loans shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day. Whenever any
payment or action to be made or taken hereunder (other than payment of the
Loans) shall be stated to be due on a day which is not a Business Day, such
payment or action shall be made or taken on the next following Business Day
(except as provided in Section 3.2
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[Interest Periods] with respect to Interest Periods under the Euro-Rate Option),
and such extension of time shall not be included in computing interest or fees,
if any, in connection with such payment or action.
10.5 Funding by Branch, Subsidiary or Affiliate.
------------------------------------------
10.5.1 Notional Funding.
----------------
Each Bank shall have the right from time to time, without notice
to any Borrower, to deem any branch, Subsidiary or Affiliate (which for the
purposes of this Section 10.5 shall mean any corporation or association which is
directly or indirectly controlled by or is under direct or indirect common
control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any Loan to
which the Euro-Rate Option applies at any time, provided that immediately
following (on the assumption that a payment were then due from any Borrower to
such other office), and as a result of such change, no Borrower would be under
any greater financial obligation pursuant to Section 4.5 [Additional
Compensation in Certain Circumstances] than it would have been in the absence of
such change. Notional funding offices may be selected by each Bank without
regard to such Bank's actual methods of making, maintaining or funding the Loans
or any sources of funding actually used by or available to such Bank.
10.5.2 Actual Funding.
--------------
Each Bank shall have the right from time to time to make or
maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such Loan subject to the last sentence of this Section
10.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain
any part of the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Loans to the same extent as if such Loans were made or
maintained by such Bank, but in no event shall any Bank's use of such a branch,
Subsidiary or Affiliate to make or maintain any part of the Loans hereunder
cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrowers hereunder or require the Borrowers to pay any
other compensation to any Bank (including any expenses incurred or payable
pursuant to Section 4.5 [Additional Compensation in Certain Circumstances])
which would otherwise not be incurred.
10.6 ICG as Agent for Loan Parties.
-----------------------------
Each Loan Party hereby irrevocably appoints ICG as the borrowing
agent and attorney-in-fact for the Loan Parties (the "Administrative Borrower")
which appointment shall remain in full force and effect unless and until the
Agent shall have received prior written notice signed by all of the Loan Parties
that such appointment has been revoked and that another Loan Party has been
appointed Administrative Borrower. Each Loan Party hereby irrevocably appoints
and authorizes the Administrative Borrower (i) to provide the Agent with all
notices with respect to Loans obtained for the benefit of any Loan Party and all
other notices and
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instructions under this Agreement and (ii) to take such action as the
Administrative Borrower deems appropriate on its behalf to obtain Loans and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. Each Loan Party hereby irrevocably appoints and
authorizes the Administrative Borrower to provide the Agent with all notices and
to take all action as the Administrative Borrower deems appropriate with respect
to all Letters of Credit under this Agreement. It is understood that the
handling of the loan account and Collateral of the Loan Parties in a combined
fashion, as more fully set forth herein, is done solely as an accommodation to
the Loan Parties in order to utilize the collective borrowing powers of the Loan
Parties in the most efficient and economical manner and at their request, and
that neither the Agent nor any Bank shall incur liability to the Loan Parties as
a result hereof. Each of the Loan Parties expects to derive benefit, directly or
indirectly, from the handling of the loan account and the Collateral in a
combined fashion since the successful operation of each Loan Party is dependent
on the continued successful performance of the integrated group. To induce the
Agent and the Banks to do so, and in consideration thereof, each of the Loan
Parties hereby jointly and severally agrees to indemnify the Agent and the Banks
and hold the Agent and the Banks harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Agent or such Banks
by any of the Loan Parties or by any third party whosoever, arising from or
incurred by reason of (a) the handling of the loan account and Collateral of the
Loan Parties as herein provided, (b) the Agent and the Banks relying on any
instructions of the Administrative Borrower, or (c) any other action taken by
the Agent or any Bank hereunder or under the other Loan Documents.
10.7 Notices.
-------
All notices, requests, demands, directions, reports and other
communications (as used in this Section 10.7, collectively referred to as
"notices") given to or made upon any party hereto under the provisions of this
Agreement shall be by telephone or in writing (including telex or facsimile
communication) unless otherwise expressly permitted hereunder and shall be
delivered or sent by telex or facsimile to the respective parties at the
addresses and numbers set forth under their respective names on Schedule 1.1(B)
---------------
hereof or in accordance with any subsequent unrevoked written direction from any
party to the others. All notices shall, except as otherwise expressly herein
provided, be effective (a) in the case of telex or facsimile, when received, (b)
in the case of hand-delivered notice, when hand-delivered, (c) in the case of
telephone, when telephoned, provided, however, that in order to be effective,
--------
telephonic notices must be confirmed in writing no later than the next day by
letter, facsimile or telex, (d) if given by mail, four (4) days after such
communication is deposited in the mail with first-class postage prepaid, return
receipt requested, and (e) if given by any other means (including by air
courier), when delivered; provided, that notices to the Agent shall not be
--------
effective until received. Any Bank giving any notice to any Loan Party shall
simultaneously send a copy thereof to the Agent, and the Agent shall promptly
notify the other Banks of the receipt by it of any such notice.
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10.8 Severability.
------------
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
10.9 Governing Law.
-------------
Each Letter of Credit and Section 2.8 [Letter of Credit Subfacility]
shall be subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, as the
same may be revised or amended from time to time, and to the extent not
inconsistent therewith, the internal laws of the Commonwealth of Pennsylvania
without regard to its conflict of laws principles and the balance of this
Agreement shall be deemed to be a contract under the Laws of the Commonwealth of
Pennsylvania and for all purposes shall be governed by and construed and
enforced in accordance with the internal laws of the Commonwealth of
Pennsylvania without regard to its conflict of laws principles.
10.10 Prior Understanding.
-------------------
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
10.11 Duration; Survival.
------------------
All representations and warranties of the Loan Parties contained
herein or made in connection herewith shall survive the making of Loans and
issuance of Letters of Credit and shall not be waived by the execution and
delivery of this Agreement, any investigation by the Agent or the Banks, the
making of Loans, issuance of Letters of Credit, or payment in full of the Loans.
All covenants and agreements of the Loan Parties contained in Sections 7.1
[Affirmative Covenants], 0 [Negative Covenants] and 7.3 [Reporting Requirements]
herein shall continue in full force and effect from and after the date hereof so
long as any Borrower may borrow or request Letters of Credit hereunder and until
termination of the Commitments and payment in full of the Loans and expiration
or termination of all Letters of Credit. All covenants and agreements of any
Borrower contained herein relating to the payment of principal, interest,
premiums, additional compensation or expenses and indemnification, including
those set forth in the Notes, Section 4 [Payments] and Sections 9.5
[Reimbursement of Agent by Borrowers, Etc.], 9.7 [Reimbursement of Agent by
Banks, Etc.] and 10.3 [Reimbursement of Banks by Borrowers; Etc.], shall survive
payment in full of the Loans, expiration or termination of the Letters of Credit
and termination of the Commitments.
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10.12 Successors and Assigns.
----------------------
(i) This Agreement shall be binding upon and
shall inure to the benefit of the Banks, the Agent, the Loan Parties and their
respective successors and assigns, except that none of the Loan Parties may
assign or transfer any of its rights and Obligations hereunder or any interest
herein. Each Bank may, at its own cost, make assignments of or sell
participations in all or any part of its Commitments and the Loans made by it to
one or more banks or other entities, subject to the consent of the
Administrative Borrower and the Agent with respect to any assignee, such consent
not to be unreasonably withheld, provided that (1) no consent of any Borrower
shall be required (A) if an Event of Default exists and is continuing, or (B) in
the case of an assignment by a Bank to an Affiliate of such Bank, and (2) any
assignment by a Bank to a Person other than an Affiliate of such Bank may not be
made in amounts less than the lesser of $2,500,000 or the amount of the
assigning Bank's Commitment. In the case of an assignment, upon receipt by the
Agent of the Assignment and Assumption Agreement, the assignee shall have, to
the extent of such assignment (unless otherwise provided therein), the same
rights, benefits and obligations as it would have if it had been a signatory
Bank hereunder, the Commitments shall be adjusted accordingly, and upon
surrender of any Note subject to such assignment, the Borrowers shall execute
and deliver a new Note to the assignee in an amount equal to the amount of the
Revolving Credit Commitment assumed by it and a new Revolving Credit Note to the
assigning Bank in an amount equal to the Revolving Credit Commitment retained by
it hereunder. Any Bank which assigns any or all of its Commitment or Loans to a
Person other than an Affiliate of such Bank shall pay to the Agent a service fee
in the amount of $3,500 for each assignment. In the case of a participation, the
participant shall only have the rights specified in Section 8.2.3 [Set-off] (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto and not to include any voting rights except with
respect to changes of the type referenced in Sections 10.1.1 [Increase of
Commitment, Etc.], 10.1.2 [Extension of Payment, Etc.], or 10.1.3 [Release of
Collateral or Guarantor]), all of such Bank's obligations under this Agreement
or any other Loan Document shall remain unchanged, and all amounts payable by
any Loan Party hereunder or thereunder shall be determined as if such Bank had
not sold such participation.
(ii) Any assignee or participant which is not
incorporated under the Laws of the United States of America or a state thereof
shall deliver to the Administrative Borrower and the Agent the form of
certificate described in Section 10.18 [Tax Withholding Clause] relating to
federal income tax withholding. Each Bank may furnish any publicly available
information concerning any Loan Party or its Subsidiaries and any other
information concerning any Loan Party or its Subsidiaries in the possession of
such Bank from time to time to assignees and participants (including prospective
assignees or participants), provided that such assignees and participants agree
to be bound by the provisions of Section 10.13 [Confidentiality].
-88-
<PAGE>
(iii) Notwithstanding any other provision in this
Agreement, any Bank may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement, its Note and the other Loan
Documents to any Federal Reserve Bank in accordance with Regulation A of the FRB
or U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or consent
of any Borrower or the Agent. No such pledge or grant of a security interest
shall release the transferor Bank of its obligations hereunder or under any
other Loan Document.
10.13 Confidentiality.
----------------
10.13.1 General.
--------
The Agent and the Banks each agree to keep confidential all
information obtained from any Loan Party or its Subsidiaries which is nonpublic
and confidential or proprietary in nature (including any information any
Borrower specifically designates as confidential), except as provided below, and
to use such information only in connection with their respective capacities
under this Agreement and for the purposes contemplated hereby. The Agent and the
Banks shall be permitted to disclose such information (i) to outside legal
counsel, accountants and other professional advisors who need to know such
information in connection with the administration and enforcement of this
Agreement, subject to agreement of such Persons to maintain the confidentiality,
(ii) to assignees and participants as contemplated by Section 10.12, and
prospective assignees and participants, (iii) to the extent requested by any
bank regulatory authority or, with notice to the Administrative Borrower, as
otherwise required by applicable Law or by any subpoena or similar legal
process, or in connection with any investigation or proceeding arising out of
the transactions contemplated by this Agreement, (iv) if it becomes publicly
available other than as a result of a breach of this Agreement or becomes
available from a source not known to be subject to confidentiality restrictions,
or (v) if the Administrative Borrower shall have consented to such disclosure.
10.13.2 Sharing Information With Affiliates of the Banks.
-------------------------------------------------
Each Loan Party acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
any Borrower or one or more of its Affiliates (in connection with this Agreement
or otherwise) by any Bank or by one or more Subsidiaries or Affiliates of such
Bank and each of the Loan Parties hereby authorizes each Bank to share any
information delivered to such Bank by such Loan Party and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of such Bank to
enter into this Agreement, to any such Subsidiary or Affiliate of such Bank, it
being understood that any such Subsidiary or affiliate of any Bank receiving
such information shall be bound by the provisions of Section 10.13.1 as if it
were a Bank hereunder. Such authorization shall survive the repayment of the
Loans and other Obligations and the termination of the Commitments.
-89-
<PAGE>
10.14 Counterparts.
-------------
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
10.15 Agent's or Bank's Consent.
--------------------------
Whenever the Agent's or any Bank's consent is required to be obtained
under this Agreement or any of the other Loan Documents as a condition to any
action, inaction, condition or event, the Agent and each Bank shall be
authorized to give or withhold such consent in its sole and absolute discretion
and to condition its consent upon the giving of additional collateral, the
payment of money or any other matter.
10.16 Exceptions.
-----------
The representations, warranties and covenants contained herein shall
be independent of each other, and no exception to any representation, warranty
or covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
10.17 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
---------------------------------------
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF CHESTER COUNTY PENNSYLVANIA AND THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH
LOAN PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 10.7 AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST
IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
-90-
<PAGE>
10.18 Tax Withholding Clause.
-----------------------
Each Bank or assignee or participant of a Bank that is not
incorporated under the Laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the Agent two (2) duly
completed copies of the following: (i) Internal Revenue Service Form W-9, 4224
or 1001, or other applicable form prescribed by the Internal Revenue Service,
certifying that such Bank, assignee or participant is entitled to receive
payments under this Agreement and the other Loan Documents without deduction or
withholding of any United States federal income taxes, or is subject to such tax
at a reduced rate under an applicable tax treaty, or (ii) Internal Revenue
Service Form W-8 or other applicable form or a certificate of such Bank,
assignee or participant indicating that no such exemption or reduced rate is
allowable with respect to such payments. Each Bank, assignee or participant
required to deliver to the Borrower and the Agent a form or certificate pursuant
to the preceding sentence shall deliver such form or certificate as follows: (A)
each Bank which is a party hereto on the Closing Date shall deliver such form or
certificate at least five (5) Business Days prior to the first date on which any
interest or fees are payable by the Borrower hereunder for the account of such
Bank; (B) each assignee or participant shall deliver such form or certificate at
least five (5) Business Days before the effective date of such assignment or
participation (unless the Agent in its sole discretion shall permit such
assignee or participant to deliver such form or certificate less than five (5)
Business Days before such date in which case it shall be due on the date
specified by the Agent). Each Bank, assignee or participant which so delivers a
Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of the
Administrative Borrower and the Agent two (2) additional copies of such form (or
a successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Administrative Borrower
or the Agent, either certifying that such Bank, assignee or participant is
entitled to receive payments under this Agreement and the other Loan Documents
without deduction or withholding of any United States federal income taxes or is
subject to such tax at a reduced rate under an applicable tax treaty or stating
that no such exemption or reduced rate is allowable. The Agent shall be entitled
to withhold United States federal income taxes at the full withholding rate
unless the Bank, assignee or participant establishes an exemption or that it is
subject to a reduced rate as established pursuant to the above provisions. The
Borrowers shall not be required to increase any amounts payable pursuant to
Section 4.5 hereof to any Bank that is not organized under the laws of the
United States of America or a state thereof if such Bank fails to comply with
requirements of this Section 10.18.
10.19 Joinder of Guarantors.
----------------------
Any Subsidiary of any Borrower which is required to join this
Agreement as a Guarantor pursuant to Section 7.2.9 [Subsidiaries, Partnerships
and Joint Ventures] shall execute and deliver to the Agent (i) a Guarantor
Joinder in substantially the form attached hereto as Exhibit 1.1(G)(1) pursuant
-----------------
to which it shall join as a Guarantor each of the documents to which the
Guarantors are parties; (ii) documents in the forms described in Section 6.1
[First Loans]
-91-
<PAGE>
modified as appropriate to relate to such Subsidiary; and (iii) documents
necessary to grant and perfect Prior Security Interests to the Agent for the
benefit of the Banks in all Collateral held by such Subsidiary. The Loan Parties
shall deliver such Guarantor Joinder and related documents to the Agent within
fifteen (15) days after the date of the filing of such Subsidiary's articles of
incorporation if the Subsidiary is a corporation, the date of the filing of its
certificate of limited partnership if it is a limited partnership or the date of
its organization if it is an entity other than a limited partnership or
corporation.
10.20 Joint and Several Obligations of Borrowers; Additional Waivers.
---------------------------------------------------------------
The Obligations and additional liabilities of the Borrowers under this
Agreement are joint and several obligations of the Borrowers, and each Borrower
hereby waives to the full extent permitted by law any defense it may otherwise
have to the payment and performance of the Obligations that its liability
hereunder is limited and not joint and several. Each Borrower acknowledges and
agrees that the foregoing waivers and those set forth below serve as a material
inducement to the agreement of the Banks to make the Loans, and that the Agent
and the Banks are relying on each specific waiver and all such waivers in
entering into this Agreement. The undertakings of each Borrower hereunder secure
the obligations of itself and the other Borrowers. Each Borrower further agrees
that:
(a) the Agent and the Banks may do any of the following without
notice to any Borrower and without adversely affecting the validity or
enforceability of this Agreement or any of the Obligations: (i) release,
surrender, exchange, compromise or settle the Obligations or any part thereof
with respect to any other Borrowers; (ii) change, renew or waive the terms of
the Obligations, or any part thereof with respect to any other Borrowers; (iii)
change, renew or waive the terms of any of the Loan Documents or any other
agreements relating to the Obligations with respect to any other Borrowers; (iv)
grant any extension or indulgence with respect to the payment or performance of
the Obligations or any part thereof with respect to the other Borrowers; (v)
enter into any agreement of forbearance with respect to the Obligations or any
part thereof with respect to the other Borrowers; and (vi) release, surrender,
exchange, impair or compromise any security of the other Borrowers held by the
Agent or the Banks for any of the Obligations. Each Borrower agrees that the
Agent and any Bank may do any of the above as the Agent or any Bank deems
necessary or advisable, in the Agent's or such Bank's sole discretion, without
giving notice to the other Borrowers, and that the other Borrowers will remain
liable for full payment and performance of the Obligations.
(b) Each Borrower waives and agrees not to enforce any of the
rights of the Agent or any Bank against any other Borrower or any Guarantor or
any other obligor of any of the Obligations or any Collateral securing the same
unless and until all Obligations shall have been indefeasibly paid in full and
the Borrowers' right to borrow hereunder have terminated, including but not
limited to any right of such Borrower to be subrogated in whole or in part to
any right or claim of Agent or any Bank with respect to any of the Obligations
or any portion thereof. Each Borrower hereby irrevocably agrees that following
the occurrence and during the continuance of
-92-
<PAGE>
any Event of Default which has not been waived by the Agent or the Banks, each
Borrower shall not enforce any rights of contribution from the other Borrowers
on account of such Borrower's payment of the obligations unless and until all
Obligations shall have been indefeasibly paid in full and the Borrowers' rights
to borrower hereunder have terminated. Each of the Borrowers hereby waives any
defenses based on suretyship or impairment of the collateral or the like.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-93-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: BORROWER:
INTERNET CAPITAL GROUP, INC.
By: /s/ Scott Welkis By: /s/ John N. Nickolas
------------------------------ ------------------------------
Name: Name: John N. Nickolas
------------------------- -------------------------
Title: Title: Managing Director and
------------------------ ------------------------
Assistant Treasurer
------------------------ ------------------------
ATTEST: INTERNET CAPITAL GROUP
OPERATIONS, INC.
By: /s/ Scott Welkis By: /s/ John N. Nickolas
------------------------------ ------------------------------
Name: Name: John N. Nickolas
------------------------- -------------------------
Title: Title: Managing Director and
------------------------ ------------------------
Assistant Treasurer
------------------------ ------------------------
<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By: /s/ Gregory M. Cote
------------------------------
Title: Vice President
---------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Douglas C. Watson
------------------------------
Title: Vice President
---------------------------
COMERICA BANK - CALIFORNIA
By: /s/ Alan Jepsen
------------------------------
Title: Vice President and
---------------------------
Assistant Manager
---------------------------
IMPERIAL BANK
By: /s/ Judith Erwin
------------------------------
Title: Senior Vice President
---------------------------
PROGRESS BANK
By: /s/ Liz Lambert
------------------------------
Title: Vice President
---------------------------
<PAGE>
SCHEDULE 1.1(A-1)
PRIVATE COMPANY RESTRICTED SECURITIES
(i) Benchmarking Partners
(ii) Bid Com, Inc.
(iii) Blackboard, Inc.
(iv) Breakaway Solutions, Inc.
(v) ClearCommerce Corporation
(vi) Collabria, Inc.
(vii) Commerx, Inc.
(viii) The ComputerJobs Store
(ix) Context Integration
(x) Deja News, Inc.
(xi) E-Chemicals
(xii) Entegrity Solutions Corporation
(xiii) Internet Commerce Systems, Inc.
(xiv) Vivant! (f/k/a Illuminate Corporation)
(xv) Linkshare Corporation
(xvi) MegaDepot, Inc.
(xvii) MessageQuest, Inc.
(xviii) PlanSponsor.com, Inc.
(xix) PrivaSeek, Inc.
(xx) RapidAutoNet Corporation
(xxi) SageMaker, Inc.
(xxii) ServiceSoft Technologies, Inc.
<PAGE>
(xxiii) Sky Alland Marketing, Inc.
(xxiv) Syncra Software, Inc.
(xxv) Universal Access, Inc.
<PAGE>
SCHEDULE 1.1(A-2)
PUBLIC COMPANY RESTRICTED SECURITIES
(i) VerticalNet, Inc.
<PAGE>
SCHEDULE 1.1(A-3)
PUBLIC COMPANY UNRESTRICTED SUBSIDIARIES
None
<PAGE>
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Page 1 of 2
PART 1 - COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES TO BANKS
- ----------------------------------------------------------------
AMOUNT OF
COMMITMENT FOR
REVOLVING
BANK CREDIT LOANS RATABLE SHARE
---- ------------ -------------
Name: PNC Bank, N.A.
Address: One PNC Plaza - 22nd Floor
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Ms. Arlene Ohler
Telephone: (412)762-3627 $17,500,000 35.0000%
Telecopy: (412) 762-8672
With a copy to:
Name: VentureBank @ PNC
Address: 1000 Westlakes Drive
Suite 200
Berwyn, Pennsylvania 19312
Attention: Mr. Gregory M. Cote
Telephone: (610)725-5775
Telecopy: (610) 725-5799
<PAGE>
BANKS
Name: Bank of America National Trust
and Savings Association
Address: c/o Nationsbanc Montgomery
Securities $10,000,000 20.0000%
530 Lytton Avenue, 2nd Floor
Palo Alto, CA 94301
Attention: Mr. Doug Watson
Telephone: (650) 853-4688
Telecopy: (650) 853-4476
With a copy to:
Name: Bank of America National
Trust and Savings Association
Address: GPO #5693
1850 Gateway Blvd., 3rd Floor
Concord, CA 94520
Attention: Louise Hosey
Telephone: (925) 675-8242
Telecopy: (925) 675-7531
Name: Comerica Bank - California
Address: 55 Almeden Blvd.
San Jose, CA 95113
Attention: Mr. Alan Jepsen
Telephone: (408) 556-5877
Telecopy: (408) 556-5889 $10,000,000 20.0000%
With a copy to:
Name: Gary Cary Ware Freidenrich
Address: 400 Hamilton
Palo Alto, CA 94301
Attention: Mr. Craig Tighe
Telephone: (650) 833-2362
Telecopy: (650) 327-3699
<PAGE>
Name: Imperial Bank
Address: 2420 Sand Hill Road
Suite 102
Menlo Park, CA 94025
Attention: Ms. Judith Erwin
Telephone: (650) 233-3082 $ 7,500,000 15.0000%
Telecopy: (650) 233-3075
With a copy to:
Name: Imperial Bank
Address: 9920 South Lacienega Blvd.
Suite 636
Englewood, CA 90301
Attention: General Counsel
Telephone: (310) 417-5929
Telecopy: (310) 417-5695
Name: Progress Bank
Address: 4 Sentry Parkway
Suite 200
Blue Bell, PA 19422
Attention: Ms. Liz A. Lambert
Telephone: (610) 941-2202 $ 5,000,000 10.0000%
Telecopy: (610) 941-4827
<PAGE>
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Page 1 of 2
PART 2 - ADDRESSES FOR NOTICES TO BORROWER AND GUARANTORS:
BORROWERS:
Name: Internet Capital Group, Inc.
Address: 800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
Attention: Mr. John N. Nickolas
Telephone: (610) 989-0111
Telecopy: (610) 989-0112
With a copy to: Henry N. Nassau, Esq.
Donna E. Ostroff, Esq.
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103-2793
Telephone: (215) 994-4000
Telecopy: (215) 994-2222
Name: Internet Capital Group Operations, Inc.
Address: 800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
Attention: Mr. John N. Nickolas
Telephone: (610) 989-0111
Telecopy: (610) 989-0112
<PAGE>
With a copy to: Henry N. Nassau, Esq.
Donna E. Ostroff, Esq.
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103-2793
Telephone: (215) 994-4000
Telecopy: (215) 994-2222
<PAGE>
Exhibit 1.1(D)
--------------
TERMS OF SUBORDINATION
The principal of and interest on the Subordinated Debt, including, without
limitation, the Subordinated Notes, together with any and all fees and expenses
and all other amounts payable thereunder, including, without limitation, post-
petition interest (the "Subordinated Indebtedness"), shall be subordinate and
junior to payment in full in cash or cash equivalents of the obligations of the
Borrowers to the Banks under the Credit Agreement and the other Loan Documents
(the "Obligations") and the instruments creating the Subordinated Indebtedness
shall include the terms and conditions set forth herein and no other terms
inconsistent therewith. Capitalized terms used herein without definition shall
have the meanings ascribed thereto in the Credit Agreement, dated as of April
30, 1999 (the "Credit Agreement"), by and among Internet Capital Group, Inc.,
Internet Capital Group Operations, Inc., the Banks (as defined in the Credit
Agreement) and PNC Bank, National Association, in its capacity as agent for the
Banks under the Credit Agreement.
Until all Obligations shall have been paid in full and Commitments under
the Credit Agreement are irrevocably terminated under the Loan Documents and
notwithstanding anything in the Subordinated Loan Documents to the contrary:
(i) Neither Borrower shall be permitted to, directly or indirectly, make
any payment on account of, or transfer any collateral for any part of, the
Subordinated Indebtedness;
(ii) Subordinated Lender shall not be permitted to demand, sue for, or
accept from any Borrower or any other Person any such payment or collateral, to
take any other action to enforce or collect upon any such payment or to enforce
its rights in respect of or accelerate the Indebtedness, nor cancel, set off or
otherwise discharge any part of the Indebtedness; and
(iii) Neither any of the Borrowers nor Subordinated Lender shall be
permitted to otherwise take any action prejudicial to or inconsistent with the
Banks' priority position over Subordinated Lender created by these subordination
provisions.
Any instrument evidencing any Subordinated Indebtedness shall bear a legend
providing that payment of the Subordinated Indebtedness has been subordinated to
prior payment of the Obligations in the manner and to the extent set forth in
the body of such instrument incorporating therein the provisions of this Exhibit
-------
1.1(D).
- ------
Subordinated Lender will not be permitted to commence or join with any
other creditor or creditors of any Borrower in commencing any bankruptcy,
reorganization or insolvency proceedings against any Borrower except at the
request of the Agent. At any general meeting of creditors of any Borrower or in
the event of any proceeding, voluntary or involuntary, for the distribution,
division or application of all or part of the assets of any Borrower or the
proceeds thereof, whether such proceeding be for the liquidation, dissolution or
winding up of any Borrower or its business, receivership, insolvency or
bankruptcy proceeding, as assignment for
<PAGE>
the benefit of creditors or proceeding by or against any Borrower for extension
or otherwise, if all the Obligations have not been paid in full at the time, the
Banks will be irrevocably authorized at any such meeting or in any such
proceeding:
(i) To enforce claims comprising the Subordinated Indebtedness in the
name of Subordinated Lender by proof of debt, proof of claim, suit or otherwise;
(ii) To collect any assets of any Borrower distributed, divided or
applied by way of dividend or payment, or such securities issued, on account of
the Subordinated Indebtedness and apply the same, or the proceeds of any
realization upon the same that the Banks in their discretion elect to effect, to
the Obligations until the Obligations shall have been paid in full;
(iii) To vote claims comprising the Subordinated Indebtedness to accept or
reject any plan or partial or complete liquidation, reorganization, arrangement,
composition or extension; and
(iv) To take generally any action in connection with any such meeting or
proceeding which Subordinated Lender might otherwise take.
Subject to and from and after the indefeasible payment in full in cash or
cash equivalents of the Obligations, Subordinated Lender shall be subrogated to
the rights of the Banks to receive payments or distributions of cash, property
or securities of any Borrower applicable to the Obligations. It being understood
that the provisions set forth in this Exhibit 1.1(D) to be included in the
--------------
instruments creating the Subordinated Indebtedness are intended solely for the
purpose of defining the relative rights of Subordinated Lender and the Banks.
None of such provisions is intended to or shall impair, as between any Borrower,
its creditors other than the Banks and Subordinated Lender the obligation of any
Borrower to pay the principal of and premium, if any, and the interest and other
amounts on any other debt of any Borrower as and when the same shall become due
and payable in accordance with their terms, or to affect the relative rights of
Subordinated Lender and any other creditors of any Borrower.
Should any payment on account of or any collateral for any part of the
Subordinated Indebtedness be received by Subordinated Lender in violation of
these provisions, such payment or collateral shall be required to be delivered
forthwith to the Banks by the recipient for application to the Obligations, in
the form received. The Banks will be irrevocably authorized to supply any
required endorsement or assignment which may have been omitted. Until so
delivered, any such payment or collateral shall be required to be held by the
recipient in trust for the Banks and shall not be permitted to be commingled
with other funds or property of the recipient.
The Banks will be authorized to demand specific performance of these
provisions, whether or not any Borrower shall have complied with the provisions
of this Exhibit 1.1(D) applicable to it, at any time when Subordinated Lender
shall have failed to comply with any provision of this Exhibit 1.1(D) applicable
--------------
to it, as such provisions are set forth in the instrument creating the
Subordinated Indebtedness. Subordinated Lender will be required to irrevocably
waive any
<PAGE>
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance in any action brought therefor by the
Banks. Subordinated Creditor will be required to waive presentment, notice and
protest in connection with all negotiable instruments evidencing the
Obligations, notice of the acceptance of the instrument creating the Obligations
incurred, extension granted or other action taken in reliance on these
provisions, and all demands and notices of every kind in connection with the
Loan Documents, the Obligations or time of payment of the Obligations; to assent
to any renewal, extension or postponement of the time of payment of the
Obligations or any other indulgence with respect thereto, to any increase in the
amount of the Obligations, to any addition, substitution, exchange or release of
collateral therefor and to the addition or release of any person primarily or
secondarily liable thereon; and to assent to the provisions of any instrument,
security or other writing evidencing the Obligations.
The portion of the instrument creating the Subordinated Indebtedness which
relates to or includes the provisions specified by this Exhibit 1.1(D) shall not
--------------
be permitted to be amended without the consent of the Banks.
The Borrower and Subordinated Lender shall be required to execute and
deliver to the Banks such further instruments and take such further action as
the Banks may at any time or times reasonably request in order to carry out the
provisions and intent of this Exhibit 1.1(D) as incorporated into the
--------------
instruments creating the Subordinated Indebtedness.
Notwithstanding anything to the contrary in this Exhibit 1.1(D), in the
--------------
event that any Subordinated Loan Documents grant or create conversion rights in
favor of holders of Subordinated Indebtedness, holders of such Subordinated
Indebtedness shall be entitled to convert all or a portion of such Subordinated
Indebtedness into equity securities of any Borrower or other Person as provided
in such Subordinated Loan Documents.
<PAGE>
SCHEDULE 1.1(P)
PERMITTED LIENS
None.
<PAGE>
SCHEDULE 2.4
Set forth below are the Revolving Credit Closing Fees for each Bank
BANK CLOSING FEE
---- -----------
PNC Bank, N.A. $78,750
Bank of America $25,000
Comerica Bank $25,000
Imperial Bank $18,750
Progress Bank $12,500
<PAGE>
SCHEDULE 5.1.1
JURISDICTIONS WHERE QUALIFIED TO DO BUSINESS
Internet Capital Group, Inc.:
Delaware
Internet Capital Group Operations, Inc.:
California
Delaware
Massachusetts
Pennsylvania
<PAGE>
SCHEDULE 5.1.2
CAPITALIZATION
(as of April 30, 1999)
<TABLE>
<CAPTION>
Stock Options and Options and
Stock Authorized Outstanding Warrants Authorized Warrants Granted
- ----------------- --------------- -------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock,
$.001 per share 130,000,000 82,005,555 10,000,000 9,734,395
</TABLE>
Total number of shares outstanding including options granted = 91,739,617 shares
of Common Stock./1/
______________________
/1/ Does not include Common Stock Warrants issued to the Banks.
<PAGE>
SCHEDULE 5.1.3
SUBSIDIARIES
Internet Capital Group Operations, Inc.
- ---------------------------------------
1,000 shares of common stock authorized, par value $0.01 per share
100 shares of common stock issued and outstanding
Shareholder Shares Held
----------- -----------
Internet Capital Group, Inc. 100
<PAGE>
SCHEDULE 5.1.8
OWNED AND LEASED PROPERTY
Owned Property:
None.
Leased Property:
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
44 Montgomery Street, Suite 3705
San Francisco, California 94104
10 Post Office Square
Boston, Massachusetts 02109
<PAGE>
SCHEDULE 5.1.13
CONSENTS AND APPROVALS
Internet Capital Group, Inc. requires consents from each of the following in
order to pledge its securities:
1. Benchmarking Partners, Inc.
2. BidCom, Inc.
3. Blackboard, Inc.
4. Breakaway Solutions, Inc.
5. ClearCommerce Corporation(f/k/a Outreach Communications Corporation)
6. Collabria, Inc.
7. Commerx, Inc.
8. The Computer Jobs Store, Inc.
9. Context Integration, Inc.
10. Deja News, Inc.
11. E-Chemicals, Inc.
12. Entegrity Solutions Corp.
13. Vivant! (f/k/a Illuminate Corporation)
14. Internet Commerce Systems, Inc.
15. LinkShare Corporation
16. Mega Depot.com, Inc.
17. MessageQuest, Inc.
18. PlanSponsor.com, Inc.
19. Priva Seek, Inc.
20. RapidAutoNet Corporation
21. Syncra Software, Inc.
22. Service Soft Technologies, Inc.
23. Sagemaker, Inc. (f/k/a E-Volve)
<PAGE>
24. Sky Alland Marketing, Inc.
25. Universal Access, Inc.
26. VerticalNet, Inc.
<PAGE>
SCHEDULE 5.1.15
PATENTS AND TRADEMARKS
A federal trademark application for the mark "Internet Capital Group" was filed
on March 18, 1997 (serial no. 75/259,155) and is presently pending.
<PAGE>
SCHEDULE 5.1.18
INSURANCE POLICIES
Term Life Insurance Policy for Douglas A. Alexander, naming Internet Capital
Group, Inc. as beneficiary, dated November 20, 1998, in the amount of $1,000,000
for 15 years from The Equitable of Colorado, Inc.
Term Life Insurance Policy for Walter W. Buckley, naming Internet Capital Group,
Inc. as beneficiary, dated September 20, 1998, in the amount of $1,000,000 for
15 years from The Equitable of Colorado, Inc.
Term Life Insurance Policy for Robert A. Pollan, naming Internet Capital Group,
Inc. as beneficiary, dated September 20, 1998, in the amount of $1,000,000 for
15 years from The Equitable of Colorado, Inc.
Application for Term Life Insurance Policy for David A. Gathman, naming Internet
Capital Group, Inc. as beneficiary, in the amount of $1,000,000 for 15 years
from The Equitable of Colorado, Inc. has been submitted.
Application for Term Life Insurance Policy for Victor Hwang, naming Internet
Capital Group, Inc. as beneficiary, in the amount of $1,000,000 for 15 years
from The Equitable of Colorado, Inc. has been submitted.
Application for Term Life Insurance Policy for Richard Bunker, naming Internet
Capital Group, Inc. as beneficiary, in the amount of $1,000,000 for 15 years
from The Equitable of Colorado, Inc. has been submitted.
Application for Term Life Insurance Policy for Kenneth A. Fox, naming Internet
Capital Group, Inc. as beneficiary, in the amount of $1,000,000 for 15 years
from The Equitable of Colorado, Inc. has been submitted.
Directors, Officers and Private Company Liability Insurance Policy from National
Union Fire Insurance Company of Pittsburgh, for the period October 28, 1998
through October 28, 1999.
Commercial General Liability and Automobile Insurance Policy No. TE06400618 from
St. Paul Fire and Marine Insurance Company, for the period February 1, 1999
through February 1, 2000.
Excess Liability Insurance Policy No. XLB9152564 from TIG Insurance Company for
the period February 1, 1999 through February 1, 2000.
Worker's Compensation and Employers' Liability Insurance Policy No. WVA6401133
from St. Paul Fire and Marine Insurance Company, for the period February 1, 1999
through February 1, 2000.
Worker's Compensation and Employers' Liability Insurance Policy No. WVA6400845
from St. Paul Fire and Marine Insurance Company, for the period February 1, 1999
through February 1, 2000.
Personal Property All Risk Insurance Policy No. 06020511 from Arkwright Mutual
Insurance Company for the period January 1, 1998 to January 1, 2001.
<PAGE>
SCHEDULE 5.1.20
MATERIAL CONTRACTS
BIDCOM, INC.
Series B Preferred Stock Purchase Agreement dated March 26, 1999 by and among
BidCom, Inc. and the Investors named therein.
Amended and Restated Investors' Rights Agreement dated March 26, 1999 by and
among BidCom, Inc. and the Investors named therein.
Amended and Restated Co-Sale Agreement dated March 26, 1999 by and among Daryl
Magana, Salvador Chavez and Habo Chen and the Purchasers named therein.
Amended and Restated Voting Agreement dated March 26, 1999 by and among BidCom,
Inc., the Investors named therein and the Founders named therein.
BENCHMAKING PARTNERS, INC.
Preferred Stock Purchase Agreement dated December 27, 1996 among Benchmaking
Partners, Theodore B. Rybeck, Technology Leaders III L.P. and Internet Capital
Group, L.L.C.
Voting, Stock Restriction and Co-Sale Agreement dated December 30, 1996 among
Benchmaking Partners, Inc., Technology Leaders III, L.P., Internet Capital
Group, L.L.C. and Theodore Rybeck.
BLACKBOARD, INC.
Series B Convertible Preferred Stock Purchase Agreement between Blackboard, Inc.
and the Purchasers named therein.
Registration Rights Agreement dated September 30, 1998 by and among Blackboard,
Inc., the Purchasers named in the Series B Convertible Preferred Stock Purchase
Agreement of even date therewith and each of the Founders and holders of Series
A Convertible Preferred Stock identified therein.
Stock Registration Agreement dated September 30, 1998 by and among Blackboard,
Inc., Michael Petit and the Purchasers named therein.
Voting Agreement dated September 30, 1998 by and among Blackboard, Inc., Matthew
Pittinsky, Daniel Cane and Michael Chasen, the Series A Holders named therein,
the Common Holders named therein and the Purchasers named therein.
Stockholders Agreement dated September 30,1998 by and among Blackboard, Inc.,
the Stockholders named therein and the Investors named therein.
BREAKAWAY SOLUTIONS, INC.
Investor Rights Agreement dated December 23, 1998 by and between Breakaway
Solutions, Inc. and Internet Capital Group, L.L.C.
<PAGE>
Series A Preferred Stock Purchase Agreement dated December 23, 1998 by and
between Breakaway Solutions, Inc. and Internet Capital Group, L.L.C.
Stockholder Agreement dated December 23, 1998 by and among Breakaway Solutions,
Inc., Internet Capital Group, L.L.C. and Frank Seldorff.
CLEARCOMMERCE CORPORATION
Investors' Rights Agreement dated September 15, 1997 by and among Outreach
Communications Corporation, the Investors named therein and the Founders named
therein.
Series A Preferred Stock Purchase Agreement dated September 15, 1997 by and
among Outreach Communications Corporation and the Investors named therein.
Right of First Refusal and Co-Sale Agreement dated September 15, 1997 by and
among Outreach Communications Corporation, the Founders named therein and the
Purchasers named therein.
Series B Preferred Stock Purchase Agreement dated January 8, 1999 by and among
Clear Commerce Corporation and the Investors named therein.
Amended and Restated Investors' Rights Agreement dated January 8, 1999 by and
among Clear Commerce Corporation, the Consenting Holder named therein, the
Series B Purchasers named therein and the Founders named therein.
Amended and Restated Right of First Refusal and Co-Sale Agreement dated January
8, 1999 by and among Clear Commerce Corporation, the Founders named therein, the
Consenting Holders named therein and the Series B Purchasers named therein.
COLLABRIA, INC.
Series A Preferred Stock Purchase Agreement dated February 25, 1999 by and among
Collabria, Inc., the Founders named therein and the Investors named therein.
Investor Rights Agreement dated as of February 25, 1999 by and among Collabria,
Inc. and the Investors named therein.
Stockholders' Agreement dated February 25, 1999 by and among Collabria, Inc.,
the Investors named therein and the Stockholders named therein.
Letter Agreement dated February 16, 1999 by and between Collabria and ICG
Capital Group, Inc.
COMMERX, INC.
Series A Preferred Stock Purchase Agreement dated December 28, 1998 by and
between Commerx, Inc. and the Investors named therein.
Investor Rights Agreement dated December 28, 1998 by and among Commerx, Inc. and
the Investors named therein.
Stockholder Agreement dated December 28, 1998 by and among Commerx, Inc.,
Efthinios Stojka, Nicholas Stojka, Constantine Stojka and John Steven Stojka,
the Transferees named therein and Internet Capital Group, L.L.C.
<PAGE>
THE COMPUTERJOBS STORE, INC.
Series A Preferred Stock and Warrant Purchase Agreement dated November 25, 1998
by and among The ComputerJobs Store, Inc. and the Purchasers named therein.
Registration Rights Agreement dated November 25, 1998 by and among the Computer
Jobs Store, Inc., the Founders named therein and the Investors named therein.
Voting Agreement dated November 25, 1998 by and among The Computer Jobs Store,
Inc., the Key Holders named therein and the Investors named therein.
Right of First Refusal and Co-Sale Agreement dated November 25, 1998 by and
among The Computer Jobs Store, Inc., the Investors named therein and the
Founders named therein.
CONTEXT INTEGRATION
Series A Preferred Stock Purchase Agreement dated March 14, 1997 by and among
Context Integration Inc., the Purchasers named therein, Michael E. Dunn and the
Founders name therein.
Rights Agreement dated March 14, 1997 by and among Context Integration, Inc.,
the Purchasers named therein and the Common Holders name therein.
Co-Sale Agreement dated March 14, 1997 by and among Michael E. Dunn, the
Founders named therein, Context Integration, Inc. and the Purchasers named
therein.
Amended and Restated Stockholders Agreement dated March 31, 1997 among Context
Integration, Inc. and the Stockholders named therein.
Series B Preferred Stock Purchase Agreement dated July 22, 1998 by and among
Context Integration, Inc., the Purchasers named therein and the Founders named
therein.
Amended and Restated Rights Agreement dated July 22, 1998 by and among Context
Integration, Inc. and the Investors named therein.
Amended and Restated Co-Sale Agreement dated July 22, 1998 by and among Michael
E. Dunn, the Founders named therein and the Purchasers named therein.
Voting Agreement dated July 22, 1998 by and among Context Integration, Inc. and
the Investors named therein.
DEJA NEWS, INC.
Series B Convertible Non-Voting Preferred Stock Purchase Agreement dated
November 14, 1997 by and among Deja News, Inc. and the Purchasers named therein.
Investors Rights Agreement dated November 14, 1997 by and among Deja News, Inc.
and the Investors named therein.
Amended and Restated Shareholders and Voting Agreement dated November 14, 1997
among Deja News, Inc. and the Shareholders named therein.
Series C Convertible Non-Voting Preferred Stock Purchase Agreement dated July
14, 1998 by and among Deja News, Inc. and the Purchasers named therein.
<PAGE>
Second Amended and Restated Shareholders and Voting Agreement dated July 14,
1998 by and among Deja News, Inc. and the Investors named therein.
Amended and Restated Investors Rights Agreement dated July 14, 1998, by and
among Deja News, Inc., the Investors named therein, Open Test Corporation and
the Other Holders named therein.
E-CHEMICALS, INC.
Note Purchase Agreement dated July 2, 1998 by and among E-Chemicals, Inc. and
the Purchasers named therein.
Convertible Subordinated Note dated July 2, 1998 by E-Chemicals in favor of
Internet Capital Group, L.L.C.
Investors' Rights Agreement dated July 2, 1998 by and among E-Chemicals, Inc.
and the Investors named therein.
Voting Agreement dated July 2, 1998 by and among E-Chemicals, Inc. and the
Investors named therein.
Right of First Refusal and Co-Sale Agreement dated July 2, 1998 by and among E-
Chemicals, Inc., the Investors named therein and the Founders named therein.
ENTEGRITY SOLUTIONS CORPORATION
Series A Preferred Stock Purchase Agreement dated July 15, 1996 by and among
Entegrity Solutions Corporation, Inc. and the Investors named therein.
Investors' Rights Agreement dated July 15, 1996 by and among Entegrity Solutions
Corporation and the Investors named therein.
Right of First Refusal and Co-Sale Agreement dated July 15, 1996 by and among
Entegrity Solutions Corporation, the Investors named therein and the
Shareholders named therein.
Series B Preferred Stock Purchase Agreement dated October 21, 1997 by and among
Entegrity Solutions Corporation and the Investors named therein.
Amended and Restated Investors' Rights Agreement dated October 21, 1997 by and
among Entegrity Solutions Corporation and the Investors named therein.
Second Rights of First Refusal and Co-Sale Agreement dated October 21, 1997 by
and among Entegrity Solutions Corporation, the Investors named therein and the
Shareholders named therein.
Voting Agreement dated October 21, 1997 by and among Entegrity Solutions
Corporation and the Investors named therein.
Amended and Restated Voting Agreement dated January 30, 1998 by and among
Entegrity Solutions Corporation and the Investors named therein.
Series C Preferred Stock and Warrant Purchase Agreement dated March 29, 1999 by
and among Entegrity Solutions Corporation and the Investors named therein.
<PAGE>
Amended and Restated Investors Rights Agreement dated March 29, 1999 by and
among Entegrity Solutions Corporation and the Investors named therein.
Second Amended and Restated Voting Agreement dated March 29, 1999 by and among
Entegrity Solutions Corporation and the Investors named therein.
VIVANT! (f/k/a Illuminate Corporation)
Series A Preferred Stock Purchase Agreement dated August 7, 1998 among
Illuminate Corporation and the Purchasers named therein.
Investor Rights Agreement dated August 7, 1998 among Illuminate Corporation, the
Investors named therein and the Founder named therein.
Co-Sale Agreement dated August 7, 1998 among the Founders named therein,
Illuminate Corporation and the Investors named therein.
Voting Agreement dated August 7, 1998 among the Founders named therein,
Illuminate Corporation and the Investors named therein.
INTERNET COMMERCE SYSTEMS, INC.
Series A Preferred Stock Purchase Agreement dated January 5, 1999 by and between
Internet Commerce Systems, Inc. and the Investors named therein.
Investor Rights Agreement dated January 5, 1999 by and among Internet Commerce
Systems, Inc. and the Investors named therein.
Stockholders Agreement dated January 5, 1999 by and among Internet Commerce
Systems, Inc. the Investors named therein and the Founders named therein.
LINKSHARE CORPORATION
Series A Preferred Stock Purchase Agreement, dated as of July 16, 1998, by and
among Link Share Corporation and the Purchasers named therein.
Investor Rights Agreement, dated as of July 16, 1998, by and among Linkshare
Corporation, Stephen Messer, Heidi Messer and Jianhao Meng (the "Initial
Founders") and the Purchasers of the Company's Series A Preferred Stock (the
"Initial Investors").
First Refusal and Co-Sale Agreement, dated as of July 16, 1998, by and among,
Linkshare Corporation, certain holders of the Company's Series A Preferred
Stock, Stephen Messer, Heidi Messer and Jianhao Meng.
MEGADEPOT.COM, INC.
Series A Preferred Stock Purchase Agreement, dated as of February 25, 1999, by
and between, MegaDepot.com, Inc., and the Purchasers named therein.
Investor's Rights Agreement, dated as of February 25, 1999, by and among
MegaDepot.com, Inc. and the Investors and the holders of common stocks.
<PAGE>
Right of First Refusal and Co-Sale Agreement, dated as of February 25, 1999, by
and among holders of common stock ("Founders"), MegaDepot.com, Inc. and the
holders of Series A Preferred Stock ("Investors").
Voting Rights Agreement, dated as February 25, 199, by and among MegaDepot.com,
Inc., holders of the Company's Common Stock, and the holders of Series A
Preferred Stock.
MESSAGE QUEST, INC.
7% Convertible Subordinated Debenture Second Purchase Agreement, dated as of
October 9, 1998, between Message Quest, Inc., SCP Private Equity Partners, L.P.
and Internet Capital Group, LLC.
Amended and Restated Participation Agreement, dated as of October 9, 1998,
between SCP Private Equity Partners, L.P., Internet Capital Group, LLC and F.
Scott Blackburn.
$1,700,000 7% Convertible Subordinated Debenture due 2003, dated September 9,
1998.
$800,000 7% Convertible Subordinated Debenture due 2003, dated October 9, 1998
PLAN SPONSOR.COM, INC.
Series A Preferred Stock Purchase Agreement, dated as of March 17, 1999, by and
among Plan Sponsor.com, Inc., Colin Wahl ("Founder") and Internet Capital Group,
Inc. ("Investor").
Investor Rights Agreement, dated as of March 17, 1999, by and among
PlanSponsor.com, Internet Capital Group, Inc., WPL Laboratories, Inc., and Colin
Wahl.
Stockholder Agreement, dated March 17, 1999, by an among PlanSponsor.com, Inc.,
Colin Wahl, Internet Capital Group, Inc., WPL Laboratories, Inc. and such other
persons as many become stockholders of the Company pursuant to a Transfer.
PRIVASEEK, INC.
Investment Agreement, dated as of December 24, 1998, by and among PrivaSeek,
Inc., and the Purchasers named therein and Excite, Inc.
Amendment No. 1 to Investment Agreement, and Investor's Rights Agreement, and
Stockholders Agreement and Voting Agreement, effective as of December 24, 1998,
by and among PrivaSeek, Inc., each Investor originally part of Investment
Agreement and Comcast Interactive Investments, Inc. (as "Purchaser").
Stockholders Agreement, dated as of December 24, 1998, by and among PrivaSeek,
Inc., the Investors named therein, and Lawrence J. Lozon (the "Manager").
Investors Rights Agreement, dated as of December 24, 1998, by and among
PrivaSeek, Inc., Lawrence J. Lozon, and the Investors named therein.
Voting Agreement, dated as of December 24, 1998, by and among PrivaSeek, Inc.,
the Investors named therein and Lawrence J. Lozon.
Note Secured by Stock Pledge Agreement, dated as of December 28, 1998, made by
ICG in favor
<PAGE>
of PrivaSeek, Inc. in the principal amount of $1,713,364.06. (An Affiliate of
Comcast Corp. purchased approximately 25% of ICG's investment in PrivaSeek and
assumed 25% of the obligations under the Note).
RAPIDAUTONET CORPORATION
Series A Preferred Stock Purchase Agreement, dated as of November 19, 1998, by
and among RapidAutoNet, and the Investors listed on Schedule A thereto.
Investors' Rights Agreement, dated as of November 14, 1998, by and among
RapidAutoNet Corporation, and the Investors listed on Schedule A thereto.
Voting Agreement, dated as of November 19, 1998, by and among RapidAutoNet
Corporation, the holders of Series A Preferred Stock listed on the Schedule of
Investors thereto and holders of Common Stock listed on the Schedule of Founders
thereto.
Right of First Refusal and Co-Sale Agreement, dated as of November 19, 1998, by
and among RapidAutoNet Corporation, Red Georgia and Shane Gorman (the
"Founders") and the holders of Series A Preferred Stock of the Company.
SYNCRA SOFTWARE, INC.
Stock Purchase Agreement dated June 5, 1998 by and between Internet Capital
Group, L.L.C. and Benchmaking Partners, Inc.
Note dated June 5, 1998 from Internet Capital Group, L.L.C. for the Benefit of
Benchmaking Partners, Inc.
Preferred Stock Purchase Agreement dated June 5, 1998 by and among Syncra
Software, Inc. and Purchasers named therein.
Amended and Restated Stockholders Agreement dated June 5, 1998 by and among
Syncra Software, Inc., Benchmaking Partners, Inc., Internet Capital Group,
L.L.C. , TL Ventures III, L.P., TL Ventures III Offshore L.P., TL Ventures
Interfund L.P., Christopher Greendale, RHL Ventures LLC and Jean C. Tempel,
Yossi Sheffi and Christopher Sellers.
Series A Preferred Stock Purchase Agreement dated February 20, 1998 by and among
CollabTech, Inc. and the Purchasers named therein.
Series B Preferred Stock Purchase Agreement dated March 31, 1999 by and among
Syncra Software, Inc. and the Purchasers named therein.
Second Amended and Restated Stockholders' Agreement dated March 31, 1999 by and
among Syncra Software, Inc., the Series A Holders named therein, the Warrant
Holders named therein, the Series B Holders named therein and the Founders named
therein.
SERVICE SOFT TECHNOLOGIES, INC.
Series G Convertible Preferred Stock Purchase Agreement dated February 12, 1998
by and among Service Corporation and the Purchasers named therein.
<PAGE>
Restated Fourth Registration Rights Agreement dated February 12, 1998 by and
among Service Soft Corporation and the Series Preferred Holders named therein.
Stockholders Agreement dated February 12, 1998 by and among Service Soft
Corporation and the Investors named therein.
SAGEMAKER, INC. (f/k/a E-Volve Corporation)
Stock Purchase Agreement dated as of September 30, 1998 by and between Brendan
Linehan ("Seller") and Buyers named therein.
Preferred Stock Purchase agreement dated as of March 25, 1998 between Sagemaker,
Inc. and the Purchasers named therein.
Voting and Stock Restriction Agreement dated as of March 25, 1998 among E-Volve
Corporation and stockholders named therein.
SKY ALLAND RESEARCH, INC.
Preferred Stock Purchase Agreement dated February 13, 1996 by and between Sky
Alland Research, Inc. and the Purchasers named therein.
Stockholders Agreement dated February 13, 1996 by and among Sky Alland Research,
Inc. and the Stockholders named therein.
Registration Rights Agreement dated February 13, 1996 by and among Sky Alland
Research, Inc. and the Purchasers named therein and the Prior Investors named
therein.
UNIVERSAL ACCESS, INC.
Series B Cumulative Convertible Preferred Stock Purchase Agreement dated as of
February 5, 1999 by and among Universal Access, Inc. and the Purchasers named
therein.
Certificate of Designation Preferences and Rights of Series B Cumulative
Convertible Preferred Stock of Universal Access, Inc.
Registration and Informational Rights Agreement dated as of February 5, 1999, by
and between the Company and the Holders named therein.
Shareholders Agreement dated as of February 5, 1999, by and among the Company
and the Shareholders named therein.
VERTICALNET, INC.
Preferred Stock Purchase Agreement by and between Internet Capital Group, L.L.C.
and Water Online, Inc. dated as of September 12, 1996.
Series B Preferred Stock Purchase Agreement by and between Internet Capital
Group, L.L.C. and VerticalNet, Inc. dated as of July 18, 1997.
Investors' Rights Agreement among VerticalNet, Inc., Internet Capital Group,
L.L.C. and certain other Investors, as defined therein, dated as of May 8, 1998.
<PAGE>
Amended and Restated Stock Purchase Warrant by and between VerticalNet, Inc. and
Internet Capital Group, L.L.C. dated May 12, 1998.
Second Amended and Restated Stock Purchase Warrant by and between VerticalNet,
Inc. and Internet Capital Group, L.L.C. dated May 12, 1998.
Registration Rights Agreement by and among VerticalNet, Inc., Internet Capital
Group, L.L.C. and certain other Investors, as defined therein, dated as of
November 25, 1998.
<PAGE>
SCHEDULE 5.1.22
EMPLOYEE BENEFIT PLAN DISCLOSURES
Membership Profit Interest Program: As of December 31, 1998, a total of
- -----------------------------------
6,783,625 shares of common stock have been reserved for issuance under the
Membership Profit Interest Program, of which 6,783,625 shares were outstanding,
leaving 0 shares available for future grant. The board has the power, subject to
the limitations contained in the Membership Profit Interest Program, to
prescribe the terms and conditions of any award granted under the Membership
Profit Interest Program, including the total number of shares awarded to each
grantee and any applicable vesting schedule.
Internet Capital Group 1999 Equity Compensation Plan: On February 2, 1999,
- -----------------------------------------------------
Internet Capital Group, L.L.C. merged with and into Internet Capital Group, Inc.
and Internet Capital Group, L.L.C.'s 1998 Equity Compensation Plan and
Director's Option Plan (collectively, the "1998 Plan") were terminated and the
1999 Equity Compensation Plan (the "1999 Plan") was adopted. The 1999 Plan
combines the two components of the 1998 Plan into a single plan which is
substantially the same as the 1998 Plan. The 1999 Plan provides that options
outstanding under the 1998 Plan will be considered options issued under the 1999
Plan. As of December 31, 1998, a total of 10,470,000 shares of common stock have
been reserved for issuance under the 1999 Plan. As of December 31, 1998,
nonqualified options to purchase 6,569,000 were outstanding, leaving 3,701,000
shares available for future grant because no incentive stock options, restricted
stock, SARs, performance awards, dividend equivalent rights or cash awards under
the 1998 Plan or the 1999 Plan were outstanding. In March, 1999, the
Compensation Committee of the Board of Directors (the "Committee") approved the
grant of nonqualified stock options to purchase an additional 2,640,000 shares.
The Committee has the power, subject to the limitations contained in the 1999
Plan, to prescribe the terms and conditions of any award granted under the 1999
Plan, including the total number of shares and SARs to be offered to each
grantee. In the event of a Change in Control (as defined in the 1999 Plan), all
of the options granted under the 1999 Plan will become immediately vested and
exercisable, restrictions on restricted shares will lapse and payments with
respect to other awards will be accelerated unless otherwise determined by the
Committtee. Our board of directors may amend the 1999 Plan at any time, except
that certain amendments require stockholder approval. The 1999 Plan will
terminate on February 2, 2009, unless terminated earlier by our board of
directors.
Internet Capital Group 401(k) Plan: The Internet Capital Group 401(k) Plan is a
- -----------------------------------
defined contribution plan that is intended to qualify under Section 401(a) of
the Code. All employees who are at least 21 years old and have been employed for
one month are eligible to participate in the 401(k) Plan. An eligible employee
of the Company may begin to participate in the 401(k) Plan on the first day of
the month after satisfying the 401(k) Plan's eligibility requirements. A
participating employee may make pre-tax contributions of a percentage (not less
than 1% and not more than 20%) of his or her eligible compensation, subject to
the limitations under the federal tax laws. Employee contributions and the
investment earnings thereon are fully vested at all times. We do not make
matching or profit-sharing contributions.
<PAGE>
SCHEDULE 5.1.24
ENVIRONMENTAL MATTERS
None.
<PAGE>
SCHEDULE 7.2.1
PERMITTED INDEBTEDNESS
Note Secured by Stock Pledge Agreement dated as of December 28, 1998 (the
"Note"), made by Internet Capital Group, Inc. (successor in interest to Internet
Capital Group, LCC) in favor in PrivaSeek, Inc., in the principal amount of
$1,713,364.06. The Note was secured by a pledge of 691,244 shares of Series A
Preferred Stock of PrivaSeek, Inc. purchased by ICG as of the closing date of
the Investment Agreement dated as of December 24, 1998 by and among PrivaSeek,
Inc. and the Purchasers named therein and Excite, Inc. As of the Closing Date of
the Agreement, the principal amount outstanding under the Note was $856,682.03,
of which ICG is obligated to pay $ 642,511.53, due and payable in accordance
with the terms of the Note on June 27, 1999. The remainder of the principal
amount outstanding on the note ($214,170.50) is payable by an affiliate of
Comcast Corp.
<PAGE>
SCHEDULE 7.2.3
PERMITTED GUARANTIES
Guaranty in favor of Silicon Valley Bank (East) in respect of E-Chemicals, Inc.
$2.0 Million Revolving Credit Facility.
Note Purchase Agreement, dated July 2, 1998, among E-Chemicals, Inc. and
Internet Capital Group, L.L.C.
<PAGE>
BORROWING BASE CERTIFICATE
--------------------------
(Internet Capital Group, Inc.)
(Internet Capital Group Operations, Inc.)
_____________________, [1999] [2000]
PNC BANK, NATIONAL ASSOCIATION
as Agent for the Banks Party to the
Credit Agreement Referred to Below
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Ms. Arlene Ohler
Ladies and Gentlemen:
I refer to Section 7.3.4 of the Credit Agreement, dated as of April 30,
1999 (the "Credit Agreement"), among INTERNET CAPITAL GROUP, INC., a Delaware
----------------
corporation ("ICG"), INTERNET CAPITAL GROUP OPERATIONS, INC., a Delaware
---
corporation ("ICG Operations"; ICG and ICG Operations being hereinafter referred
--------------
to individually as a "Borrower" and collectively as the "Borrowers", the Banks
and PNC BANK, NATIONAL ASSOCIATION, as Agent (the "Agent"), on behalf of the
Banks. Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein with the same meanings. I, ____________________________, [CHIEF
EXECUTIVE OFFICER, PRESIDENT, CHIEF FINANCIAL OFFICER, TREASURER OR ASSISTANT
TREASURER] of the Administrative Borrower, do hereby certify on behalf of each
Borrower as of the last Business Day of the week ended _______________,
[1999/2000] (the "Report Date"), that the components of the "Borrowing Base" are
-----------
as follows:
A. BORROWING BASE
1. Private Company Advance (as determined in accordance
with the definition of "Borrowing Base" in the Credit
Agreement) - See Schedule A attached hereto [Included
Securities] and Schedule D attached hereto [Excluded
Securities] $__________
2. Additional Private Company Advance, if any $__________
3. 15% of the value (as determined in accordance with the
definition of Borrowing Base) of Qualified Public Company
Restricted Securities - See Schedule B attached hereto and
Schedule D attached hereto [Excluded Securities] $__________
<PAGE>
4. 25% of the value (as determined in accordance with
the definition of Borrowing Base) of Qualified Public
Company Unrestricted Securities - See Schedule C
attached hereto and Schedule D attached hereto [Excluded
Securities] $__________
5. Sum of Items A(1), A(2), A(3) and A(4)= "Borrowing $__________
B. OUTSTANDINGS
1. Principal Amount of Loans Outstanding $__________
2. Letters of Credit Outstanding $__________
3. Sum of Items B(1) and B(2) = "Facility Usage" $__________
C. COMPLIANCE
1. Excess of Item A(5) over Item B(3) $__________
2. If Item C(1) is less than zero ($0),
amount of mandatory prepayment due $__________
D. OTHER MATTERS
The undersigned further certifies as follows:
1. Each Borrower is in compliance with, and since the most recent prior
Report Date has at all times complied with, the provisions of the Credit
Agreement.
2. No event has occurred and is continuing which constitutes an Event of
Default or Potential Default.
3. With respect to all financial statements delivered by or on behalf of
any Borrower contemporaneously herewith, such statements are true and correct.
4. Borrowers have received all consents necessary to pledge any Private
Company Restricted Securities included in this Borrowing Base Certificate
acquired by such Borrowers since the date of the last Borrowing Base
Certificate.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Borrowing Base Certificate
this ___ day of _____________, [1999/2000].
INTERNET CAPITAL GROUP, INC.
By:________________________________
Name:______________________________
Title: [CHIEF EXECUTIVE OFFICER, PRESIDENT,
CHIEF FINANCIAL OFFICER, TREASURER OR
ASSISTANT TREASURER]
<PAGE>
SCHEDULE A
----------
COST BASIS DETERMINED
NAME OF ISSUER OF PRIVATE IN ACCORDANCE WITH THE
COMPANY RESTRICTED SECURITY BORROWING BASE DEFINITION
--------------------------- -------------------------
(i) Benchmarking Partners
(ii) Bid Com, Inc.
(iii) Blackboard, Inc.
(iv) Breakaway Solutions, Inc.
(v) ClearCommerce Corporation
(vi) Collabria, Inc.
(vii) Commerx, Inc.
(viii) The ComputerJobs Store
(xi) Context Integration
(x) Deja News, Inc.
(xi) E-Chemicals, Inc.
(xii) Entegrity Solutions Corporation
(xiii) Vivant! (f/k/a Illuminate Corporation)
(xiv) Internet Commerce Systems, Inc.
(xv) Linkshare Corporation
(xvi) MegaDepot, Inc.
(xvii) MessageQuest, Inc.
(xviii) PlanSponsor.com, Inc.
(xix) PrivaSeek, Inc.
(xx) RapidAutoNet Corporation
<PAGE>
(xxi) SageMaker, Inc.
(xxii) ServiceSoft Technologies, Inc.
(xxiii) Sky Alland Marketing, Inc.
(xxiv) Syncra Software, Inc.
(xxv) Universal Access, Inc.
<PAGE>
SCHEDULE B
----------
MARKET VALUE DETERMINED IN
NAME OF ISSUER OF PUBLIC ACCORDANCE WITH THE BORROWING
COMPANY RESTRICTED SECURITY BASE DEFINITION
--------------------------- -----------------------------
$______________________
<PAGE>
SCHEDULE C
----------
MARKET VALUE DETERMINED IN
NAME OF ISSUER OF PUBLIC ACCORDANCE WITH THE BORROWING
COMPANY UNRESTRICTED SECURITY BASE DEFINITION
----------------------------- -----------------------------
$_____________________
<PAGE>
SCHEDULE D
----------
MARKET VALUE OR COST BASIS
DETERMINED IN ACCORDANCE WITH
EXCLUDED PLEDGED SECURITIES THE BORROWING BASE DEFINITION
--------------------------- -----------------------------
Excite, Inc. $_____________________
Lycos, Inc. $_____________________
Applica Corporation $_____________________
SMART Technologies, Inc. $_____________________
U.S. Interactive, Inc. $_____________________
Who? Vision Systems, Inc. $_____________________
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES
REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE
BORROWER, TO THE EFFECT THAT THE PROPOSED SALE, ASSIGNMENT, TRANSFER, OR
DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT. IN
ADDITION, THIS CONVERTIBLE NOTE AND THE SECURITIES ISSUABLE UPON ITS
CONVERSION ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS UNDER THE
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE COMPANY.
PAYMENT UNDER THIS CONVERTIBLE NOTE IS SUBJECT TO THE PRIOR PAYMENT IN FULL
OF THE BORROWER'S OBLIGATIONS UNDER THE CREDIT AGREEMENT AS MORE FULLY
DESCRIBED IN THE SUBORDINATION PROVISIONS OF SECTION 5 HEREIN.
CONVERTIBLE NOTE (Internet Capital Group, Inc.)
$______ April , 1999
In consideration of the loan (hereinafter referred to as a "Loan")
______________, [an individual/corporation/partnership] (the "Lender"), has made
to Internet Capital Group, Inc., a Delaware corporation (the "Borrower"), and
for value received, the Borrower hereby promises to pay to the order of the
Lender, at the Lender's office located at ____________________________________,
or at such other place in the continental United States as the Lender may
designate in writing, in lawful money of the United States, and in immediately
available funds, the principal sum of $_________.
1. Maturity Date. The unpaid principal balance of this Convertible Note
-------------
(this "Note") shall be paid on the earlier of (i) April, 2002 (the "Due Date"),
(ii) the closing of the next round of equity financing in the Borrower raising
not less than $50,000,000 from private investors (the "Next Round Financing")
and (iii) the effective date of the registration statement for an underwritten
public offering of Borrower's Common Stock (as defined below)(the "IPO").
2. Interest. The Borrower hereby further promises to pay to the order of
--------
the Lender interest on the outstanding principal amount from April _____, 1999,
at an annual rate equal to (i) the Applicable Federal Rate as of the date hereof
(4.99%) for the period from the date hereof until April , 2000 (the "Initial
Term") and (ii) the announced prime rate of PNC Bank, N.A. (the "Prime Rate")
for the period following the Initial Term (the "Second Term"). The interest rate
for the Second Term shall be changed when and as the Prime Rate changes. In
addition, the
<PAGE>
Borrower shall pay on demand interest on any overdue payment of principal and
interest (to the extent legally enforceable) at the fluctuating Prime Rate plus
three percent (3%).
Interest shall be payable when the unpaid principal balance of the Note is
paid. If this Note is converted as provided in Section 3 hereof, no interest
will be paid.
All payments made on this Note shall be applied, at the option of the
Lender, first to late charges and collection costs, if any, then to accrued
interest and then to principal. Interest payable hereunder shall be calculated
for actual days elapsed on the basis of a 360-day year. Accrued and unpaid
interest shall be due and payable upon maturity of this Note. After maturity or
in the event of default, interest shall continue to accrue on the Note at the
rate set forth above and shall be payable on demand of the Lender.
Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.
3. Conversion. (a) Subject to and in compliance with the provisions of
----------
this Section 3, if during the Initial Term the Borrower completes an IPO or Next
Round Financing, the outstanding principal amount of this Note shall
automatically convert into fully paid nonassessable shares of the Borrower's
Common Stock, par value $.001 per share (the "Common Stock"), at the Conversion
Price in effect on the date of conversion. Such conversion shall become
effective immediately prior to (i) the effectiveness of the registration
statement for the IPO or (ii) the closing of the Next Round Financing, as
applicable.
(b) Subject to and in compliance with the provisions of this Section
3, during the Second Term and prior to the payment of the outstanding principal
amount of this Note, the Lender may convert the outstanding principal amount of
this Note, in whole or in part, into fully paid nonassessable shares of the
Common Stock at the Conversion Price in effect on the date of conversion. The
Lender shall only be entitled to convert this Note into Common Stock one time,
upon the earliest of the following events to occur.
(i) If, prior to the Due Date, the Borrower files a registration
statement for an IPO, the Borrower shall, within five business days of the
initial filing of such registration statement, send written notice to the Lender
of such filing (the "Filing Notice"). The Lender shall, within 30 days from the
date of receipt of the Filing Notice (but in any event no later than the
printing of the red herring prospectus for the IPO), determine whether or not it
will convert the outstanding principal amount of this Note, in whole or in part,
into Common Stock in accordance with this Section 3 and send written notice to
the Borrower of such election. If, upon the expiration of such 30-day period,
the Lender has not elected to convert this Note into Common Stock or has not
notified the Borrower of its election, the Lender shall forfeit its right to
-2-
<PAGE>
convert this Note into Common Stock. If the Lender has elected to convert this
Note into Common Stock pursuant to this paragraph (b)(i), the conversion shall
become effective immediately prior to the effectiveness of the registration
statement for the IPO.
(ii) If, prior to the Due Date, the Borrower has scheduled the
closing of the Next Round Financing, then at least 20 days prior to the closing
of the Next Round Financing the Borrower shall send written notice to the Lender
of such closing (the "Closing Notice"). The Lender shall, within 20 days from
the date of receipt of the Closing Notice, determine whether or not it will
convert the outstanding principal amount of this Note, in whole or in part, into
Common Stock in accordance with this Section 3 and send written notice to the
Borrower of such election. If, upon the expiration of such 20-day period, the
Lender has not elected to convert this Note into Common Stock or has not
notified the Borrower of its election, the Lender shall forfeit its right to
convert this Note into Common Stock. If the Lender has elected to convert this
Note into Common Stock pursuant to this paragraph (b)(ii), the conversion shall
become effective immediately prior to the closing of the Next Round Financing.
4. The "Conversion Price" at which Common Stock shall be issuable upon
conversion of this Note shall equal either (i) the price per share of the Common
Stock in the IPO or (ii) the price per share of Common Stock in the Next Round
Financing.
To exercise the conversion privilege or effect the automatic conversion,
the Lender shall surrender this Note to the Borrower at its principal office. In
the case of exercising the conversion privilege, the Lender shall surrender the
Note together with a written conversion notice to the Borrower. This Note or
portion thereof shall be deemed to have been converted immediately prior to the
close of business on the date of receipt of such Note, even if the Borrower's
stock transfer books are on that date closed, and the Lender, or the nominee or
nominees of such Lender, shall be treated for all purposes as the record holder
of the shares of Common Stock deliverable upon such conversion as of the close
of business on such date. Promptly after receipt by the Borrower of this Note
and written conversion notice, the Borrower shall issue and deliver, at its
expense, to the Lender, or to the nominee or nominees of such Lender, a
certificate or certificates for the number of shares of its Common Stock due on
such conversion. In the case of a conversion of only a portion of the
outstanding principal amount of this Note, the Borrower shall execute and
deliver to the Holder (or its nominee or nominees), at the expense of the
Borrower, a replacement note in a principal amount equal to the unconverted
portion of such Note and dated and bearing interest from the date of such Note.
No fractional shares of Common Stock shall be issued upon conversion of
this Note. Instead of any fractional share of Common Stock which would otherwise
be issuable upon conversion of this Note, the Borrower shall pay a cash
adjustment in respect of such fractional interest. The Lender, by its acceptance
thereof, expressly waives any right to receive any fractional share upon
conversion of the Note.
-3-
<PAGE>
5. Subordination. The Note is subordinated in right of payment, in the
-------------
manner and to the extent set forth in the Credit Agreement, dated as of April
____, 1999 (as amended, supplemented or modified from time to time, the "Credit
Agreement") among the Borrower, Internet Capital Group Operations, Inc., the
Banks (as defined in the Credit Agreement), and PNC Bank, National Association,
in its capacity as Agent for the Banks, to the prior payment in full of all
Obligations (as defined in the Credit Agreement) of the Loan Parties (as defined
in the Credit Agreement) whether outstanding on the date of the Credit Agreement
or thereafter created, incurred, assumed or guaranteed. The terms of
subordination evidenced by Exhbit 1.1(D) to the Credit Agreement and attached
-------------
hereto as Exhibit B are hereby incorporated herein by reference thereto. The
---------
Lender by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Agent, on his behalf, to take such action
as may be necessary or appropriate to enforce the subordination provided for in
the Credit Agreement and herein and appoints the Agent his attorney-in-fact for
such purpose.
6. Events of Default. An event of default hereunder shall consist of:
-----------------
(a) a default in the payment by the Borrower to the Lender of
principal or interest under this Note as and when the same shall become due and
payable, and such default continues for a period of 15 days;
(b) an event of default by the Borrower under any other obligation,
instrument, note or agreement for borrowed money ("Indebtedness"), beyond any
applicable notice and/or grace period (a "Cross-Default"), provided the
--------
aggregate principal amount of such Indebtedness to which such Cross-Default
relates, together with any such other Indebtedness in which there is a Cross-
Default, exceeds $1,000,000;
(c) institution of any proceeding by or against the Borrower under
any present or future bankruptcy or insolvency statute or similar law and, if
involuntary, if the same are not stayed or dismissed within ninety (90) days, or
the Borrower's assignment for the benefit of creditors or the appointment of a
receiver, trustee, conservator or other judicial representative for the Borrower
or the Borrower's property, or the Borrower's being adjudicated a bankrupt or
insolvent.
Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), and
the entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available at law or in
equity.
7. Summary Proceedings. Any action, suit or proceeding where the amount
-------------------
in controversy as to at least one party, exclusive of interest and costs,
exceeds $1,000,000 ("Summary Proceeding"), arising out of or relating to this
Note, or the breach, termination or validity thereof, shall be litigated
exclusively in the Superior Court of the State of Delaware (the
-4-
<PAGE>
"Delaware Superior Court") as a summary proceeding pursuant to Rules 124-131 of
the Delaware Superior Court, or any successor rules (the "Summary Proceeding
Rules"). Each of the parties hereto hereby irrevocably and unconditionally (i)
submits to the jurisdiction of the Delaware Superior Court for any Summary
Proceeding, (ii) agrees not to commence any Summary Proceeding except in the
Delaware Superior Court, (iii) waives, and agrees not to plead or to make, any
objection to the venue of any Summary Proceeding in the Delaware Superior Court,
(iv) waives, and agrees not to plead or to make, any claim that any Summary
Proceeding brought in the Delaware Superior Court has been brought in an
improper or otherwise inconvenient forum, (v) waives, and agrees not to plead or
to make, any claim that the Delaware Superior Court lacks personal jurisdiction
over it, (vi) waives its right to remove any Summary Proceeding to the federal
courts except where such courts are vested with sole and exclusive jurisdiction
by statute and (vii) understands and agrees that it shall not seek a jury trial
or punitive damages in any Summary Proceeding based upon or arising out of or
otherwise related to this Note and waives any and all rights to any such jury
trial or to seek punitive damages.
In the event any action, suit or proceeding where the amount in controversy
as to at least one party, exclusive of interest and costs, does not exceed
$1,000,000 (a "Proceeding"), arising out of or relating to this Note or the
breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.
If a Summary Proceeding is not available to resolve any dispute hereunder,
the controversy or claim shall be settled by arbitration conducted on a
confidential basis, under the U.S. Arbitration Act, if applicable, and the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "Association") strictly in accordance with the terms of this Note and the
substantive law of the State of Delaware. The arbitration shall be conducted at
the Association's regional office located closest to the Lender's principal
place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators' award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.
Neither party shall be precluded hereby from securing equitable remedies in
courts of any jurisdiction, including, but not limited to, temporary restraining
orders and preliminary injunctions to protect its rights and interests but such
remedies shall not be sought as a means to avoid or stay arbitration or a
Summary Proceeding.
8. Waivers. The Borrower hereby waives presentment, demand, protest and
-------
notice of dishonor and protest, and also waives all other exemptions; and agrees
that extension or extensions of the time of payment of this Note or any
installment or part thereof may be made
-5-
<PAGE>
before, at or after maturity by agreement by the Lender. Upon default hereunder
the Lender shall have the right to offset the amount owed by the Borrower
against any amounts owed by the Lender in any capacity to the Borrower, whether
or not due, and the Lender shall be deemed to have exercised such right of
offset and to have made a charge against any such account or amounts immediately
upon the occurrence of an event of default hereunder even though such charge is
made or entered on the books of the Lender subsequent thereto. The Borrower
shall pay to the Lender, upon demand, all costs and expenses, including, without
limitation, attorneys' fees and legal expenses, that may be incurred by the
Lender in connection with the enforcement of this Note.
9. Registration Rights. The shares of Common Stock issuable upon
-------------------
conversion of this Note are subject to the registration rights set forth in
Exhibit A attached hereto.
- ---------
10. Notices. Notices required to be given hereunder shall be deemed
-------
validly given (i) three business days after sent, postage prepaid, by certified
mail, return receipt requested, (ii) one business day after sent, charges paid
by the sender, by Federal Express Next Day Delivery or other guaranteed delivery
service, (iii) when sent by confirmed facsimile transmission, or (iv) when
delivered by hand:
If to the Lender: At the address of its office listed in
the first paragraph of this Note
If to the Borrower: Internet Capital Group, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.
11. Failure or Indulgence Not Waiver. Any failure by the Lender to
--------------------------------
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any time. No amendment to or
modification of this Note shall be binding upon the Lender unless in writing and
signed by it. Any provision hereof found to be illegal, invalid or unenforceable
for any reason whatsoever shall not affect the validity, legality or
enforceability of the remainder hereof. This Note shall apply to and bind the
successors of the Borrower and shall inure to the benefit of the Lender, its
successors and assigns.
12. Governing Law. The Note shall be governed by and interpreted in
-------------
accordance with the laws of the State of Delaware.
-6-
<PAGE>
IN WITNESS WHEREOF, the Borrower, by its duly authorized officer
intending to be legally bound hereby, has duly executed this Convertible Note as
of the date first written above.
INTERNET CAPITAL GROUP, INC.
By:_________________________
Name:
Title:
-7-
<PAGE>
EXHIBIT A
---------
REGISTRATION RIGHTS
-------------------
1.1 Piggyback Registration.
----------------------
(a) If the Company at any time after the consummation of its
initial public offering proposes for any reason, whether for its own account or
the account of others, to register any of its securities under the Securities
Act, other than pursuant to a Special Registration Statement (as hereinafter
defined), it shall each such time promptly give written notice to the registered
Holders of the Eligible Securities (as defined in Section 1.2(c)) of its
intention to do so, and, upon the written request, given within twenty (20) days
after receipt of any such notice, of a Holder to register any of its Eligible
Securities, the Company shall (subject to Section 1.1(b) hereof) use its best
efforts to cause all Eligible Securities with respect to which Holders shall
have so requested registration to be registered under the Securities Act
promptly upon receipt of the written request of such Holders for such
registration, all to the extent required to permit the sale or other disposition
by the Holders of the Eligible Securities so registered in the manner
contemplated by such registration statement. "Special Registration Statement"
means a registration statement on Forms S-8 or S-4 or any successor form or
other registration statement relating to shares of Common Stock issued in
connection with an acquisition of an entity or business or other business
combination, or shares of Common Stock issued in connection with stock option or
other employee benefit plans.
(b) In connection with any exercise by a Holder of its
"piggyback" registration rights pursuant to this Section 1.1 in connection with
any underwritten offering of securities of the Company, if the Company is
advised in writing (with a copy to the Holders requesting registration) by the
lead underwriter for the offering that, in such firm's opinion, a registration
of Eligible Securities at that time would interfere with the orderly sale and
distribution of the securities being sold by the Company for its own account,
then the number of shares that may be included in the underwriting shall be
allocated, first, to the Company, second, to each of the Holders requesting
inclusion of their Eligible Securities in such registration statement on a pro
rata basis based on the total number of Eligible Securities held by each such
Holder and, third, to any other shareholders requesting registration.
(c) For purposes of this Exhibit A, the following terms shall
have the following meanings: (i) "Common Stock" shall mean the shares of common
stock of Internet Capital or any successor corporation; (ii) "Company" shall
mean and include Internet Capital and any successor corporation; (iii) "Holders"
shall mean each Strategic Partner, as such term is defined in the Securities
Holders Agreement (the "SHA"), dated February 2, 1999 among Internet Capital and
the investors named therein, for so long as (and to the extent that) it owns any
Eligible Securities, each of their respective successors, assigns, and
transferees who become registered owners of Eligible Securities, and the holders
of Eligible Securities pursuant to the Convertible Note (the "Note") dated April
, 1999 and the Common Stock Purchase Warrant (the "Warrant"), dated April
_____, 1999 to which this Exhibit A is attached; and (iv) "Internet
---------
-1-
<PAGE>
Capital" shall mean Internet Capital Group, Inc., a Delaware corporation.
1.2 Demand Registration.
-------------------
(a) Any Strategic Partner may, at any time after consummation of
the Company's initial public offering of equity securities, request in writing
that the Company cause a registration statement to be filed under the Securities
Act (on any Form then available to the Company) with respect to such of its
Eligible Securities as it shall specify in such request, provided that (i) the
gross proceeds from such offering will be or are reasonably expected to be not
less than $5 million and (ii) such Strategic Partner includes at least 25% of
its Eligible Securities in its request. The Company shall promptly give written
notice of such request to the other Holders of Eligible Securities and afford
them the opportunity of including in the requested registration statement such
of their Eligible Securities as they shall specify in a written notice given to
the Company within thirty (30) days after their receipt of the Company's notice
of the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which Holders shall have so requested
registration to be registered under the Securities Act, all to the extent
required to permit the sale or other disposition by the Holders of the Eligible
Securities so registered in the manner specified by such Holders in their
notices and pursuant to this Section.
(b) The Company shall not be required to file and cause to become
effective more than two (2) registration statements at the demand of any
Strategic Partner made under this Section 1.2.
(c) The term "Eligible Securities" shall mean, on any date, (i)
all shares of Common Stock or other securities of the Company issued by way of a
stock split, stock dividend, recapitalization, merger or consolidation, (ii)
plus all shares of Common Stock or other securities of the Company issued in
respect of the Note and Warrant, (iii) but exclusive of any securities described
in clauses (i) or (ii) which have been (A) sold in a public offering registered
under Securities Act or (B) subsequently sold pursuant to Rule 144 under the
Securities Act.
(d) If the Holders of the Eligible Securities making such demand
propose to sell their Eligible Securities in a firm commitment underwriting and
the managing underwriter advises such Holders that not all Eligible Securities
of such Holders can be included in such offering, then the requisite number of
Eligible Securities shall be excluded from registration on a basis pro rata
among the Holders of the Eligible Securities requesting such registration on the
basis of the number of Eligible Securities held by each of them. If by virtue
of this Section 1.2(d), more than 50% of the Eligible Securities which a
Strategic Partner has demanded be registered are excluded from the registration
statements then such Strategic Partner shall not be deemed to have exercised a
demand registration right under this Section 1.2.
(e) Provided the Company has honored its obligations under
Section 1.1, no demand registration right granted in this Section may be
exercised by any Strategic Partner during any period of time beginning on the
date the Company (i) files a registration statement with
-2-
<PAGE>
the Securities and Exchange Commission registering any of its securities for
sale to the public or (ii) files a registration statement upon the demand of any
other Strategic Partner pursuant to this Section 1.2, and ending on the earlier
to occur of (A) 90 days after the date on which such registration statement is
declared effective by the Securities and Exchange Commission or otherwise
becomes effective, and (B) the 180th day after the date of such filing.
(f) The demand registration rights granted in this Section 1.2
shall expire, if not exercised prior thereto, on the date on which more than 90%
of the Eligible Securities (as of the date of this Agreement) shall have been
publicly sold by the Holders thereof in a public offering registered under the
Securities Act of 1933 or pursuant to Rule 144 thereunder.
1.3 Form S-3 Registrations. In addition to the rights provided the
----------------------
Holders of registrable securities in Sections 1.1 and 1.2 above, if the
registration of Eligible Securities under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), then upon the
written request of one or more Holders of Eligible Securities, the Company will
so notify each Holder of Eligible Securities, including each Holder who has a
right to acquire Eligible Securities, and then will, as expeditiously as
possible, use its best efforts to effect qualification and registration under
the Securities Act on Form S-3 of all or such portion of the Eligible Securities
as the Holder or Holders shall specify pursuant to this Section 1.3, provided
that the Company shall have no obligation to file a registration statement under
this Section 1.3 unless the gross proceeds from the offering will be or are
reasonably expected to be not less than $500,000.
1.4 Registration Procedures. If and whenever the Company is under an
-----------------------
obligation pursuant to the provisions of this Exhibit A to use its best efforts
to effect the registration of any Eligible Securities the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission
a registration statement with respect to such Eligible Securities and use its
best efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective under the Securities Act until the earlier of
such time as all securities covered thereby have been sold or one hundred and
eighty (180) days after such registration statement becomes effective, as such
period may be extended pursuant to Section 1.5, and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Eligible Securities covered by such registration statement for such
period;
(c) furnish to each selling stockholder such numbers of copies of
each prospectus (including each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of such Eligible Securities;
-3-
<PAGE>
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter, if any, or if there
is no managing underwriter, the Holders of at least 25% of the Eligible
Securities, shall request, (provided that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
reasonably necessary or advisable to enable such seller to consummate the public
sale or other disposition in such jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in clause (b) of this Section 1.4, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish on the date that such Eligible Securities are
delivered to the underwriters for sale pursuant to such registration or, if such
Eligible Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Eligible Securities becomes
effective, (i) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and at the request of any Holder or Holders of Eligible
Securities requesting registration pursuant to this Exhibit A, to the Holder or
Holders making such request, stating that such registration statement has become
effective under the Securities Act and that (1) no stop order suspending the
effectiveness thereof has been issued and, to the best knowledge of such
counsel, no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (2) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein); (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no
opinion as to financial statements contained therein); (4) the description in
the registration statement or the prospectus, or any amendment or supplement
thereto, of all legal and governmental matters and all contracts and other legal
documents or instruments are accurate and fairly present the information
required to be shown; (5) such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be described in
the registration statement or prospectus, or any
-4-
<PAGE>
amendment or supplement thereto, which are not described as required, nor of any
contracts or documents or instruments of a character required to be described in
the registration statement or prospectus, or any amendment or supplement
thereto, or to be filed as exhibits to the registration statement which are not
described and filed as required, and (6) such other legal matters with respect
to such registration as the underwriters, if any, and any such Holder or Holders
requesting such opinion may reasonably request; and (ii) in the case of an
underwritten offering, a comfort letter, dated such date, from the independent
certified public accountants of the Company, addressed to the underwriters and
the Company's Board of Directors in the customary form.
1.5 Delay in Registration. Notwithstanding anything contained in
---------------------
this Agreement to the contrary, the Company reserves the right to delay any such
registration pursuant to this Exhibit A for a period of not more than one
hundred and twenty (120) days, or to withhold efforts to cause such registration
statement to become effective for a period of not more than one hundred twenty
(120) days, if the Board of Directors of the Company determines in good faith
that such registration might (A) interfere with or affect the negotiation or
completion of any material transaction that is being contemplated by the
Company, or (B) involve initial or continuing disclosure obligations materially
adverse to the best interests of the Company's shareholders. If, after a
registration statement becomes effective, the Company advises the Holders of the
registrable securities covered by such registration statement that the Company
considers it appropriate for the registration statement to be amended, the
Holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The time periods referred to this Exhibit A shall be extended for an
additional number of business days during which the rights to sell shares was
suspended.
1.6 Information to be Furnished by Holders of Eligible Securities.
-------------------------------------------------------------
Each prospective seller of Eligible Securities, registered or to be registered
under any registration statement shall furnish to the Company such information
and execute such documents regarding the Eligible Securities held by such seller
and the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company.
1.7 Expenses of Registration.
------------------------
(a) All expenses incurred by the Company in complying with this
Exhibit A (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (iv) printing expenses; (v) fees and
disbursements of Company counsel and of one counsel for the participating
Holders together, which counsel is reasonably acceptable to the Holders; and
(vi) the fees and expenses of the independent public accountants (including the
expense of any special audits in connection with any such registration), are
hereinafter called "Registration Expenses." All underwriting discounts and
commissions applicable to the Eligible Securities covered by any such
registration, are herein called "Selling Expenses."
-5-
<PAGE>
(b) The Company shall pay all Registration Expenses in connection
with all piggyback registrations under Section 1.1 and all demand registrations
under Section 1.2 plus up to one (1) S-3 registration per year pursuant to
Section 1.3. All Selling Expenses in connection with each registration pursuant
to this Exhibit A and any legal fees and expenses of additional special counsel
for the sellers shall be borne by the seller or sellers therein in proportion to
the number of Eligible Securities included by each in such registration, or in
such other proportions as they may agree upon.
1.8 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each Holder of
Eligible Securities, its executive officers, directors and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to this
Exhibit A against any loss, claims, damages or liabilities to which any of them
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in a
registration statement including Eligible Securities owned by such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any of them for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable hereunder to a
particular Holder in any such case if any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company for such purpose by such Holder or by its representative or by any
underwriter on behalf of such Holder or if the untrue statement or omission is
corrected in a supplement or amendment to the prospectus provided by the Company
to such Holder in a timely fashion in accordance with this Exhibit A which was
not used by such Holder.
(b) Each Holder of Eligible Securities joining in any
registration statement of the Company pursuant to this Exhibit A shall indemnify
and hold harmless the Company, its executive officers, directors, and
controlling persons (within the meaning of the Securities Act) and each person
who participates as an underwriter or controlling person of an underwriter
(within the meaning of the Securities Act) with respect to a registration
statement pursuant to Exhibit A against any losses, claims, damages, or
liabilities to which any of them may become subject under the Securities Act or
otherwise insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of any
material fact contained in such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, made in reliance upon and in conformity with written
information furnished to the Company by such Holder or by its representative or
by any underwriter
-6-
<PAGE>
on behalf of such Holder for such purpose, and will reimburse any of them for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending, any such loss, claim, damage, liability or action
provided, however, that the total amount payable by a Holder under this Section
- -------- -------
1.8(b) shall not exceed the net proceeds received by such Holder in such
registered offering.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
unavailable to or insufficient to hold harmless an amount in excess of the
proceeds received by such Holder in the offering.
1.9 Underwriting Agreement. If Eligible Securities are sold pursuant
----------------------
to a registration statement in an underwritten offering pursuant to this Exhibit
A, the Company and the Holders participating therein agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of, or, as the case may be,
the seller of the securities being registered and customary covenants and
agreements to be performed by such issuer or seller, including, without limiting
the generality of the foregoing, customary provisions with respect to
indemnification by the Company of the underwriter(s) of such offering.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
----------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any Eligible
Securities for up to that period of time following the effective date of a
registration statement of the Company filed under the Securities Act as is
requested by the managing underwriters of such offering, not to exceed one
hundred and eighty (180) days.
1.11 Subsequent Registration Rights. The Company shall not grant any
------------------------------
registration rights to any other person that are more favorable to such person
than the registration rights granted to the Holders hereunder without the prior
written consent of the Holders of at least a majority of the Eligible
Securities.
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<PAGE>
1.12 Assignment. The registration rights granted hereunder may be
----------
assigned by a Holder to any person who acquires such Holder's Eligible
Securities in accordance with the SHA and the Amended and Restated Certificate
of Incorporation and Bylaws of the Company..
-8-
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT, made as of this 30th day of April, 1999, between INTERNET
CAPITAL GROUP, INC. ("ICG" or the "Pledgor"), a Delaware corporation with an
office at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA 19087 and
PNC BANK, NATIONAL ASSOCIATION, in its capacity as Agent for the Banks referred
to below (in such capacity, "Pledgee").
W I T N E S S E T H :
---------------------
WHEREAS, the Pledgor has entered into a Credit Agreement, dated as of April
30, 1999 (said Credit Agreement, as the same may from time to time be amended or
supplemented, is referred to as the "Credit Agreement"), with the Pledgee and
the Banks referred to therein, the terms of which are incorporated herein by
reference, pursuant to which the Banks have agreed, on the terms set forth in
the Credit Agreement, to make certain loans and extend credit to the Pledgor;
WHEREAS, in order to secure the due payment and performance of all of the
Obligations (as defined in the Credit Agreement), the Pledgor has agreed to
grant to the Pledgee a first lien on and security interest in, and pledge with
the Pledgee, the Pledged Securities, as hereinafter defined;
WHEREAS, all terms used in this Agreement which are not defined herein, but
are defined in the Credit Agreement, shall have the respective meanings ascribed
to them therein; and
WHEREAS, it is a condition precedent to the obligations of the Pledgee and
the Banks under the Credit Agreement that the Pledgor shall execute and deliver
this Pledge Agreement.
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound, the Pledgor hereby agrees with the Pledgee as follows:
1. (a) The term "Pledged Securities" as used herein shall mean and
include:
(i) Any and all shares of capital stock, options, warrants and
other securities now, heretofore or at any time hereafter issued by any present
and future Investment Entities (including but not limited to the corporations
set forth on Exhibit A hereto, the securities of which are more specifically set
---------
forth on Annex A to the Letter Agreement which is incorporated herein and made a
part hereof) in which the Pledgor now or hereafter has any interest (the
"Securities"); and
(ii) Any Securities or other rights issued by any issuer of the
foregoing (whether or not certificated) as an addition to, in substitution of or
in exchange for, or resulting from the conversion of any such shares or other
securities, and, subject to the provisions of
<PAGE>
Section 3 hereof, any and all proceeds, including without limitation, all cash
dividends and stock dividends thereof, now or hereafter owned or acquired by the
Pledgor.
(b) Notwithstanding the foregoing, for so long as no Event of Default
shall have occurred and be continuing under the Credit Agreement, Excluded
Pledged Securities (as defined hereinafter) shall not be deemed to be Pledged
Securities for the purposes of this Agreement. "Excluded Pledged Securities"
shall mean:
(i) The 24,000 shares of common stock of Excite, Inc. pledged by
ICG to Silicon Valley Bank in connection with ICG's guaranty of certain
obligations of E-Chemicals, Inc., until such time as such pledge is no longer
required under such guaranty; and the 22,374 shares of common stock Lycos, Inc.
owned of record by ICG as of the date hereof; and
(ii) Restricted Securities owned by the Pledgor issued by one or
more Investment Entities provided that the class of such securities is not
listed on a recognized national securities exchange, on the Nasdaq National
Market or Nasdaq SmallCap Market or on the over-the-counter market; provided,
however that the value of such Restricted Securities excluded from the
definition of Pledged Securities hereunder shall not exceed Ten Million Dollars
($10,000,000) calculated on a cost basis in accordance with Section 2.9 of the
Credit Agreement.
The Excluded Pledged Securities shall be set forth on Annex B to the Letter
Agreement, as amended from time to time, which is incorporated herein and made a
part hereof.
(c) The Pledged Securities are sometimes collectively referred to
herein as the "Collateral".
2. (a) As collateral security for the due payment and performance of all
Obligations, the Pledgor hereby pledges, assigns, hypothecates, delivers and
sets over to Pledgee, and grants a security interest to Pledgee in, the
Collateral.
(b) If the Pledgor shall become entitled to receive or shall receive
any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital), option, warrant or other
rights, whether as an addition to, in substitution of, or in exchange for any
shares of the Pledged Securities or otherwise, the Pledgor shall accept any such
instruments as the Pledgee's agent, shall hold them in trust for the Pledgee and
shall deliver them forthwith to the Pledgee in the exact form received, with the
Pledgor's endorsement when necessary and/or appropriate stock powers duly
executed in blank, to be held by the Pledgee as "Pledged Securities" subject to
the terms hereof, as further collateral security for the Obligations.
(c) Any or all of the Pledged Securities held by the Pledgee
hereunder may, at the option of the Pledgee, following an Event of Default under
the Credit Agreement that is continuing, be registered in the name of the
Pledgee or its nominee, and the Pledgee or its nominee may thereafter, with
notice, after the occurrence of any Event of Default defined or specified in the
Credit Agreement exercise all voting and corporate rights at any meeting of any
-2-
<PAGE>
corporation issuing any of the shares included in the Pledged Securities and
exercise any and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the Pledged Securities
as if it were the absolute owner thereof, including, without limitation, the
right to exchange, at its discretion, any or all of the Pledged Securities upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of any corporation issuing any of such shares or upon the exercise
by any such issuer of any right, privilege or option pertaining to any of the
Pledged Securities, and in connection therewith, to deposit and deliver any or
all of the Pledged Securities with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine, all without liability except to account for property actually
received by it, but the Pledgee shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
(d) Subject to Section 3 hereof, all cash dividends payable with
respect to any part of the Pledged Securities shall be paid to the Pledgee to be
held by the Pledgee as additional collateral security hereunder until applied to
the Obligations, whether or not the Pledgee shall have caused any of the Pledged
Securities to be registered in its or its nominee's name, and any such cash
dividends received by the Pledgors shall be held in trust for the Pledgee by the
Pledgor and shall be promptly delivered to the Pledgee.
(e) In the event of the occurrence of any Event of Default defined or
specified in the Credit Agreement that is continuing, following requisite notice
and after the expiration of any applicable cure period provided therein,
(i) the Pledgee without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Pledgor or any other person
(all and each of which demands, advertisements and/or notices are, to the extent
permitted by law, hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give an option or options to purchase, contract to sell
or otherwise dispose of and deliver said Collateral, or any part thereof, in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or at any of the Pledgee's offices or elsewhere at such prices and on such
terms (including, without limitation, a requirement that any purchaser of all or
any part of the Collateral shall be required to purchase the Pledged Securities
for investment and without any intention to make a distribution thereof) as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk, with the right to the Pledgee or any purchaser upon such
sale or sales whether public or private to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Pledgor,
which right or equity is hereby expressly waived and released; and
(ii) The Pledgor hereby authorizes the Pledgee and does hereby
make, constitute and appoint the Pledgee and any officer or agent of the
Pledgee, with full power of substitution, as the Pledgor's true and lawful
attorney-in-fact, with power, in its own name or in the name of the Pledgor, to
endorse any notes, checks, drafts, money orders, or other instruments of payment
in respect of the Collateral that may come into possession of the Pledgee; to
demand, collect, receipt for, compromise, settle and sue for monies due in
respect of any or all of the
-3-
<PAGE>
Collateral; and, generally, to do, at the Pledgee's option and at Pledgor's
expense, at any time, or from time to time, all acts and things which Pledgee
deems necessary to protect, preserve and realize upon the Collateral and the
Pledgee's security interest therein in order to effect the intent of this Pledge
Agreement and the Credit Agreement, all as fully and effectually as the Pledgor
might or could do; and the Pledgor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney shall
be irrevocable as long as any of the Obligations shall be outstanding.
(f) The proceeds of any collection, recovery, receipt, appropriation,
realization or sale as aforesaid, shall be applied as follows:
First, to the costs and expenses of every kind incurred in connection
therewith or incidental to the care, safekeeping or otherwise of any and all of
the Collateral or in any way relating to the rights of the Pledgee hereunder,
including attorneys' fees and legal expenses;
Second, to the Obligations;
Third, to the payment of any other amounts required by applicable law
(including without limitation, Section 9-504(1) of the Uniform Commercial Code;
and
Fourth, to the Pledgors or to whomsoever is legally entitled thereto,
to the extent of the surplus proceeds, if any.
(g) The Pledgee need not give more than five days' (or less, if
commercially reasonable) notice of the time and place of any public sale or of
the time after which a private sale may take place and the Pledgor agrees such
notice shall be reasonable notification of such matters.
(h) In the event that the proceeds of any collection, recovery,
receipt, appropriation, realization, or sale as aforesaid are insufficient to
pay all amounts to which the Pledgee is legally entitled, the Pledgor will be
liable for the deficiency, together with interest thereon, at the rate
prescribed in the Credit Agreement, and the reasonable fees of any attorneys
employed by the Pledgee to collect such deficiency, provided that the foregoing
is not intended to restrict Pledgee's right to proceed against the Pledgor or
any other assets of Pledgor prior to proceeding against the Collateral hereunder
or otherwise enforcing its rights in any order and against any property as
Pledgee may in its discretion determine.
3. So long as no Event of Default under the Credit Agreement shall have
occurred and be continuing:
(a) Pledgor shall be entitled to exercise any and all voting and
other consensual rights and powers pertaining to the Collateral of Pledgor or
any part thereof for any purpose not inconsistent with the terms of this
Agreement; provided, however, that Pledgor shall not exercise or refrain from
-------- -------
exercising any such right if such action could reasonably be expected to result
in a Material Adverse Change in the value of the Collateral or any part thereof;
(b) The Pledgor shall be entitled to receive and retain any and all
cash dividends and distributions and interest payable on the Collateral, but any
---
and all stock and/or
-4-
<PAGE>
liquidating dividends, distributions in property, returns of capital or other
distributions made on or in respect of the Collateral, whether resulting from a
subdivision, combination or reclassification of the outstanding capital stock of
any issuer thereof or received in exchange for Collateral or any part thereof or
as a result of any merger, consolidation, acquisition or other exchange of
assets to which any such issuer may be a party or otherwise, and any and all
cash and other property received in payment of the principal of or in redemption
of or in exchange for any Collateral (either at maturity, upon call for
redemption or otherwise), shall be and become part of the Collateral and, if
received by the Pledgor, shall be held in trust for the benefit of the Pledgee
and shall forthwith be delivered to the Pledgee or its designated agent
(accompanied by proper instruments of assignment and/or stock and/or bond powers
executed by such in accordance with the Pledgee's instructions) to be held
subject to the terms of this Agreement, pursuant to Section 2(d) hereof and
except as otherwise required under the Credit Agreement and shall, if received
by Pledgor, be received in trust for the benefit of the Pledgee, be segregated
from the other property or funds of Pledgor and be forthwith delivered to the
Pledgee as Collateral in the same form as so received (with any necessary
endorsement); and
(c) The Pledgee shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies, dividend orders, interest coupons
and other instruments as Pledgor may reasonably request for the purpose of
enabling Pledgor to exercise the voting and other consensual rights and powers
that it is entitled to exercise pursuant to paragraph (i) above and to receive
the dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
4. The Pledgor represents and warrants that:
(a) ICG is the direct and beneficial owner of all of the Pledged
Securities; and
(b) The Pledged Securities listed on Annex A to the Letter Agreement
constitute all of the outstanding Securities of the Investment Entities owned by
ICG (not including the Excluded Pledged Securities);
(c) All of the Pledged Securities have been duly and validly issued
and are fully paid and non-assessable and the Collateral is owned by the
Pledgors free and clear of any Liens except for the pledge of such shares to the
Pledgee and the grant to the Pledgee of a security interest therein pursuant to
this Agreement, the contractual restrictions applicable to the transfer of the
Pledged Securities disclosed in the Letter Agreement, and Permitted Liens; and
(d) Upon delivery of the Pledged Securities to the Pledgee (or an
agent for the Pledgee), this Pledge Agreement creates and grants a valid first
lien on and perfected security interest in the Collateral and the proceeds
thereof, subject to no prior security interest, lien, charge or encumbrance or
to any agreement purporting to grant to any third party a security interest in
the property or assets of the Pledgor which would include the Collateral,
subject to Section 4(c) above.
5. (a) The Pledgor hereby covenants that so long as the Obligations
shall be outstanding and unpaid, in whole or in part, the Pledgor will not,
except as provided in Section
-5-
<PAGE>
5(c) herein, sell, convey or otherwise dispose of any of the Collateral or any
interest therein, nor will the Pledgor create, incur or permit to exist any
Liens except Permitted Liens with respect to any of the Collateral or the
proceeds thereof other than that created hereby.
(b) The Pledgor warrants and will defend the Pledgee's right, title,
special property and security interest in and to the Collateral against the
claims of any person, firm, corporation or other entity.
(c) Provided there does not exist and there is not continuing an
Event of Default under the Credit Agreement, Pledgor may sell Pledged
Securities, with contemporaneous notice to the Pledgee, as long as Pledgor
maintains with Pledgee, the Pledged Collateral in compliance with the Borrowing
Base as provided in the Credit Agreement. Following an Event of Default under
the Credit Agreement that is continuing, the proceeds of the sale of any Pledged
Securities sold pursuant hereto shall be used solely to repay amounts due under
the Credit Agreement. After the Expiration Date and repayment in full of the
Obligations other than the aggregate withdrawn face amount of issued and
outstanding letters of credit and all expenses and interest and fees thereon,
Pledgor may, except as next set forth, withdraw all Pledged Securities from the
pledge hereof, provided that Pledgor provides Pledgee with cash collateral,
satisfactory to Pledgee in its sole discretion, in an amount equal to 100% of
the face amount of all issued and outstanding letters of credit issued by the
Agent under the Credit Agreement.
(d) The Pledgor will update Annex A and Annex B to the Letter
Agreement, incorporated herein, in accordance with Sections 7.1.13 and 7.1.15 of
the Credit Agreement.
(e) The Pledgor hereby covenants that the cost basis of Excluded
Pledged Securities shall not exceed $10,000,000 in the aggregate, at any time.
6. (a) If the Pledgee shall determine to exercise its right to sell all
or any part of the Pledged Securities after the occurrence of an Event of
Default, and if in the opinion of counsel for the Pledgee it is necessary to
have the Pledged Securities, or that portion thereof to be sold, registered
under the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Pledgor will use its best commercial efforts to cause each issuer of
shares included in the Pledged Securities contemplated to be sold to execute and
deliver, and cause the directors and officers of each such issuer to execute and
deliver, all at the Pledgor's expense, all such instruments and documents, and
to do or cause to be done all such other acts and things as may be necessary to
register the Pledged Securities, or that portion thereof to be sold, under the
provisions of the Securities Act and to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Securities, or
that portion thereof so to be sold, and to make all amendments thereto and/or to
the related prospectus which, in the opinion of the Pledgee or its counsel, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto; to cause each such issuer to comply with the
provisions of the "Blue Sky" law of any jurisdiction which the Pledgee shall
designate; and to cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) covering a period of twelve months, but not more than eighteen months,
beginning with the first month after the effective date
-6-
<PAGE>
of any such registration statement, which earnings statement will satisfy the
provisions of Section 11(a) of the Securities Act.
(b) The Pledgor acknowledges that a breach of any of the covenants
contained in subparagraph (a) above will cause irreparable injury to the
Pledgee, that the Pledgee shall have no adequate remedy at law in respect of
such breach and, as a consequence, the covenants of the Pledgor contained in the
said subparagraph 5(a) shall be specifically enforceable against the Pledgor,
and the Pledgor hereby waives, and shall not assert any defenses against an
action for specific performance of such covenants, except for a defense that no
Event of Default defined or specified in the Credit Agreement has occurred.
(c) Notwithstanding the foregoing, the Pledgor recognizes that the
Pledgee may be unable to effect a public sale of all or a part of the Pledged
Securities, and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges
that any such private sales may be at prices and on terms less favorable to the
seller than if sold at public sales and agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner, and that the
Pledgee has no obligation to delay sale of any such securities for the period of
time necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act.
7. The Pledgor shall at any time and from time to time upon the written
request of the Pledgee, execute and deliver such further documents and do such
further acts and things as the Pledgee may reasonably request in order to
effectuate the purposes of this Pledge Agreement including without limitation,
delivering to the Pledgee at any time hereafter irrevocable proxies in respect
of the Pledged Securities, exercisable upon the occurrence and during the
continuance of an Event of Default, in a form reasonably satisfactory to the
Pledgee.
8. (a) Beyond the exercise of reasonable care to assure the safe custody
of the Collateral while held hereunder, the Pledgee shall have no duty or
liability to preserve rights pertaining thereto, and shall be relieved of all
responsibility for the Collateral upon surrendering it to the Pledgor.
(b) No course of dealing between the Pledgor and the Pledgee, nor any
failure to exercise, nor any delay in exercising, on the part of the Pledgee,
any right, power or privilege hereunder or under, arising out of, or in any way
connected with the Credit Agreement or the Notes, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(c) The rights and remedies herein provided, and provided in, arising
out of, or in any way connected with the Credit Agreement or the Notes, and in
all other agreements, instruments and documents delivered pursuant thereto, are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law including, without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code.
-7-
<PAGE>
(d) The provisions of this Pledge Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision in this Pledge Agreement.
9. The rights of the Pledgee hereunder shall not be impaired or in any
way affected, nor shall the Pledgor have any rights against the Pledgee by
reason of the fact that the Pledgee fails to preserve any rights in the
Collateral or fails to take any other action whatsoever in regard to the
Collateral; nor by reason of the fact that a valid lien in any of the Collateral
may not be conveyed to, or created in favor of the Pledgee; nor by reason of the
fact that any of the Obligations may be invalid or unenforceable against the
Pledgor or any obligor thereon for any reason whatsoever; nor by reason of the
release, in whole or in part, with or without consideration, of the Collateral
or any part of it.
10. Any notice or other communication given hereunder to the Pledgor shall
be deemed sufficient if given in accordance with the Credit Agreement.
11. This Pledge Agreement shall inure to the benefit of and be binding
upon, the successors and assigns of the parties hereto.
12. This Pledge Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania
relating to contracts executed and to be performed therein. The Pledgor hereby
irrevocably consents to the jurisdiction of the Courts of Common Pleas of
Philadelphia, Pennsylvania in all actions and proceedings in connection with
this Agreement, the Pledged Securities or the Loan Documents. The Pledgor
agrees that in any action or proceeding brought by it in such connection,
exclusive jurisdiction shall lie in the Courts of Common Pleas of Philadelphia,
Pennsylvania and the United States District Court for the Eastern District of
Pennsylvania.
13. All agreements, representations and warranties made herein shall
survive the delivery of this Agreement. THE PLEDGORS AND THE PLEDGEE
IRREVOCABLY WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN CONNECTION WITH, OR ARISING OUT OF, THIS AGREEMENT, THE NOTES, THE SECURITY
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
* * * * * *
-8-
<PAGE>
IN WITNESS WHEREOF, the parties intending this to take effect as an
instrument under seal have caused these presents to be duly executed and
delivered the day and year first above written.
ATTEST: INTERNET CAPITAL GROUP, INC.
Name:_________________________ BY:_______________________________
Title:________________________ Name:__________________________
Title:_________________________
PNC BANK, NATIONAL ASSOCIATION,
as Agent
BY:_______________________________
Name:__________________________
Title:_________________________
-9-
<PAGE>
EXHIBIT A
(AS OF APRIL 30, 1999)
(1) Benchmarking Partners, Inc. ("Benchmarking")
(2) BidCom, Inc. ("BidCom")
(3) Blackboard, Inc. ("Blackboard")
(4) Breakaway Solutions, Inc. ("Breakaway")
(5) ClearCommerce Corporation ("ClearCommerce"), formerly Outreach
(6) Collabria, Inc. ("Collabria")
(7) Commerx, Inc. ("Commerx") d/b/a Plastics Net
(8) The ComputerJobs Store, Inc. ("ComputerJobs")
(9) Context Integration, Inc. ("Context")
(10) Deja News, Inc. ("Deja News")
(11) E-Chemicals, Inc. ("E-Chemicals")
(12) Entegrity Solutions Corporation ("Entegrity")
(13) Internet Commerce Systems, Inc. ("ICS")
(14) Vivant! ("Vivant")
(15) LinkShare Corporation ("LinkShare")
(16) MegaDepot.com, Inc. ("MegaDepot")
(17) MessageQuest, Inc. ("MessageQuest")
(18) PlanSponsor.com, Inc. ("PlanSponsor")
(19) PrivaSeek, Inc. ("PrivaSeek")
(20) RapidAutoNet Corporation ("RapidAutoNet")
(21) SageMaker, Inc. ("SageMaker") formerly E-Volve
(22) ServiceSoft Corporation ("ServiceSoft")
(23) Sky Alland Marketing, Inc. ("Sky Alland")
<PAGE>
(24) Syncra Software, Inc. ("Syncra Software")
(25) Universal Access, Inc. ("Universal Access")
(26) VerticalNet, Inc. ("VerticalNet")
<PAGE>
COMPLIANCE CERTIFICATE
APRIL 30, 1999
PNC BANK, NATIONAL ASSOCIATION
as Agent for the Banks Party
to the Credit Agreement Referred to Below
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Ladies and Gentlemen:
I refer to the Credit Agreement, dated as of April 30, 1999 (as amended,
supplemented, restated or modified from time to time, the "Credit Agreement"),
among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations"; ICG
--------------
and ICG Operations being referred to herein individually as a "Borrower" and
--------
collectively as the "Borrowers"), the Banks party thereto and PNC BANK, NATIONAL
---------
ASSOCIATION, in its capacity as agent for the Banks under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings and all references to section numbers are to the
Credit Agreement. All calculations herein are performed according to the
conditions set forth in Section 1.3 of the Credit Agreement.
I, John N. Nickolas, Assistant Treasurer of the Administrative Borrower, do
hereby certify on behalf of each Borrower as set forth below as of the date
hereof, which date constitutes the Closing Date under the Credit Agreement:
1. MAXIMUM LEVERAGE RATIO (Section 7.2.17).
The ratio of (A) consolidated total indebtedness on the Closing Date to (B)
Consolidated Tangible Net Worth on the Closing Date is _____ to 1.0,
calculated as set forth below, which does not exceed .50 to 1.0.
(A) Consolidated Total Indebtedness for the Borrowers and their respective
-------------------------------
Subsidiaries as of the Closing Date, without duplication, is computed
as follows:
<TABLE>
<CAPTION>
<S> <C>
(i) Loans under the Credit Agreement $ --------------
(ii) Borrowed money and amounts raised under or liabilities in
respect of any note purchase or acceptance credit facility $ --------------
(iii) Reimbursement obligations under any letter of credit, currency
swap agreement, interest rate swap, cap, collar or floor
agreement or other interest rate management device $ --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(iv) Any other transaction (including forward sale or purchase
agreements, capitalized leases and conditional sales
agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or
capital requirements $ --------------
(v) All other obligations, indebtedness or liabilities (and
guaranties of any of the foregoing) defined as "Indebtedness"
in the Credit Agreement $ --------------
(vi) Sum of Items (A)(i) through (A)(v) equals consolidated total $ --------------
indebtedness of the Borrowers and their respective
Subsidiaries on the Closing Date
</TABLE>
(B) Consolidated Tangible Net Worth for the Borrowers and their
-------------------------------
respective Subsidiaries as of the Closing Date is computed as
follows, in each case determined on a consolidated basis in
accordance with GAAP:
<TABLE>
<CAPTION>
<S> <C>
(i) total stockholders' equity for the Borrowers and their $ --------------
respective Subsidiaries
(ii) minority interests in net assets of each Borrower's $ --------------
Subsidiaries
(iii) intangible assets for the Borrowers and their respective $ --------------
Subsidiaries
(iv) Sum of (x) (Items (B)(i) and (B)(ii)) minus (y) Item (B)(iii)
equals Consolidated Tangible Net Worth as of the Closing Date $ --------------
</TABLE>
2. INVESTMENTS (Section 7.1.15).
At no time did any Loan Party make an Investment in any Person, whether as
further Investment in a Person in which an Investment has previously been
made or as a new Investment in a new Person, in excess of $25,000,000 per
annum.
3. EVENTS OF DEFAULT OR POTENTIAL DEFAULT.
The Loan Parties are in compliance with all of the covenants under the
Credit Agreement and no event exists and is continuing which constitutes an
Event of Default or Potential Default.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 30th
day of April, 1999.
INTERNET CAPITAL GROUP, INC.
By:_______________________________________
Name: John N. Nickolas
Title: Assistant Treasurer
<PAGE>
COLLATERAL ASSIGNMENT OF CONTRACT RIGHTS
THIS ASSIGNMENT is made and entered into the 30th day of April, 1999,
by INTERNET CAPITAL GROUP, INC., a Delaware corporation, and INTERNET CAPITAL
GROUP OPERATIONS, INC., a Delaware corporation, (each an "Assignor", and
--------
together the "Assignors"), in favor of PNC BANK, NATIONAL ASSOCIATION, in its
---------
capacity as agent for the Banks under the Credit Agreement (as hereinafter
defined) (the "Agent" or "Assignee").
----- --------
WITNESSETH:
----------
WHEREAS, pursuant to that certain $50,000,000 Secured Revolving Credit
Facility Credit Agreement (as it may hereafter from time to time be restated,
amended, modified or supplemented, the "Credit Agreement") of even date herewith
----------------
by and among the Assignors as Borrowers, Assignee as Agent for the Banks named
therein, the Banks named therein and the Guarantors named therein, the Banks
have agreed to provide certain loans to the Assignors; and
WHEREAS, in order to provide additional security for the repayment of
such loans, the parties hereto desire that Assignee be granted an assignment and
security interest in all registration rights of the Assignors under those
certain Material Contracts (as defined in the Credit Agreement), listed on
Schedule A attached hereto (collectively referred to as the "Assigned
- ---------- --------
Contracts") relating to the securities of the Investment Entities (as defined in
the Credit Agreement) owned by the Assignors, pursuant to which the Assignors
have been granted by each of the Investment Entities certain demand and/or
piggy-back registration rights, among other rights, if any.
NOW, THEREFORE, in consideration of the promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by each Assignor, and intending to be
legally bound, each Assignor assigns to Assignee for the benefit of the Assignee
all of its right, title and interest in and to the Assigned Contracts to the
extent assignable and to the fullest extent permitted by Law.
1. Except as otherwise expressly provided herein, capitalized terms
used in this Assignment shall have the respective meanings given to them in the
Credit Agreement.
2. Each Assignor does hereby assign, transfer and set over unto
Assignee for the benefit of the Banks, its respective successors and assigns,
all the rights, interests and privileges which each such Assignor has or may
have in or under the Assigned Contracts, including without limiting the
generality of the foregoing, the present and continuing right with full power
and authority, in its own name, or in the name of the Assignor, or otherwise,
but subject to the provisions and limitations of Section 3 hereof, (i) to make
claim for, enforce, perform, collect and receive any and all rights under the
Assigned Contracts, (ii) to do any and all things which Assignor is or may
become entitled to do under the Assigned Contracts, and (iii) to make all
waivers and agreements, give all notices, consents and releases and other
instruments and
<PAGE>
to do any and all other things whatsoever which Assignor is or may become
entitled to do under the Assigned Contracts.
3. The acceptance of this Assignment and the payment or performance
under the Assigned Contracts shall not constitute a waiver of any rights of
Assignee under the terms of the Credit Agreement or any other Loan Documents, it
being understood that this Assignment is for security purposes only.
Accordingly, notwithstanding anything to the contrary set forth herein, each
Assignor shall retain all rights with respect to the Assigned Contracts,
including without limitation, the right to enforce all rights of each such
Assignor thereunder, except in each case during a period when an Event of
Default (as such term is defined in the Credit Agreement) has occurred and is
continuing.
4. Each Assignor, upon the occurrence and continuation of an Event of
Default, hereby authorizes Assignee, at Assignee's option, to do all acts
required or permitted under the Assigned Contracts as Assignee in its sole
discretion may deem proper. Each Assignor hereby irrevocably constitutes and
appoints Assignee, while this Assignment remains in force and effect and, in
each instance, to the full extent permitted by applicable Law, its true and
lawful attorney-in-fact, coupled with an interest and with full power of
substitution and revocation, for Assignor and in its name, place and stead, to
demand and enforce compliance with all the terms and conditions of the Assigned
Contracts and all benefits accrued thereunder, whether at law, in equity or
otherwise; provided, however, that Assignee shall not exercise any such power
-------- -------
unless and until an Event of Default shall have occurred and is continuing.
5. Assignee shall not be obligated to perform or discharge any
obligation or duty to be performed or discharged by any Assignor under the
Assigned Contracts, and each Assignor hereby agrees to indemnify Assignee for,
and to hold Assignee harmless from, any and all liability arising under the
Assigned Contracts, other than arising or resulting from Assignee's (or its
agents, employees or contractors) gross negligence or willful misconduct.
6. Each Assignor agrees that this Assignment and the designation and
directions herein set forth are irrevocable.
7. Neither this Assignment nor any action or inaction on the part of
Assignee shall constitute an assumption on the part of Assignee of any
obligations or duties under the Assigned Contracts.
8. Each Assignor covenants and warrants that:
(a) it has the power and authority to assign its Assigned
Contracts and there have been no prior assignments of its Assigned Contracts;
- 2 -
<PAGE>
(b) each of its Assigned Contracts is a valid contract, and that there
are, to the extent ascertainable by Assignor, no defaults on the part of any of
the parties thereto;
(c) it will not further assign, pledge or otherwise encumber its
Assigned Contracts without the prior written consent of Assignee;
(d) it will not cancel, terminate or accept any surrender of its
Assigned Contracts, or (except as may otherwise be permitted by the Loan
Documents) amend or modify the same directly or indirectly in any respect
whatsoever, without having obtained the prior written consent of Assignee
thereto;
(e) it will not waive or give any consent with respect to any material
default or material variation in the performance under its Assigned Contracts,
it will at all times take proper steps to enforce all of the provisions and
conditions thereof, and it will forthwith notify Assignee of any material
default under its Assigned Contracts;
(f) it will perform and observe, or cause to be performed and
observed, all of the terms, covenants and conditions on its part to be performed
and observed with respect to its Assigned Contracts;
(g) it will execute from time to time any and all additional
assignments or instruments of further assurance to Assignee, as Assignee may at
any time reasonably request;
(h) each of the Assigned Contracts permits Assignor to assign its
rights hereunder, and all consents from third parties, if required, have been
obtained prior to the execution hereof; and
(i) the Assignor has no other registration rights relating to its
securities of the Investment Entities other than those set forth in the Assigned
Contracts.
9. At such time as the Loans are indefeasibly paid in full, this
Assignment and all of each Assignee's right, title and interest hereunder with
respect to its Assigned Contracts shall terminate.
10. This Assignment shall inure to the benefit of Assignee, its
respective successors and assigns, and shall be binding upon each Assignor, its
successors, successors in title and assigns.
11. This Agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Pennsylvania without regard to its
conflicts of law principles.
[SIGNATURES BEGIN ON NEXT PAGE]
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this instrument as of
the day and year first above written.
INTERNET CAPITAL GROUP, INC.
By: _______________________________________________
Name: John Nickolas
Title: Managing Director and Assistant Treasurer
[Seal]
INTERNET CAPITAL GROUP OPERATIONS, INC.
By: _______________________________________________
Name: John N. Nickolas
Title: Managing Director, Operations and
Assistant Secretary
PNC BANK, NATIONAL ASSOCIATION,
As Agent
By: _______________________________________________
Name: Gregory M. Cote
Title: Vice President/Team Leader
<PAGE>
SCHEDULE A
----------
[List of Material Contracts to be provided.
<PAGE>
[LETTERHEAD OF DECHERT PRICE & RHOADS APPEARS HERE]
April 30, 1999
PNC Bank, National Association,
as Agent
One PNC Plaza - 22/nd/ Floor
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2797
and each of the Banks from time to time parties
to the Credit Agreement referred to below
Re: Internet Capital Group, Inc. and Internet Capital Group, Operations, Inc.
-------------------------------------------------------------------------
Ladies and Gentlemen:
We have served as special counsel to Internet Capital Group, Inc. ("ICG")
and Internet Capital Group Operations, Inc. ("ICGO" and together with ICG, each
a "Borrower" and collectively the "Borrowers"), each a Delaware corporation, in
connection with the $50,000,000 Secured Revolving Credit Facility Credit
Agreement dated as of the date hereof (the "Agreement"), by and among the
Borrowers, the Banks (as defined in the Agreement), and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as agent for the Banks under the Agreement
(hereinafter referred to in such capacity as the "Agent"). This opinion is
delivered pursuant to the requirements set forth in Section 6.1.7 of the
Agreement. Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Loan Documents (as defined below).
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 2
In connection with our representation as described above, we have reviewed
executed copies of the following documents, each dated on or about the date
hereof (the "Loan Documents"):
1. the Agreement;
2. the Revolving Credit Notes;
3. the Pledge Agreement;
4. the Intercompany Subordination Agreement;
5. the Patent, Trademark and Copyright Assignment;
6. the Security Agreement;
7. the Warrant Agreement;
8. the Collateral Assignment of Contract Rights; and
9. the Letter Agreement.
In rendering this opinion we have examined, in addition to the Loan
Documents, (i) certified copies of the applicable organizational documents and
resolutions of each Borrower, (ii) certificates of good standing for each
Borrower issued by the jurisdiction of its incorporation or formation, and (iii)
such other documents and records pertaining to each Borrower as in our judgment
are necessary or appropriate to enable us to render the opinions expressed
below.
For purposes of this opinion, we have assumed that:
(a) The execution and delivery of the Loan Documents and other
documents reviewed by us, and the entry into and performance of the transactions
contemplated by the Loan Documents by all parties other than the Borrowers have
been duly authorized by all necessary corporate action and constitute the valid
and binding obligations of all such parties other than the Borrowers.
(b) All natural persons who are signatories to the Loan Documents were
legally competent at the time of execution and delivery; all signatures on the
Loan Documents and other documents reviewed by us on behalf of parties other
than the Borrowers are genuine; the copies of all documents submitted to us are
accurate and complete and conform to originals; and all material terms and
conditions of the relationship among the Borrowers, the Agent and the Banks are
correctly and completely reflected in the Loan Documents.
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 3
(c) Each Borrower has rights in each item of its respective collateral
existing on the date hereof and will have rights in each such item of collateral
arising after the date hereof.
(d) As to matters of fact material to our opinions, we have relied
upon representations of ICG or ICGO or both, as applicable, in the Loan
Documents, and on certificates of officers of ICG or ICGO or both, as
applicable, delivered to the Agent, and of public officials, and we have made no
independent inquiry into the accuracy of such representations.
Our opinions set forth herein are based on our consideration of only those
statutes, rules, regulations and judicial decisions which, in our experience,
are normally applicable to, or normally relevant in connection with, a
transaction of the type contemplated in the Loan Documents. Whenever our
opinion with respect to the existence or absence of facts is indicated to be
based on our knowledge or awareness, we are referring to the current actual
knowledge of the Dechert Price & Rhoads' attorneys who have rendered legal
services to the Borrowers in connection with the transactions contemplated by
the Loan Documents, which knowledge has been obtained by such attorneys in their
capacity as such. Except as expressly set forth herein, we have not undertaken
any independent investigation to determine the existence or absence of such
facts and no inference as to our knowledge concerning such facts should be drawn
from the fact that such representation has been undertaken by us.
Based upon the foregoing, but subject to the assumptions, limitations, and
qualifications set forth below, we are of the opinion that:
1. Each Borrower is a corporation validly existing and in good
standing under the laws of the State of Delaware. Each Borrower has the
requisite corporate power to own or lease its properties and to engage in the
business it presently conducts or presently proposes to conduct. Each Borrower
has the requisite corporate power and authority to execute and deliver each Loan
Document to which it is a party and to borrow under the Agreement, perform its
obligations thereunder and grant the security interests to be granted by it
pursuant to the applicable Loan Documents.
2. Each Borrower has taken all necessary corporate action to
authorize its execution, delivery and performance of the Loan Documents, to
grant the security interests granted by it pursuant to the Loan Documents and to
borrow under the Agreement. Each Loan Document to which a Borrower is a party
has been duly executed and delivered by such Borrower.
3. The execution and delivery by each Borrower of the Loan
Documents, each Borrower's borrowings in accordance with the terms of the Loan
Documents, performance of each Borrower's obligations thereunder and granting of
the security interests to be granted by
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 4
each Borrower pursuant to the Loan Documents (a) will not result in any breach
or violation of any of the terms or provisions of, or constitute a default under
(1) the Certificate of Incorporation or By-Laws of such Borrower, or (2)
assuming that proceeds of borrowings will be used in accordance with the terms
of the Loan Documents, any federal or Pennsylvania statute or the Delaware
General Corporation Law or any rule or regulation issued pursuant to any
Pennsylvania or federal statute or the Delaware General Corporation Law or any
order known to us issued by any court or governmental agency or body applicable
to such Borrower and (b) will not result in a breach of, constitute a default
under, require any consent under, or result in the acceleration or required
prepayment of any indebtedness pursuant to the terms of, any agreement or
instrument of which we have knowledge to which such Borrower is a party or by
which such Borrower is bound or to which such Borrower is subject, or (except
for the liens created pursuant to the Loan Documents) result in the creation or
imposition of any lien upon any property of such Borrower pursuant to the terms
of any such agreement or instrument.
4. No consent, approval, authorization, order, filing, registration
or qualification of or with any federal or Pennsylvania governmental agency or
body or any Delaware governmental agency or body acting pursuant to the Delaware
General Corporation Law is required for the execution and delivery by the
Borrowers of the Loan Documents, the borrowings by the Borrowers in accordance
with the terms of the Loan Documents or the performance by the Borrowers of
their respective payment and other obligations under the Loan Documents or the
granting of any security interests under the Loan Documents, except for the
filing of any Financing Statements and a Federal Reserve Form U-1. We express
no opinion with respect to the Investment Company Act of 1940, as amended, which
opinion we understand will be provided to the Agent, for the benefit of the
Banks, by Davis Polk & Wardwell.
5. Each Loan Document to which a Borrower is a party is the valid
and legally binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms.
6. To our knowledge, (a) there is no action, suit or proceeding now
pending before or by any court, arbitrator or governmental agency, body or
official to which either Borrower is a party or to which the business, assets or
property of either Borrower is subject, and (b) no such action, suit or
proceeding is threatened to which either Borrower or the business, assets or
property of either Borrower would be subject, that in the case of either (a) or
(b), questions the validity of the Loan Documents or the transactions
contemplated thereby.
7. Assuming that each Borrower will comply the provisions of the
Loan Documents relating to the use of proceeds and the maintenance of collateral
levels required
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 5
under the Pledge Agreement, the making of loans under the Loan Documents on the
date hereof will not violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System.
8. The Pledge Agreement creates in favor of the Agent, for the
benefit of the Banks, a security interest under the Pennsylvania Uniform
Commercial Code (the "Pennsylvania UCC") in the Pledged Securities ( as defined
in the Pledge Agreement) of the Investment Entities identified from time to time
by Borrower under the Loan Documents.
9. The Agent for the benefit of the Banks will have a perfected
security interest in the Pledged Securities under the Pennsylvania UCC upon
delivery to the Agent in the Commonwealth of Pennsylvania of the certificates
representing the Pledged Securities in registered form, endorsed in blank by an
effective endorsement or accompanied by undated stock, warrant, debenture or
note powers, as applicable, with respect thereto duly endorsed in blank by an
effective endorsement. Assuming the Agent does not have notice of any adverse
claim to the Pledged Securities, the Agent for the benefit of the Banks will
acquire the security interest in the Pledged Securities prior to any other lien
or security interest therein.
10. The Security Agreement creates in favor of the Agent for the
benefit of the Banks a security interest in the collateral described therein in
which a security interest may be created under Article 9 of the Pennsylvania UCC
(the "Article 9 Collateral").
11. Upon the proper filing of each financing statement in the
applicable offices, assuming the representations made by each Loan Party in the
Security Agreement with respect to the location of its Article 9 Collateral are
and remain true and correct, the security interest in favor of the Agent for the
benefit of the Banks in the Article 9 Collateral described in such financing
statement will be perfected to the extent a security interest in such Article 9
Collateral can be perfected by filing a financing statement under the provisions
of the Pennsylvania UCC.
12. Based solely upon our review of the Borrowers' stock record
books, all of the shares of capital stock described on Schedule 5.1.2 to the
Agreement are owned of record by the Persons set forth on Schedule 5.1.2 to the
Agreement.
13. The shares of Common Stock of ICG issuable upon the exercise of
the Warrant, and upon payment therefor in accordance with the terms of the
Warrant will be validly issued, fully paid and non-assessable. The shares have
been duly reserved for issuance by ICG.
Our opinions are subject to the following further qualifications:
(a) The opinions expressed herein are limited by principles of
equity which may limit the availability of certain rights and remedies and do
not reflect the effect of
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 6
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws or decisions relating to or affecting debtors' obligations or
creditors' rights generally. The opinions expressed above also do not reflect
the effect of laws and equitable doctrines (including requirements that the
parties to agreements act reasonably and in good faith and, with respect to
collateral, in a commercially reasonable manner, and give reasonable notice
prior to exercising rights and remedies) which may limit the availability of any
particular remedy but which will not, in our judgment, make the remedies
available to the Agent or the Banks under the Loan Documents inadequate for the
practical realization of the benefits of the security provided for in the Loan
Documents, except for the economic consequence of any delay which may be imposed
thereby or result therefrom, and except that we express no opinion as to the
rights of any of the parties to the Loan Documents to accelerate the due dates
of any payment due thereunder or to exercise other remedies available to them on
the happening of a non-material breach of any such document or agreement.
(b) Without limiting the generality of the foregoing, we express no
opinion with respect to: (1) the availability of specific performance or other
equitable remedies for noncompliance with any of the provisions contained in the
Loan Documents; or (2) the enforceability of provisions contained in Loan
Documents relating to the effect of laws which may be enacted in the future.
(c) We have made no examination and express no opinion with respect
to: (1) the title to or ownership of the Pledged Securities; (2) the accuracy of
any descriptions of Collateral in any security agreement or financing
statements; (3) the existence or absence of any liens, charges or encumbrances
on any Pledged Securities; and (4) except as set forth in the last sentence of
paragraph 9 hereof, the priority of any lien or security interest.
(d) Without limiting the generality of the foregoing, we express no
opinion as to the legality, validity, binding nature or enforceability of (1)
any self-help provisions; (2) provisions in the Loan Documents purporting to
waive the effect of applicable laws; (3) provisions that purport to establish
evidentiary standards; (4) provisions that provide for the enforceability of the
remaining terms and provisions of the applicable Loan Document in circumstances
in which certain other terms and provisions of such Loan Documents are illegal
or unenforceable; (5) provisions that provide that certain rights or obligations
are absolute or unconditional; (6) provisions related to waivers of remedies (or
the delay or omission of enforcement of remedies), disclaimers, liability
limitations or limitations on the obligations of the Bank in circumstances in
which a failure of condition or default by any Loan Party is not material; (7)
provisions related to releases or waivers of legal or equitable rights,
discharges of defenses, or reimbursement or indemnification in circumstances in
which the person seeking reimbursement or indemnification has breached its
duties under the applicable Loan Document, or otherwise, or itself has been
negligent; (8) provisions which purport to authorize any person to sign or file
financing statements without the signature of the debtor (except to the extent
that a
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 7
secured party may execute and file financing statements without the signature of
the debtor under Section 9-402(2) of the UCC); or (9) any power-of-attorney
given under the Loan Documents which is intended to bind successors and assigns
which have not granted such powers by a power-of-attorney specifically executed
by them.
(e) In giving the opinion set forth in paragraph 9 above, we have
assumed that (1) the Agent maintains possession and control of certificates
representing the Pledged Securities accompanied by appropriate executed stock
powers; (2) no part of the Pledged Securities is subject to a security interest
that is perfected under the laws of another jurisdiction by means other than
possession and control, or constitutes the proceeds of any property subject to a
third party security interest; and (3) the Pledged Securities or the proceeds
thereof are not subject to (i) any lien of any government or any agency or
instrumentality thereof, including without limitation, any federal, state or
local tax lien, (ii) any claims of any federal priority statute (31 U.S.C. (S)
3713), (iii) any lien arising under the Employee Retirement Income Security Act
of 1974, as amended or (iv) any lien arising by operation of law other than
under the Pennsylvania UCC (including without limitation any attachment or
execution lien) or other lien which does not require possession or control to
take priority over other security interests.
We are qualified to practice law in the Commonwealth of Pennsylvania. We
do not express any opinion herein concerning any laws of any jurisdiction other
than the laws of the Commonwealth of Pennsylvania, the General Corporation Law
of the State of Delaware and the federal laws of the United States of America.
Our opinions are limited to the specific issues addressed and are limited
in all respects to laws and facts existing on the date hereof. By rendering our
opinions, we do not undertake to advise you of any changes in such laws or facts
which may occur after the date hereof.
The opinions set forth herein are expressed solely for your benefit and for
the benefit of any other parties which may subsequently become Banks, assignees
or participants as permitted under Section 10.12 of the Agreement.
Very truly yours,
<PAGE>
EXHIBIT 1.1(A)
form of
ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to the Credit Agreement dated as of April __, 1999,
(as amended, supplemented or modified from time to time, the "Credit Agreement")
----------------
among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
---
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations"; ICG
--------------
and ICG Operations being hereinafter referred to individually as a "Borrower"
and collectively as the "Borrowers"), the BANKS (as defined in the Credit
Agreement) and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the
Banks (the "Agent"). Unless otherwise defined herein, terms defined in the
-----
Credit Agreement are used herein with the same meanings.
__________________________________ (the "Assignor") and
________________________________ (the "Assignee"), intending to be legally bound
hereby, make this Assignment and Assumption Agreement this __ day of___________,
_____ and hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE to the
Assignor, a ________ percent (_____%) interest in and to all of the Assignor's
rights and obligations under the Credit Agreement as of the Effective Date (as
defined below), including without limitation, such percentage interest in the
Assignor's Revolving Credit Commitment and Revolving Credit Loans, as in effect
or owing to the Assignor on the Effective Date and the Notes evidencing the
outstanding Loans held by the Assignor.
2. The Assignor: (i) represents and warrants that, as of the date
hereof, its Revolving Credit Commitment is $_______, the unpaid principal amount
of the Revolving Credit Loans owing to the Assignor is $_______; (ii) represents
and warrants that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (iii) makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or any of the Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any of the Loan Documents or any other instrument or
document furnished pursuant thereto; (iv) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under the Credit Agreement or any of the Loan Documents or any other
instrument or document furnished pursuant thereto; and (v) attaches the Notes
referred to in paragraph 1 above and requests that the Agent exchange such Notes
for new Notes as follows:
[INSERT LIST OF NEW NOTES]
3. The Assignee: (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements (if any)
referred to in Sections 5.1.9, 7.3.1 and 7.3.2, of the Credit Agreement and such
other documents and information as it has
<PAGE>
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Bank, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) appoints and authorizes the Agent to take such
actions on its behalf and to exercise such powers under the Loan Documents as
are delegated to such Agent by the terms thereof; (iv) agrees that it will
become a party to and be bound by the Credit Agreement on the Effective Date
(including without limitation the provisions of Section 10.11 and Section 10.12)
as if it were an original Bank thereunder and will have the rights and
obligations of a Bank thereunder and will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are required
to be performed by it as a Bank; and (v) specifies as its address for notices
the office set forth beneath its name on the signature pages hereof.
4. The effective date of this Assignment and Assumption shall be
_____________, _____ (the "Effective Date"). Following the execution of this
--------------
Assignment and Assumption, it will be delivered to the Agent for acceptance and
recording by the Agent.
5. Upon such acceptance and recording, as of the Effective Date, (i)
the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Assumption, have the rights and obligations of a
Bank thereunder and under the Loan Documents and (ii) the Assignor shall, to the
extent provided in this Assignment and Assumption, relinquish its rights and be
released from its obligations under the Credit Agreement and the Revolving
Credit Commitment of the Assignor and the Assignee shall be as set forth in
Schedule I hereto.
6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payment under the Credit Agreement and the Notes
in respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest, Commitment Fees and Letter of Credit Fees with
respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement and the Notes for
periods prior to the Effective Date directly between themselves.
7. The Assignor makes this assignment to the Assignee in
consideration of the payment by the Assignee to the Assignor of $_______,
receipt of which is hereby acknowledged by the Assignee.
8. This Assignment and Assumption shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
9. Assignor has paid to the Agent the fee of $3,500 referred to in
Section 10.11 of the Credit Agreement.
10. [This section is applicable only if the Assignee is incorporated
outside of the United States.] Assignee has delivered at least five (5) Business
Days prior to the Effective Date two duly completed copies of Internal Revenue
Service Form W-9, 4224 or 1001, or other applicable form prescribed by the
Internal Revenue Service, certifying that such Assignee is
-2-
<PAGE>
entitled to receive payments under the Credit Agreement and the other Loan
Documents without deduction or withholding of any United States federal income
taxes, or is subject to such tax at a reduced rate under an applicable tax
treaty. [Alternative: Assignee has delivered at least five (5) Business Days
prior to the Effective Date two duly completed copies of Internal Revenue
Service Form W-8 of Assignee indicating that Assignee is subject to withholding
of United States federal income taxes.]
[NAME OF ASSIGNOR]
By: __________________________________
Name: ____________________________
Title:____________________________
[NAME OF ASSIGNEE]
By: __________________________________
Name: ____________________________
Title:____________________________
Notice Address:
________________________________________
________________________________________
________________________________________
Telephone No.: _________________________
Telecopier No.: ________________________
Attn:.__________________________________
CONSENTED TO this____
day of ___________, ____.
PNC BANK, NATIONAL
ASSOCIATION, as Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
INTERNET CAPITAL GROUP, NC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
*If applicable
-3-
<PAGE>
SCHEDULE I
Amount of Commitment for Amount of Revolving
Revolving Credit Loans as Credit Loans as of the
of the Effective Date Effective Date
[Assignor] $__________________ $__________________
[Assignee] $__________________ $__________________
<PAGE>
EXHIBIT 1.1(B)
Form of
BORROWING BASE CERTIFICATE
--------------------------
(Internet Capital Group, Inc.)
(Internet Capital Group Operations, Inc.)
______________________, [1999] [2000]
PNC BANK, NATIONAL ASSOCIATION
as Agent for the Banks Party to the
Credit Agreement Referred to Below
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Ms. Arlene Ohler
Ladies and Gentlemen:
I refer to Section 7.3.4 of the Credit Agreement, dated as of April 30,
1999 (the "Credit Agreement"), among INTERNET CAPITAL GROUP, INC., a Delaware
----------------
corporation ("ICG"). INTERNET CAPITAL GROUP OPERATIONS, INC., a Delaware
---
corporation ("ICG Operations"; ICG and ICG Operations being hereinafter referred
--------------
to individually as a "Borrower" and collectively as the "Borrowers", the Banks
and PNC BANK, NATIONAL ASSOCIATION, as Agent (the "Agent"), on behalf of the
Banks. Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein with the same meanings. I, ____________________________________,
[CHIEF EXECUTIVE OFFICER, PRESIDENT, CHIEF FINANCIAL OFFICER, TREASURER OR
ASSISTANT TREASURER] of the Administrative Borrower, do hereby certify on behalf
of each Borrower as of the last Business Day of the week ended _______________
[1999/2000] (the "Report Date"), that the components of the "Borrowing Base" are
as follows:
A. BORROWING BASE
1. Private Company Advance (as determined in accordance
with the definition of "Borrowing Base" in the Credit
Agreement) - See Schedule A attached hereto [Included
Securities] and Schedule D attached hereto [Excluded
Securities] $___________
2. Additional Private Company Advance, if any $___________
3. 15% of the value (as determined in accordance with the
definition of Borrowing Base) of Qualified Public
Company Restricted Securities - See Schedule B attached
hereto and Schedule D attached hereto [Excluded
Securities] $___________
<PAGE>
4. 25% of the value (as determined in accordance with the
definition of Borrowing Base) of Qualified Public
Company Unrestricted Securities - See Schedule C
attached hereto and Schedule D attached hereto
[Excluded Securities] $___________
5. Sum of Items A(1), A(2), A(3) and A(4) $___________
B. OUTSTANDINGS
1. Principal Amount of Loans Outstanding $___________
2. Letters of Credit Outstanding $___________
3. Sum of Items B(1) and B(2) = "Facility Usage" $___________
C. COMPLIANCE
1. Excess of Item A(5) over Item B(3) $___________
2. If Item C(1) is less than zero ($0), amount of
mandatory prepayment due $___________
D. OTHER MATTERS
The undersigned further certifies as follows:
1. Each Borrower is in compliance with, and since the most recent prior
Report Date has at all times complied with, the provisions of the Credit
Agreement.
2. No event has occurred and is continuing which constitutes an Event of
Default or Potential Default.
3. With respect to all financial statements delivered by or on behalf of
any Borrower contemporaneously herewith, such statements are true and correct.
4. Borrowers have received all consents necessary to pledge any Private
Company Restricted Securities included in this Borrowing Base Certificate
acquired by such Borrowers since the date of the last Borrowing Base
Certificate.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Borrowing Base Certificate
this ___ day of______________, [1999/2000].
INTERNET CAPITAL GROUP, INC.
By:__________________________________________
Name:________________________________________
Title: [CHIEF EXECUTIVE OFFICER, PRESIDENT,
CHIEF FINANCIAL OFFICER, TREASURER OR
ASSISTANT TREASURER]
<PAGE>
SCHEDULE A
----------
COST BASIS DETERMINED
NAME OF ISSUER OF PRIVATE IN ACCORDANCE WITH THE
COMPANY RESTRICTED SECURITY BORROWING BASE DEFINITION
- --------------------------- -------------------------
(i) Benchmarking Partners
(ii) Bid Coin, Inc.
(iii) Blackboard, Inc.
(iv) Breakaway Solutions, Inc.
(v) ClearCommerce Corporation
(vi) Collabria, Inc.
(vii) Commerx, Inc.
(viii) The ComputerJobs Store
(ix) Context Integration
(x) Deja News, Inc.
(xi) E-Chemicals, Inc.
(xii) Entegrity Solutions Corporation
(xiii) Vivant! (f/k/a Illuminate Corporation)
(xiv) Internet Commerce Systems, Inc.
(xv) Linkshare Corporation
(xvi) MegaDepot, Inc.
(xvii) MessageQuest, Inc.
(xviii) PlanSponsor.com, Inc.
(xix) PrivaSeek, Inc.
(xx) RapidAutoNet Corporation
<PAGE>
(xxi) SageMaker, Inc.
(xxii) ServiceSoft Technologies, Inc.
(xxiii) Sky Alland Marketing, Inc.
(xxiv) Syncra Software, Inc.
(xxv) Universal Access, Inc.
<PAGE>
SCHEDULE B
----------
NAME OF ISSUER OF PUBLIC MARKET VALUE DETERMINED IN ACCORDANCE
COMPANY RESTRICTED SECURITY WITH THE BORROWING BASE DEFINITION
- --------------------------- ----------------------------------
$________________________
<PAGE>
SCHEDULE C
----------
NAME OF ISSUER OF PUBLIC MARKET VALUE DETERMINED IN ACCORDANCE
COMPANY RESTRICTED SECURITY WITH THE BORROWING BASE DEFINITION
- --------------------------- ----------------------------------
$________________________
<PAGE>
SCHEDULE D
----------
MARKET VALUE OR COST BASIS DETERMINED IN
EXCLUDED PLEDGED SECURITIES ACCORDANCE WITH THE BORROWING BASE DEFINITION
- --------------------------- ---------------------------------------------
Excite, Inc. $________________________
Lycos, Inc. $________________________
Applica Corporation $________________________
SMART Technologies, Inc. $________________________
U.S. Interactive, Inc. $________________________
Who? Vision Systems, Inc. $________________________
<PAGE>
EXHIBIT 1.1(C)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL
FOR THE BORROWER, TO THE EFFECT THAT THE PROPOSED SALE,
ASSIGNMENT, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED
WITHOUT REGISTRATION UNDER THE ACT. IN ADDITION, THIS
CONVERTIBLE NOTE AND THE SECURITIES ISSUABLE UPON ITS
CONVERSION ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS
UNDER THE CERTIFICATE OF INCORPORATION AND BYLAWS OF THE
COMPANY.
PAYMENT UNDER THIS CONVERTIBLE NOTE IS SUBJECT TO THE PRIOR
PAYMENT IN FULL OF THE BORROWER'S OBLIGATIONS UNDER THE
CREDIT AGREEMENT AS MORE FULLY DESCRIBED IN THE
SUBORDINATION PROVISIONS OF SECTION 5 HEREIN.
CONVERTIBLE NOTE (Internet Capital Group, Inc.)
$______ April __, 1999
In consideration of the loan (hereinafter referred to as a "Loan") ___ [an
individual/corporation/partnership] (the "Lender"), has made to Internet Capital
Group, Inc., a Delaware corporation (the "Borrower"), and for value received,
the Borrower hereby promises to pay to the order of the Lender, at the Lender's
office located at ___________________________________________________ or at
such other place in the continental United States as the Lender may designate in
writing, in lawful money of the United States, and in immediately available
funds, the principal sum of $_______.
1. Maturity Date. The unpaid principal balance of this Convertible Note
-------------
(this "Note") shall be paid on the earlier of (i) April __, 2002 (the "Due
Date"), (ii) the closing of the next round of equity financing in the Borrower
raising not less than $50,000,000 from private investors (the "Next Round
Financing") and (iii) the effective date of the registration statement for an
underwritten public offering of Borrower's Common Stock (as defined below)(the
"IPO").
2. Interest. The Borrower hereby further promises to pay to the order of
--------
the Lender interest on the outstanding principal amount from April ___, 1999, at
an annual rate equal to (i) the Applicable Federal Rate as of the date hereof
(4.99%) for the period from the date hereof until April __, 2000 (the "Initial
Term") and (ii) the announced prime rate of PNC Bank, N.A. (the "Prime Rate")
for the period following the Initial Term (the "Second Term"). The interest rate
for the Second Term shall be changed when and as the Prime Rate changes. In
addition, the
<PAGE>
Borrower shall pay on demand interest on any overdue payment of principal and
interest (to the extent legally enforceable) at the fluctuating Prime Rate plus
three percent (3%).
Interest shall be payable when the unpaid principal balance of the Note is
paid. If this Note is converted as provided in Section 3 hereof, no interest
will be paid.
All payments made on this Note shall be applied, at the option of the
Lender, first to late charges and collection costs, if any, then to accrued
interest and then to principal. Interest payable hereunder shall be calculated
for actual days elapsed on the basis of a 360-day year. Accrued and unpaid
interest shall be due and payable upon maturity of this Note. After maturity or
in the event of default, interest shall continue to accrue on the Note at the
rate set forth above and shall be payable on demand of the Lender.
Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.
3. Conversion. (a) Subject to and in compliance with the provisions of
----------
this Section 3, if during the Initial Term the Borrower completes an IP0 or Next
Round Financing, the outstanding principal amount of this Note shall
automatically convert into fully paid nonassessable shares of the Borrower's
Common Stock, par value $.001 per share (the "Common Stock"), at the Conversion
Price in effect on the date of conversion. Such conversion shall become
effective immediately prior to (i) the effectiveness of the registration
statement for the IP0 or (ii) the closing of the Next Round Financing, as
applicable.
(b) Subject to and in compliance with the provisions of this Section
3, during the Second Term and prior to the payment of the outstanding principal
amount of this Note, the Lender may convert the outstanding principal amount of
this Note, in whole or in part, into fully paid nonassessable shares of the
Common Stock at the Conversion Price in effect on the date of conversion. The
Lender shall only be entitled to convert this Note into Common Stock one time,
upon the earliest of the following events to occur.
(i) If, prior to the Due Date, the Borrower files a registration
statement for an IP0, the Borrower shall, within five business days of the
initial filing of such registration statement, send written notice to the Lender
of such filing (the "Filing Notice"). The Lender shall, within 30 days from the
date of receipt of the Filing Notice (but in any event no later than the
printing of the red herring prospectus for the IPO), determine whether or not it
will convert the outstanding principal amount of this Note, in whole or in part,
into Common Stock in accordance with this Section 3 and send written notice to
the Borrower of such election. If, upon the expiration of such 30-day period,
the Lender has not elected to convert this Note into Common Stock or has not
notified the Borrower of its election, the Lender shall forfeit its right to
-2-
<PAGE>
convert this Note into Common Stock. If the Lender has elected to convert this
Note into Common Stock pursuant to this paragraph (b)(i), the conversion shall
become effective immediately prior to the effectiveness of the registration
statement for the IPO.
(ii) If, prior to the Due Date, the Borrower has scheduled the
closing of the Next Round Financing, then at least 20 days prior to the closing
of the Next Round Financing the Borrower shall send written notice to the Lender
of such closing (the "Closing Notice"). The Lender shall, within 20 days from
the date of receipt of the Closing Notice, determine whether or not it will
convert the outstanding principal amount of this Note, in whole or in part, into
Common Stock in accordance with this Section 3 and send written notice to the
Borrower of such election. If, upon the expiration of such 20-day period, the
Lender has not elected to convert this Note into Common Stock or has not
notified the Borrower of its election, the Lender shall forfeit its right to
convert this Note into Common Stock. If the Lender has elected to convert this
Note into Common Stock pursuant to this paragraph (b)(ii), the conversion shall
become effective immediately prior to the closing of the Next Round Financing.
4. The "Conversion Price" at which Common Stock shall be issuable upon
conversion of this Note shall equal either (i) the price per share of the Common
Stock in the IPO or (ii) the price per share of Common Stock in the Next Round
Financing.
To exercise the conversion privilege or effect the automatic conversion,
the Lender shall surrender this Note to the Borrower at its principal office. In
the case of exercising the conversion privilege, the Lender shall surrender the
Note together with a written conversion notice to the Borrower. This Note or
portion thereof shall be deemed to have been converted immediately prior to the
close of business on the date of receipt of such Note, even if the Borrower's
stock transfer books are on that date closed, and the Lender, or the nominee or
nominees of such Lender, shall be treated for all purposes as the record holder
of the shares of Common Stock deliverable upon such conversion as of the close
of business on such date. Promptly after receipt by the Borrower of this Note
and written conversion notice, the Borrower shall issue and deliver, at its
expense, to the Lender, or to the nominee or nominees of such Lender, a
certificate or certificates for the number of shares of its Common Stock due on
such conversion. In the case of a conversion of only a portion of the
outstanding principal amount of this Note, the Borrower shall execute and
deliver to the Holder (or its nominee or nominees), at the expense of the
Borrower, a replacement note in a principal amount equal to the unconverted
portion of such Note and dated and bearing interest from the date of such Note.
No fractional shares of Common Stock shall be issued upon conversion of
this Note. Instead of any fractional share of Common Stock which would otherwise
be issuable upon conversion of this Note, the Borrower shall pay a cash
adjustment in respect of such fractional interest. The Lender, by its acceptance
thereof, expressly waives any right to receive any fractional share upon
conversion of the Note.
-3-
<PAGE>
5. Subordination. The Note is subordinated in right of payment, in the
-------------
manner and to the extent set forth in the Credit Agreement, dated as of April
__, 1999 (as amended, supplemented or modified from time to time, the "Credit
Agreement") among the Borrower, Internet Capital Group Operations, Inc., the
Banks (as defined in the Credit Agreement), and PNC Bank, National Association,
in its capacity as Agent for the Banks, to the prior payment in full of all
Obligations (as defined in the Credit Agreement) of the Loan Parties (as defined
in the Credit Agreement) whether outstanding on the date of the Credit Agreement
or thereafter created, incurred, assumed or guaranteed. The terms of
subordination evidenced by Exhibit 1.1 (D) to the Credit Agreement and attached
hereto as Exhibit B are hereby incorporated herein by reference thereto. The
Lender by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Agent, on his behalf, to take such action
as may be necessary or appropriate to enforce the subordination provided for in
the Credit Agreement and herein and appoints the Agent his attorney-in-fact for
such purpose.
6. Events of Default. An event of default hereunder shall consist of:
-----------------
(a) a default in the payment by the Borrower to the Lender of
principal or interest under this Note as and when the same shall become due
and payable, and such default continues for a period of 15 days;
(b) an event of default by the Borrower under any other obligation,
instrument, note or agreement for borrowed money ("Indebtedness"), beyond
any applicable notice and/or grace period (a "Cross-Default"), provided the
aggregate principal amount of such Indebtedness to which such Cross-Default
relates, together with any such other Indebtedness in which there is a
Cross-Default, exceeds $1,000,000;
(c) institution of any proceeding by or against the Borrower under
any present or future bankruptcy or insolvency statute or similar law and,
if involuntary, if the same are not stayed or dismissed within ninety (90)
days, or the Borrower's assignment for the benefit of creditors or the
appointment of a receiver, trustee, conservator or other judicial
representative for the Borrower or the Borrower's property, or the
Borrower's being adjudicated a bankrupt or insolvent.
Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), and
the entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available at law or in
equity.
7. Summary Proceedings. Any action, suit or proceeding where the amount
-------------------
in controversy as to at least one party, exclusive of interest and costs,
exceeds $1,000,000 ("Summary Proceeding"), arising out of or relating to this
Note, or the breach, termination or validity thereof, shall be litigated
exclusively in the Superior Court of the State of Delaware (the
-4-
<PAGE>
"Delaware Superior Court") as a summary proceeding pursuant to Rules 124-131 of
the Delaware Superior Court, or any successor rules (the "Summary Proceeding
Rules"). Each of the parties hereto hereby irrevocably and unconditionally (i)
submits to the jurisdiction of the Delaware Superior Court for any Summary
Proceeding, (ii) agrees not to commence any Summary Proceeding except in the
Delaware Superior Court, (iii) waives, and agrees not to plead or to make, any
objection to the venue of any Summary Proceeding in the Delaware Superior Court,
(iv) waives, and agrees not to plead or to make, any claim that any Summary
Proceeding brought in the Delaware Superior Court has been brought in an
improper or otherwise inconvenient forum, (v) waives, and agrees not to plead or
to make, any claim that the Delaware Superior Court lacks personal jurisdiction
over it, (vi) waives its right to remove any Summary Proceeding to the federal
courts except where such courts are vested with sole and exclusive jurisdiction
by statute and (vii) understands and agrees that it shall not seek a jury trial
or punitive damages in any Summary Proceeding based upon or arising out of or
otherwise related to this Note and waives any and all rights to any such jury
trial or to seek punitive damages.
In the event any action, suit or proceeding where the amount in controversy
as to at least one party, exclusive of interest and costs, does not exceed
$1,000,000 (a "Proceeding"), arising out of or relating to this Note or the
breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.
If a Summary Proceeding is not available to resolve any dispute hereunder,
the controversy or claim shall be settled by arbitration conducted on a
confidential basis, under the U.S. Arbitration Act, if applicable, and the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "Association") strictly in accordance with the terms of this Note and the
substantive law of the State of Delaware. The arbitration shall be conducted at
the Association's regional office located closest to the Lender's principal
place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators' award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.
Neither party shall be precluded hereby from securing equitable remedies in
courts of any jurisdiction, including, but not limited to, temporary restraining
orders and preliminary injunctions to protect its rights and interests but such
remedies shall not be sought as a means to avoid or stay arbitration or a
Summary Proceeding.
8. Waivers. The Borrower hereby waives presentment, demand, protest and
-------
notice of dishonor and protest, and also waives all other exemptions; and agrees
that extension or extensions of the time of payment of this Note or any
installment or part thereof may be made
-5-
<PAGE>
before, at or after maturity by agreement by the Lender. Upon default hereunder
the Lender shall have the right to offset the amount owed by the Borrower
against any amounts owed by the Lender in any capacity to the Borrower, whether
or not due, and the Lender shall be deemed to have exercised such right of
offset and to have made a charge against any such account or amounts immediately
upon the occurrence of an event of default hereunder even though such charge is
made or entered on the books of the Lender subsequent thereto. The Borrower
shall pay to the Lender, upon demand, all costs and expenses, including, without
limitation, attorneys fees and legal expenses, that may be incurred by the
Lender in connection with the enforcement of this Note.
9. Registration Rights. The shares of Common Stock issuable upon
-------------------
conversion of this Note are subject to the registration rights set forth in
Exhibit A attached hereto.
- ---------
10. Notices. Notices required to be given hereunder shall be deemed
validly given (3) three business days after sent, postage prepaid, by certified
mail, return receipt requested, (ii) one business day after sent, charges paid
by the sender, by Federal Express Next Day Delivery or other guaranteed delivery
service, (iii) when sent by confirmed facsimile transmission, or (iv) when
delivered by hand:
If to the Lender: At the address of its office listed in the first
paragraph of this Note
If to the Borrower: Internet Capital Group, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.
11. Failure or Indulgence Not Waiver. Any failure by the Lender to
--------------------------------
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any time. No amendment to or
modification of this Note shall be binding upon the Lender unless in writing and
signed by it. Any provision hereof found to be illegal, invalid or unenforceable
for any reason whatsoever shall not affect the validity, legality or
enforceability of the remainder hereof. This Note shall apply to and bind the
successors of the Borrower and shall inure to the benefit of the Lender, its
successors and assigns.
12. Governing Law. The Note shall be governed by and interpreted in
-------------
accordance with the laws of the State of Delaware.
-6-
<PAGE>
IN WITNESS WHEREOF, the Borrower, by its duly authorized officer
intending to be legally bound hereby, has duly executed this Convertible Note as
of the date first written above.
INTERNET CAPITAL GROUP, NC.
By:____________________________________
Name:
Title:
-7-
<PAGE>
EXHIBIT A
---------
REGISTRATION RIGHTS
-------------------
1.1 Piggyback Registration.
----------------------
(a) If the Company at any time after the consummation of its initial
public offering proposes for any reason, whether for its own account or the
account of others, to register any of its securities under the Securities Act,
other than pursuant to a Special Registration Statement (as hereinafter
defined), it shall each such time promptly give written notice to the registered
Holders of the Eligible Securities (as defined in Section 1.2(c)) of its
intention to do so, and, upon the written request, given within twenty (20) days
after receipt of any such notice, of a Holder to register any of its Eligible
Securities, the Company shall (subject to Section 1.1(b) hereof) use its best
efforts to cause all Eligible Securities with respect to which Holders shall
have so requested registration to be registered under the Securities Act
promptly upon receipt of the written request of such Holders for such
registration, all to the extent required to permit the sale or other disposition
by the Holders of the Eligible Securities so registered in the manner
contemplated by such registration statement. "Special Registration Statement
means a registration statement on Forms S-8 or S-4 or any successor form or
other registration statement relating to shares of Common Stock issued in
connection with an acquisition of an entity or business or other business
combination, or shares of Common Stock issued in connection with stock option or
other employee benefit plans.
(b) In connection with any exercise by a Holder of its "piggyback"
registration rights pursuant to this Section 1.1 in connection with any
underwritten offering of securities of the Company, if the Company is advised in
writing (with a copy to the Holders requesting registration) by the lead
underwriter for the offering that, in such firm's opinion, a registration of
Eligible Securities at that time would interfere with the orderly sale and
distribution of the securities being sold by the Company for its own account,
then the number of shares that may be included in the underwriting shall be
allocated, first, to the Company, second, to each of the Holders requesting
inclusion of their Eligible Securities in such registration statement on a pro
rata basis based on the total number of Eligible Securities held by each such
Holder and, third, to any other shareholders requesting registration.
(c) For purposes of this Exhibit A, the following terms shall have
the following meanings: (i) "Common Stock" shall mean the shares of common stock
of Internet Capital or any successor corporation; (ii) "Company" shall mean and
include Internet Capital and any successor corporation; (iii) "Holders" shall
mean each Strategic Partner, as such term is defined in the Securities Holders
Agreement (the "SHA"), dated February 2, 1999 among Internet Capital and the
investors named therein, for so long as (and to the extent that) it owns any
Eligible Securities, each of their respective successors, assigns, and
transferees who become registered owners of Eligible Securities, and the holders
of Eligible Securities pursuant to the Convertible Note (the "Note") dated April
____, 1999 and the Common Stock Purchase Warrant (the "Warrant"), dated April
________, 1999 to which this Exhibit A is attached; and (iv) "Internet
---------
-1-
<PAGE>
Capital" shall mean Internet Capital Group, Inc., a Delaware corporation.
1.2 Demand Registration.
-------------------
(a) Any Strategic Partner may, at any time after consummation of the
Company's initial public offering of equity securities, request in writing that
the Company cause a registration statement to be filed under the Securities Act
(on any Form then available to the Company) with respect to such of its Eligible
Securities as it shall specify in such request, provided that (3) the gross
proceeds from such offering will be or are reasonably expected to be not less
than $5 million and (ii) such Strategic Partner includes at least 25% of its
Eligible Securities in its request. The Company shall promptly give written
notice of such request to the other Holders of Eligible Securities and afford
them the opportunity of including in the requested registration statement such
of their Eligible Securities as they shall specify in a written notice given to
the Company within thirty (30) days after their receipt of the Company's notice
of the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which Holders shall have so requested
registration to be registered under the Securities Act, all to the extent
required to permit the sale or other disposition by the Holders of the Eligible
Securities so registered in the manner specified by such Holders in their
notices and pursuant to this Section.
(b) The Company shall not be required to file and cause to become
effective more than two (2) registration statements at the demand of any
Strategic Partner made under this Section 1.2.
(c) The term "Eligible Securities" shall mean, on any date, (i) all
shares of Common Stock or other securities of the Company issued by way of a
stock split, stock dividend, recapitalization, merger or consolidation, (ii)
plus all shares of Common Stock or other securities of the Company issued in
respect of the Note and Warrant, (iii) but exclusive of any securities described
in clauses (3) or (ii) which have been (A) sold in a public offering registered
under Securities Act or (B) subsequently sold pursuant to Rule 144 under the
Securities Act.
(d) If the Holders of the Eligible Securities making such demand
propose to sell their Eligible Securities in a firm commitment underwriting and
the managing underwriter advises such Holders that not all Eligible Securities
of such Holders can be included in such offering, then the requisite number of
Eligible Securities shall be excluded from registration on a basis pro rata
among the Holders of the Eligible Securities requesting such registration on the
basis of the number of Eligible Securities held by each of them. If by virtue of
this Section 1.2(d), more than 50% of the Eligible Securities which a Strategic
Partner has demanded be registered are excluded from the registration statements
then such Strategic Partner shall not be deemed to have exercised a demand
registration right under this Section 1.2.
(e) Provided the Company has honored its obligations under Section 1.1
no demand registration right granted in this Section may be exercised by any
Strategic Partner during any period of time beginning on the date the Company
(i) files a registration statement with
-2-
<PAGE>
the Securities and Exchange Commission registering any of its securities for
sale to the public or (ii) files a registration statement upon the demand of any
other Strategic Partner pursuant to this Section 1.2, and ending on the earlier
to occur of (A) 90 days after the date on which such registration statement is
declared effective by the Securities and Exchange Commission or otherwise
becomes effective, and (B) the 180th day after the date of such filing.
(f) The demand registration rights granted in this Section 1.2 shall
expire, if not exercised prior thereto, on the date on which more than 90% of
the Eligible Securities (as of the date of this Agreement) shall have been
publicly sold by the Holders thereof in a public offering registered under the
Securities Act of 1933 or pursuant to Rule 144 thereunder.
1.3 Form S-3 Registrations. In addition to the rights provided the Holders
----------------------
of registrable securities in Sections 1.1 and 1.2 above, if the registration of
Eligible Securities under the Securities Act can be effected on Form S-3 (or any
similar form promulgated by the Commission), then upon the written request of
one or more Holders of Eligible Securities, the Company will so notify each
Holder of Eligible Securities, including each Holder who has a right to acquire
Eligible Securities, and then will, as expeditiously as possible, use its best
efforts to effect qualification and registration under the Securities Act on
Form S-3 of all or such portion of the Eligible Securities as the Holder or
Holders shall specify pursuant to this Section 1.3, provided that the Company
shall have no obligation to file a registration statement under this Section 1.3
unless the gross proceeds from the offering will be or are reasonably expected
to be not less than $500,000.
1.4 Registration Procedures. If and whenever the Company is under an
-----------------------
obligation pursuant to the provisions of this Exhibit A to use its best efforts
to effect the registration of any Eligible Securities the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Eligible Securities and use its
best efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective under the Securities Act until the earlier
of such time as all securities covered thereby have been sold or one
hundred and eighty (180) days after such registration statement becomes
effective, as such period may be extended pursuant to Section 1.5, and to
comply with the provisions of the Securities Act with respect to the sale
or other disposition of all Eligible Securities covered by such
registration statement for such period;
(c) furnish to each selling stockholder such numbers of copies of
each prospectus (including each preliminary prospectus) in conformity with
the requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the public sale or
other disposition of such Eligible Securities;
-3-
<PAGE>
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the managing underwriter, if any, or
if there is no managing underwriter, the Holders of at least 25% of the
Eligible Securities, shall request, (provided that the Company shall not be
required to consent to general service of process for all purposes in any
jurisdiction where it is not then qualified) and do any and all other acts
or things which may be reasonably necessary or advisable to enable such
seller to consummate the public sale or other disposition in such
jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate
period mentioned in clause (b) of this Section 1.4, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such seller prepare
and furnish to such seller a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Eligible Securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish on the date that such Eligible Securities are delivered
to the underwriters for sale pursuant to such registration or, if such
Eligible Securities are not being sold through underwriters, on the date
that the registration statement with respect to such Eligible Securities
becomes effective, (i) an opinion, dated such date, of the independent
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and at the request of any Holder or
Holders of Eligible Securities requesting registration pursuant to this
Exhibit A, to the Holder or Holders making such request, stating that such
registration statement has become effective under the Securities Act and
that (1) no stop order suspending the effectiveness thereof has been issued
and, to the best knowledge of such counsel, no proceedings for that purpose
have been instituted or are pending or contemplated under the Securities
Act; (2) the registration statement, the related prospectus, and each
amendment or supplement thereto, comply as to form in all material respects
with the requirements of the Securities Act and the applicable rules and
regulations of the Securities and Exchange Commission thereunder (except
that such counsel need express no opinion as to financial statements
contained therein); (3) such counsel has no reason to believe that either
the registration statement or the prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading (except that such counsel
need express no opinion as to financial statements contained therein); (4)
the description in the registration statement or the prospectus, or any
amendment or supplement thereto, of all legal and governmental matters and
all contracts and other legal documents or instruments are accurate and
fairly present the information required to be shown; (5) such counsel does
not know of any legal or governmental proceedings, pending or contemplated,
required to be described in the registration statement or prospectus, or
any
-4-
<PAGE>
amendment or supplement thereto, which are not described as required, nor of any
contracts or documents or instruments of a character required to be described in
the registration statement or prospectus, or any amendment or supplement
thereto, or to be filed as exhibits to the registration statement which are not
described and filed as required, and (6) such other legal matters with respect
to such registration as the underwriters, if any, and any such Holder or Holders
requesting such opinion may reasonably request; and (ii) in the case of an
underwritten offering, a comfort letter, dated such date, from the independent
certified public accountants of the Company, addressed to the underwriters and
the Company's Board of Directors in the customary form
1.5 Delay in Registration. Notwithstanding anything contained in this
---------------------
Agreement to the contrary, the Company reserves the right to delay any such
registration pursuant to this Exhibit A for a period of not more than one
hundred and twenty (120) days, or to withhold efforts to cause such registration
statement to become effective for a period of not more than one hundred twenty
(120) days, if the Board of Directors of the Company determines in good faith
that such registration might (A) interfere with or affect the negotiation or
completion of any material transaction that is being contemplated by the
Company, or (B) involve initial or continuing disclosure obligations materially
adverse to the best interests of the Company's shareholders. If after a
registration statement becomes effective, the Company advises the Holders of the
registrable securities covered by such registration statement that the Company
considers it appropriate for the registration statement to be amended, the
Holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The time periods referred to this Exhibit A shall be extended for an
additional number of business days during which the rights to sell shares was
suspended.
1.6 Information to be Furnished by Holders of Eligible Securities. Each
-------------------------------------------------------------
prospective seller of Eligible Securities, registered or to be registered under
any registration statement shall furnish to the Company such information and
execute such documents regarding the Eligible Securities held by such seller and
the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company
1.7 Expenses of Registration.
------------------------
(a) All expenses incurred by the Company in complying with this
Exhibit A (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (v) printing expenses; (v) fees and
disbursements of Company counsel and of one counsel for the participating
Holders together, which counsel is reasonably acceptable to the Holders; and
(vi) the fees and expenses of the independent public accountants (including the
expense of any special audits in connection with any such registration), are
hereinafter called "Registration Expenses." All underwriting discounts and
commissions applicable to the Eligible Securities covered by any such
registration, are herein called "Selling Expenses."
-5-
<PAGE>
(b) The Company shall pay all Registration Expenses in connection with
all piggyback registrations under Section 1.1 and all demand registrations under
Section 1.2 plus up to one (1) S-3 registration per year pursuant to Section
1.3. All Selling Expenses in connection with each registration pursuant to this
Exhibit A and any legal fees and expenses of additional special counsel for the
sellers shall be borne by the seller or sellers therein in proportion to the
number of Eligible Securities included by each in such registration, or in such
other proportions as they may agree upon.
1.8 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each Holder of
Eligible Securities, its executive officers, directors and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to this
Exhibit A against any loss, claims, damages or liabilities to which any of them
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in a
registration statement including Eligible Securities owned by such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any of them for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable hereunder to a
particular Holder in any such case if any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company for such purpose by such Holder or by its representative or by any
underwriter on behalf of such Holder or if the untrue statement or omission is
corrected in a supplement or amendment to the prospectus provided by the Company
to such Holder in a timely fashion in accordance with this Exhibit A which was
not used by such Holder.
(b) Each Holder of Eligible Securities joining in any registration
statement of the Company pursuant to this Exhibit A shall indemnify and hold
harmless the Company, its executive officers, directors, and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to Exhibit
A against any losses, claims, damages, or liabilities to which any of them may
become subject under the Securities Act or otherwise insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, made in reliance
upon and in conformity with written information furnished to the Company by such
Holder or by its representative or by any underwriter
-6-
<PAGE>
on behalf of such Holder for such purpose, and will reimburse any of them for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending, any such loss, claim, damage, liability or action
provided, however, that the total amount payable by a Holder under this Section
- -------- -------
1.8(b) shall not exceed the net proceeds received by such Holder in such
registered offering.
(c) Promptly after receipt by an indemnified party under this Section
1.8 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying party, notify
the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
unavailable to or insufficient to hold harmless an amount in excess of the
proceeds received by such Holder in the offering.
1.9 Underwriting Agreement. If Eligible Securities are sold pursuant to a
----------------------
registration statement in an underwritten offering pursuant to this Exhibit A,
the Company and the Holders participating therein agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of, or, as the case may be,
the seller of the securities being registered and customary covenants and
agreements to be performed .by such issuer or seller, including, without
limiting the generality of the foregoing, customary, provisions with respect to
indemnification by the Company of the underwriter(s) of such offering.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it shall
----------------------------
not, to the extent requested by the Company or an underwriter of securities of
the Company, sell or otherwise transfer or dispose of any Eligible Securities
for up to that period of time following the effective date of a registration
statement of the Company filed under the Securities Act as is requested by the
managing underwriters of such offering, not to exceed one hundred and eighty
(180) days.
1.11 Subsequent Registration Rights. The Company shall not grant any
------------------------------
registration rights to any other person that are more favorable to such person
than the registration rights granted to the Holders hereunder without the prior
written consent of the Holders of at least a majority of the Eligible
Securities.
-7-
<PAGE>
1.12 Assignment. The registration rights granted hereunder may be assigned
----------
by a Holder to any person who acquires such Holder's Eligible Securities in
accordance with the SHA and the Amended and Restated Certificate of
Incorporation and Bylaws of the Company..
-8-
<PAGE>
Exhibit 1.1(D)
--------------
TERMS OF SUBORDINATION
The principal of and interest on the Subordinated Debt, including, without
limitation, the Subordinated Notes, together with any and all fees and expenses
and all other amounts payable thereunder, including, without limitation,
post-petition interest (the "Subordinated Indebtedness"), shall be subordinate
and junior to payment in full in cash or cash equivalents of the obligations of
the Borrowers to the Banks under the Credit Agreement and the other Loan
Documents (the "Obligations") and the instruments creating the Subordinated
Indebtedness shall include the terms and conditions set forth herein and no
other terms inconsistent therewith. Capitalized terms used herein without
definition shall have the meanings ascribed thereto in the Credit Agreement,
dated as of April 30, 1999 (the "Credit Agreement"), by and among Internet
Capital Group, Inc., Internet Capital Group Operations, Inc., the Banks (as
defined in the Credit Agreement) and PNC Bank, National Association, in its
capacity as agent for the Banks under the Credit Agreement.
Until all Obligations shall have been paid in full and Commitments under
the Credit Agreement are irrevocably terminated under the Loan Documents and
notwithstanding anything in the Subordinated Loan Documents to the contrary:
(i) Neither Borrower shall be permitted to, directly or indirectly, make
any payment on account of, or transfer any collateral for any part of, the
Subordinated Indebtedness;
(ii) Subordinated Lender shall not be permitted to demand, sue for, or
accept from any Borrower or any other Person any such payment or collateral, to
take any other action to enforce or collect upon any such payment or to enforce
its rights in respect of or accelerate the Indebtedness, nor cancel, set off or
otherwise discharge any part of the Indebtedness; and
(iii) Neither any of the Borrowers nor Subordinated Lender shall be
permitted to otherwise take any action prejudicial to or inconsistent with the
Banks' priority position over Subordinated Lender created by these subordination
provisions.
Any instrument evidencing any Subordinated Indebtedness shall bear a legend
providing that payment of the Subordinated Indebtedness has been subordinated to
prior payment of the Obligations in the manner and to the extent set forth in
the body of such instrument incorporating therein the provisions of this Exhibit
-------
1.1(D).
- ------
Subordinated Lender will not be permitted to commence or join with any
other creditor or creditors of any Borrower in commencing any bankruptcy,
reorganization or insolvency proceedings against any Borrower except at the
request of the Agent. At any general meeting of creditors of any Borrower or in
the event of any proceeding, voluntary or involuntary, for the distribution,
division or application of all or part of the assets of any Borrower or the
proceeds thereof whether such proceeding be for the liquidation, dissolution or
winding up of any Borrower or its business, receivership, insolvency or
bankruptcy proceeding, as assignment for
<PAGE>
the benefit of creditors or proceeding by or against any Borrower for extension
or otherwise, if all the Obligations have not been paid in full at the time, the
Banks will be irrevocably authorized at any such meeting or in any such
proceeding:
(i) To enforce claims comprising the Subordinated Indebtedness in the
name of Subordinated Lender by proof of debt, proof of claim, suit or otherwise;
(ii) To collect any assets of any Borrower distributed, divided or applied
by way of dividend or payment, or such securities issued, on account of the
Subordinated Indebtedness and apply the same, or the proceeds of any realization
upon the same that the Banks in their discretion elect to effect, to the
Obligations until the Obligations shall have been paid in full;
(iii) To vote claims comprising the Subordinated Indebtedness to accept or
reject any plan or partial or complete liquidation, reorganization, arrangement,
composition or extension, and
(iv) To take generally any action in connection with any such meeting or
proceeding which Subordinated Lender might otherwise take.
Subject to and from and after the indefeasible payment in full in cash or
cash equivalents of the Obligations, Subordinated Lender shall be subrogated to
the rights of the Banks to receive payments or distributions of cash, property
or securities of any Borrower applicable to the Obligations. It being understood
that the provisions set forth in this Exhibit 1.1(D) to be included in the
--------------
instruments creating the Subordinated Indebtedness are intended solely for the
purpose of defining the relative rights of Subordinated Lender and the Banks.
None of such provisions is intended to or shall impair, as between any Borrower,
its creditors other than the Banks and Subordinated Lender the obligation of any
Borrower to pay the principal of and premium, if any, and the interest and other
amounts on any other debt of any Borrower as and when the same shall become due
and payable in accordance with their terms, or to affect the relative rights of
Subordinated Lender and any other creditors of any Borrower.
Should any payment on account of or any collateral for any part of the
Subordinated Indebtedness be received by Subordinated Lender in violation of
these provisions, such payment or collateral shall be required to be delivered
forthwith to the Banks by the recipient for application to the Obligations, in
the form received. The Banks will be irrevocably authorized to supply any
required endorsement or assignment which may have been omitted. Until so
delivered, any such payment or collateral shall be required to be held by the
recipient in trust for the Banks and shall not be permitted to be commingled
with other funds or property of the recipient.
The Banks will be authorized to demand specific performance of these
provisions, whether or not any Borrower shall have complied with the provisions
of this Exhibit 1.1(D) applicable to it, at any time when Subordinated Lender
--------------
shall have failed to comply with any provision of this Exhibit 1.1(D)
--------------
applicable to it, as such provisions are set forth in the instrument creating
the Subordinated Indebtedness. Subordinated Lender will be required to
irrevocably waive any
<PAGE>
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance in any action brought therefor by the
Banks. Subordinated Creditor will be required to waive presentment, notice and
protest in connection with all negotiable instruments evidencing the
Obligations, notice of the acceptance of the instrument creating the Obligations
incurred, extension granted or other action taken in reliance on these
provisions, and all demands and notices of every kind in connection with the
Loan Documents, the Obligations or time of payment of the Obligations; to assent
to any renewal, extension or postponement of the time of payment of the
Obligations or any other indulgence with respect thereto, to any increase in the
amount of the Obligations, to any addition, substitution, exchange or release of
collateral therefor and to the addition or release of any person primarily or
secondarily liable thereon;.and to assent to the provisions of any instrument,
security or other writing evidencing the Obligations.
The portion of the instrument creating the Subordinated Indebtedness which
relates to or includes the provisions specified by this Exhibit 1.1(D) shall
--------------
not be permitted to be amended without the consent of the Banks.
The Borrower and Subordinated Lender shall be required to execute and
deliver to the Banks such further instruments and take such further action as
the Banks may at any time or times reasonably request in order to carry out the
provisions and intent of this Exhibit 1.1(D) as incorporated into the
--------------
instruments creating the Subordinated Indebtedness.
Notwithstanding anything to the contrary in this Exhibit 1.1(D), in the
--------------
event that any Subordinated Loan Documents grant or create conversion rights in
favor of holders of Subordinated Indebtedness, holders of such Subordinated
Indebtedness shall be entitled to convert all or a portion of such Subordinated
Indebtedness into equity securities of any Borrower or other Person as provided
in such Subordinated Loan Documents.
<PAGE>
EXHIBIT 1.1(G)(1)
FORM OF
GUARANTOR JOINDER AND ASSUMPTION AGREEMENT
This Guarantor Joinder and Assumption Agreement is made as of__________,
[1999] [2000], by ____________________________, a _____________________________
[corporation/partnership](the "New Guarantor").
-------------
Background
----------
Reference is made to (i) the Credit Agreement dated as of April __, 1999,
as the same may be modified, supplemented or amended (the "Agreement"), by and
---------
among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
---
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations"; ICG
--------------
and ICG Operations being referred to herein individually as a "Borrower" and
--------
collectively as the "Borrowers"), the Banks who are parties to the Agreement,
---------
and PNC BANK, NATIONAL ASSOCIATION, in its capacity as Agent for the Banks under
the Agreement, (ii) the Guaranty and Suretyship Agreement, dated as of
______________,[1999] [2000] (the "Guaranty"), of Guarantors issued to Banks and
--------
Agent, as the same may be modified, supplemented or amended, (iii) the Security
Agreement referred to in the Agreement, as the same may be modified,
supplemented or amended, (iv) the Intercompany Subordination Agreement referred
to in the Agreement, as the same may be modified, supplemented or amended, and
(v) the other Loan Documents referred to in the Agreement, as the same may be
modified, supplemented or amended.
Agreement
---------
Capitalized terms defined in the Agreement are used herein as defined
therein. In consideration of the New Guarantor becoming a Guarantor under the
terms of the Agreement (including, but not limited to Sections 7.2.9 and 10.19
thereof) and in consideration of the value of the synergistic benefits received
by New Guarantor as a result of becoming affiliated with the Borrowers and the
Guarantors, the New Guarantor hereby agrees that effective as of the date hereof
it hereby is, and shall be deemed to be, a Guarantor under the Agreement, and
the Guaranty, and hereby becomes party to the Intercompany Subordination
Agreement, the Security Agreement and each of the other Loan Documents to which
the Guarantors are a party and agrees that from the date hereof and so long as
any Loan or any Commitment of any Bank shall remain outstanding and until the
payment in full of the Loans and the Notes and the performance of all other
obligations of each Borrower under the Loan Documents, New Guarantor has assumed
the obligations of a Guarantor under, and New Guarantor shall perform, comply
with and be subject to and bound by, jointly and severally, each of the terms,
provisions and waivers of the Agreement, the Guaranty, the Intercompany
Subordination Agreement, the Security Agreement and each of the other Loan
Documents which are stated to apply to or are made by a Guarantor. Without
limiting the generality of the foregoing, the New Guarantor hereby represents
and warrants that (i) each of the representations and warranties with respect to
the Guarantors set forth in Article 5 of the Agreement is true and correct, in
all material respects, as to New Guarantor on and as of the date hereof as if
made on and as of the date hereof by New Guarantor (except representations and
warranties which relate solely to an earlier date or time which representations
and warranties shall be true and correct
<PAGE>
in all material respects on and as of the specific date or times referred to in
said representations and warranties) and (ii) New Guarantor has heretofore
received a true and correct copy of the Agreement, the Guaranty and each of the
other Loan Documents (including any modifications thereof or supplements or
waivers thereto) as in effect on the date hereof.
New Guarantor hereby makes, affirms, and ratifies in favor of the Banks and
the Agent, the Agreement, the Guaranty, the Intercompany Subordination
Agreement, the Security Agreement and each of the other Loan Documents to which
the Guarantors are parties.
New Guarantor is simultaneously delivering to the Agent the following
documents together with the Joinder required under Sections 7.2.9 (Subsidiaries,
etc.) and 10.19 (Joinder of Guarantors) of the Agreement:
Not
Document Delivered Delivered
Amendment to Patent, Trademark and Copyright [_]
Security Agreement (mandatory)
Pledge Agreement - New Guarantor pledging stock [_] [_]
of its Subsidiaries (if applicable)
UCC-1 Financing Statement naming New [_]
Guarantor as debtor (mandatory)
Opinion of Counsel (mandatory) [_]
Not
Schedule No. and Description Delivered Delivered
---------------------------- --------- ---------
Schedules to Security Agreement.
Schedule 1 - List of Grantors; Collateral [_]
Information (mandatory)
New Guarantor shall, or shall cause the Borrowers to, deliver to the Agent
the following documents:
Pledge Agreement - parent of New Guarantor [_]
pledging Stock of New Guarantor (if applicable)
-2-
<PAGE>
Updated Schedules to Credit Agreement. [Note: updates to schedules do not cure
any breach of warranties].
Not
Schedule No. and Description Delivered Delivered
---------------------------- --------- ---------
Schedule 5.1.1 - Qualification to do [_]
Business (mandatory)
Schedule 5.1.3 - Subsidiaries (mandatory) [_]
Schedule 5.1.8 - Owned and Leased Real [_] [_]
Property (if applicable)
Schedule 5.1.15 - Patents, Trademarks, [_] [_]
Copyrights, Licenses,
Etc. (if applicable)
Schedule 5.1.18 - Insurance Policies (if [_] [_]
applicable)
Schedule 5.1.20 - Material Contracts (if [_] [_]
applicable)
Schedule 5.1.22 - Employee Benefit Plan [_] [_]
Disclosures (if
applicable)
Schedule 5.1.24 - Environmental [_] [_]
Disclosures (if
applicable)
Schedule 7.2.1 - Permitted Indebtedness [_] [_]
(if applicable)
-3-
<PAGE>
In furtherance of the foregoing, New Guarantor shall execute and deliver or
cause to be executed and delivered at any time and from time to time such
further instruments and documents and do or cause to be done such further acts
as may be reasonably necessary or proper in the opinion of the Agent to carry
out more effectively the provisions and purposes of this Guarantor Joinder and
Assumption Agreement.
IN WITNESS WHEREOF, the New Guarantor has duly executed this Joinder and
Assumption Agreement and delivered the same to the Agent for the benefit of the
Banks, as of the date and year first above written.
[___________________________________]
By:__________________________________
Title:_______________________________
Acknowledged and accepted:
PNC BANK, NATIONAL ASSOCIATION, as Agent
By:___________________________________
Title:________________________________
For purposes of delivering the Pledge Agreement referred to hereinabove and
updating the Schedules to the Agreement referred to herein:
INTERNET CAPITAL GROUP, NC.
By:___________________________________
Name: ________________________________
Title:________________________________
-4-
<PAGE>
INTERNET CAPITAL GROUP OPERATIONS, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
-5-
<PAGE>
EXHIBIT 1.1(G)(2)
FORM OF
GUARANTY AND SURETYSHIP AGREEMENT
This Agreement (the "Agreement"), dated as of___________, [1999/2000], is
made and given by_______________, a __________ corporation and each of the other
Subsidiaries which become Guarantors from time to time pursuant to a Guarantor
Joinder and Assumption Agreement (collectively the "Guarantors;" and each is
----------
sometimes referred to individually as a "Guarantor" ), INTERNET CAPITAL GROUP,
---------
INC., a Delaware corporation ("ICG"), INTERNET CAPITAL GROUP OPERATIONS, INC., a
---
Delaware corporation ("ICG Operations"; ICG and ICG Operations being referred to
--------------
herein individually as a "Borrower" and collectively as the "Borrowers"), in
-------- ---------
favor of the Agent and the Banks as defined in that certain Credit Agreement
dated as of even date herewith (as it may hereinafter from time to time be
amended, restated, modified or supplemented, the "Credit Agreement"), by and
----------------
among ICG, ICG Operations, the Banks party thereto and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as Agent for the Banks (the "Agent").
-----
WITNESSETH:
----------
WHEREAS, this Agreement is made by the Guarantors, among other things, to
induce the Agent and the Banks to enter into and make loan advances pursuant to
the Credit Agreement, to induce the Agent and the Banks to extend credit to the
Borrowers from time to time under the Credit Agreement, and to comply with the
requirements of the Credit Agreement; and
WHEREAS, the respective businesses and investments of the Guarantors are
interdependent and loans made to any Borrower under the Credit Agreement are
with the expectation that the profits and other opportunities from such
investment will directly or indirectly inure to the benefit of each Guarantor
and to all of them taken as an affiliated group.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound, the Guarantors hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.01. Definitions. Capitalized terms used herein and not otherwise
-----------
defined herein shall have such meanings as given to them in the Credit
Agreement. In addition to the other terms defined elsewhere in this Agreement,
the following terms shall have the following meanings:
"Guaranteed Obligations" shall mean with respect to each Guarantor all
----------------------
obligations from time to time of any Borrower or any other Guarantor to any
of the Agent or the Banks under or in connection with the Credit Agreement
or any other Loan Document or which arise in any other manner and relate
thereto, whether for principal, interest, fees,
<PAGE>
indemnities, expenses or otherwise, and all refinancings or refundings
thereof, whether such obligations are direct or indirect, otherwise secured
or unsecured, joint or several, absolute or contingent, due or to become
due, whether for payment or performance, now existing or hereafter arising
(specifically including but not limited to obligations arising or accruing
after the commencement of any bankruptcy, insolvency, reorganization or
similar proceeding with respect to any Borrower or any Guarantor
(hereinafter referred to as an "Obligor") or which would have arisen or
-------
accrued but for the commencement of such proceeding, even if the claim for
such obligation is not enforceable or allowable in such proceeding).
Without limitation of the foregoing, such obligations include all
obligations arising from any extensions of credit under or in connection
with the Loan Documents from time to time, regardless of whether any such
extensions of credit are in excess of the amount committed under or
contemplated by the Loan Documents or are made in circumstances in which
any condition to extension of credit is not satisfied. Without limitation
of the foregoing, any of the Guaranteed Obligations (including, without
limitation, any Guaranteed Obligations resulting from extension of credit
by any other Obligor under or in connection with the Loan Documents) shall
be and remain Guaranteed Obligations entitled to the benefit of this
Agreement if the Agent and the Banks (or any successive assignee or
transferee) from time to time assign or otherwise transfer all of their
respective rights and obligations under the Loan Documents (including,
without limitation, all of any commitment to extend credit), or any other
Guaranteed Obligations, to any other Obligor.
ARTICLE II
GUARANTY
--------
2.01 Guaranty and Suretyship. The Guarantors jointly and severally
-----------------------
hereby absolutely, unconditionally and irrevocably guarantee and become surety,
as though each Guarantor was a primary obligor, for the full and punctual
payment and performance of the Guaranteed Obligations as and when such payment
or performance shall become due (at scheduled maturity, by acceleration or
otherwise) in accordance with the terms of the Loan Documents. This Agreement is
an agreement of suretyship as well as of guaranty, is a guarantee of payment and
performance and not merely of collectibility, and is in no way conditioned upon
any attempt to collect from or proceed against any Borrower or any other Person
or any other event or circumstance. The obligations of the Guarantors under this
Agreement are direct and primary obligations of each Guarantor and are
independent of the Guaranteed Obligations, and a separate action or actions may
be brought against any one or more of the Guarantors regardless of whether
action is brought against any Borrower, any other Guarantor or any other Person
or whether any Borrower, any other Guarantor or any other Person is joined in
any such action or actions.
2.02 Obligations Absolute. The Guarantors agree that the Guaranteed
--------------------
Obligations will be paid and performed strictly in accordance with the terms of
the Loan Documents, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting the Guaranteed Obligations, any of the
terms of the Loan Documents or the rights of the Agent or the Banks or any other
Person with respect thereto. The obligations of the
-2-
<PAGE>
Guarantors under this Agreement shall be absolute, unconditional and
irrevocable, irrespective of any of the following:
(a) Any lack of genuineness, legality, validity,
enforceability or allowability (in a bankruptcy, insolvency, reorganization or
similar proceeding, or otherwise), or any avoidance or subordination, in whole
or in part, of any Loan Document or any of the Guaranteed Obligations.
(b) Any increase, decrease or change in the amount, nature,
type or purpose of any of the Guaranteed Obligations (whether or not
contemplated by the Loan Documents as presently constituted); any change in the
time, manner, method or place of payment or performance of, or in any other term
of, any of the Guaranteed Obligations; any execution or delivery of any
additional Loan Documents; or any amendment, modification or supplement to, or
refinancing or refunding of, any Loan Document or any of the Guaranteed
Obligations.
(c) Any failure to assert any breach of or default under any
Loan Document or any of the Guaranteed Obligations; any extensions of credit in
excess of the amount committed under or contemplated by the Loan Documents, or
in circumstances in which any condition to such extensions of credit has not
been satisfied; any other exercise or non-exercise, or any other failure,
omission, breach, default delay or wrongful action in connection with any
exercise or non-exercise, of any right or remedy against any Borrower or any
other Obligor under or in connection with any Loan Document or any of the
Guaranteed Obligations; any refusal of payment or performance of any of the
Guaranteed Obligations, whether or not with any reservation of rights against
any Guarantor; or any application of collections (including but not limited to
collections resulting from realization upon any direct or indirect security for
the Guaranteed Obligations) to other obligations, if any, not entitled to the
benefits of this Agreement, in preference to Guaranteed Obligations entitled to
the benefits of this Agreement, or if any collections are applied to Guaranteed
Obligations, any application to particular Guaranteed Obligations.
(d) Any taking, exchange, amendment, modification, supplement,
termination, subordination, release, loss or impairment of, or any failure to
--
protect, perfect, or preserve the value of or any enforcement of, realization
--
upon, or exercise of rights, or remedies under or in connection with, or any
failure, omission, breach, default, delay or wrongful action by the Agent or the
Banks, or any of them, or any other Person in connection with the enforcement
of, realization upon, or exercise of rights or remedies under or in connection
with, or, any other action or inaction by any of the Agent or the Banks, or any
--
of them, or any other Person in respect of, any direct or indirect security for
any of the Guaranteed Obligations. As used in this Agreement, "direct or
indirect security" for the Guaranteed Obligations, and similar phrases, includes
but is not limited to any collateral security, guaranty, suretyship, letter of
credit, capital maintenance agreement, put option, subordination agreement or
other right or arrangement of any nature providing direct or indirect assurance
of payment or performance of any of the Guaranteed Obligations, made by or on
behalf of any Obligor.
-3-
<PAGE>
(e) Any merger, consolidation, liquidation, dissolution,
winding-up, charter revocation or forfeiture, or other change in, restructuring
or termination of the corporate structure or existence of, any Borrower or any
other Obligor; any bankruptcy, insolvency, reorganization or similar proceeding
with respect to any Borrower or any other Obligor; or any action taken or
election made by the Agent or the Banks, or any of them (including but not
limited to any election under Section 111 1(b)(2) of the United States
Bankruptcy Code), any Borrower or any other Obligor in connection with any such
proceeding.
(f) Any defense, setoff or counterclaim (excluding only the
defense of full, strict and indefeasible payment and performance), which may at
any time be available to or be asserted by any Borrower or any other person with
respect to any Loan Document or any of the Guaranteed Obligations; or any
discharge by operation of law or release of any Borrower or any other Obligor
from the performance or observance of any Loan Document or any of the Guaranteed
Obligations.
(g) Any other event or circumstance, whether similar or
dissimilar to the foregoing, and whether known or unknown, which might otherwise
constitute a defense available to, or limit the liability of, any Guarantor, a
guarantor or a surety, excepting only full, strict and indefeasible payment and
performance of the Guaranteed Obligations in full.
2.03. Waivers, etc. The Guarantors hereby waive any defense to or
------------
limitation on their obligations under this Agreement arising out of or based on
any event or circumstance referred to in Section 2.02 hereof Without limitation
and to the full extent permitted by applicable law, the Guarantors waive each of
the following:
(a) All notices, disclosures and demand of any nature which
otherwise might be required from time to time to preserve intact any rights
against any Guarantor, including without limitation the following: any notice of
any event or circumstance described in Section 2.02 hereof any notice required
by any law, regulation or order now or hereafter in effect in any jurisdiction;
any notice of nonpayment, nonperformance, dishonor, or protest under any Loan
Document or any of the Guaranteed Obligations; any notice of the incurrence of
any Guaranteed Obligation; any notice of any default or any failure on the part
of any Borrower or any other Obligor to comply with any Loan Document or any of
the Guaranteed Obligations or any direct or indirect security for any of the
Guaranteed Obligations; and any notice of any information pertaining to the
business, operations, condition (financial or otherwise) or prospects of any
Borrower or any other Obligor.
(b) Any right to any marshalling of assets, to the filing of
any claim against the Borrower or any other Obligor in the event of any
bankruptcy, insolvency, reorganization or similar proceeding, or to the exercise
against any Borrower or any other Obligor of any other right or remedy under or
in connection with any Loan Document or any of the Guaranteed Obligations or any
direct or indirect security for any of the Guaranteed Obligations; any
requirement of promptness or diligence on the part of the Agent or the Banks, or
any of them, or any other Person; any requirement to exhaust any remedies under
or in connection with, or to mitigate the damages resulting from default under,
any Loan Document or any of the Guaranteed
-4-
<PAGE>
Obligations or any direct or indirect security for any of the Guaranteed
Obligations; any benefit of any statute of limitations; and any requirement of
acceptance of this Agreement, and any requirement that any Guarantor receive
notice of such acceptance.
(c) Any defense or other right arising by reason of any law
now or hereafter in effect in any jurisdiction pertaining to election of
remedies (including but not limited to anti-deficiency laws, "one action" laws
or the like), or by reason of any election of remedies or other action or
inaction by the Agent or the Banks, or any of them (including but not limited to
commencement or completion of any judicial proceeding or nonjudicial sale or
other action in respect of collateral security for any of the Guaranteed
Obligations), which results in denial or impairment of the right of the Agent or
the Banks, or any of them, to seek a deficiency against any Borrower or any
other Person or which otherwise discharges or impairs any of the Guaranteed
Obligations.
2.04. Reinstatement. This Agreement shall continue to be effective,
-------------
or be automatically reinstated, as the case may be, if at any time payment of
any of the Guaranteed Obligations is avoided, rescinded or must otherwise be
returned by the Agent and the Banks, or any of them, for any reason (including,
without limitation, by reason of such payment being a preference, fraudulent
transfer or fraudulent conveyance), all as though such payment had not been
made.
2.05. No Stay. Without limitation of any other provision of this
-------
Agreement, if any declaration of default or acceleration or other exercise or
condition to exercise of rights or remedies under or with respect to any
Guaranteed Obligation shall at any time be stayed, enjoined or prevented for any
reason (including but not limited to stay or injunction resulting from the
pendency against any Borrower or any other Obligor of a bankruptcy, insolvency,
reorganization or similar proceeding), the Guarantors agree that, for the
purposes of this Agreement and their obligations hereunder, the Guaranteed
Obligations shall be deemed to have been declared in default or accelerated, and
such other exercise or conditions to exercise shall be deemed to have been taken
or met.
2.06. Payments. All payments to be made by any Guarantor pursuant to
--------
this Agreement shall be made without setoff counterclaim, withholding or other
deduction of any nature.
2.07. Continuing Guaranty. This Agreement is a continuing agreement
-------------------
and shall continue in full force and effect (notwithstanding that no Guaranteed
Obligations may be outstanding from time to time, or any other event or
circumstance) until all Guaranteed Obligations and all other amounts payable
under this Agreement have been paid and performed in full, and all commitments
to extend credit under the Loan Documents have terminated, subject in any event
to reinstatement in accordance with Section 2.04 hereof Any purported
termination, revocation or discharge of this Agreement shall be void and of no
effect. For purposes of this Agreement the Guaranteed Obligations shall not be
deemed to have been paid in full until the Agent and the Banks shall have
indefeasibly received payment of the Guaranteed Obligations in full and in cash
and all commitments to extend credit under the Loan Documents have terminated.
-5-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Each Guarantor hereby represents and warrants to the Agent and the
Banks with respect to itself as follows:
3.01. No Conditions Precedent. There are no conditions precedent to
-----------------------
the effectiveness of this Guaranty that have not been satisfied or waived.
3.02. No Reliance. The Guarantor has, independently and without
-----------
reliance upon the Agent and the Banks, or any of them, and based upon such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
3.03. Representations and Warranties Remade at Each Extension of
----------------------------------------------------------
Credit. Each request (including any deemed request) by any Borrower for any
- ------
extension of credit under the Credit Agreement shall be deemed to constitute a
representation and warranty by each Guarantor to the Agent and the Banks that
the representations and warranties made by each Guarantor in this Agreement are
true and correct, in all material respects, on and as of the date of such
request with the same effect as though made on and as of such date.
ARTICLE IV
MISCELLANEOUS
-------------
4.01. Amendments, etc. No amendment to or waiver of any provision of
---------------
this Agreement, and no consent to any departure by any Guarantor herefrom, shall
in any event be effective unless in a writing manually signed by the applicable
Guarantor and by or on behalf of the Agent and the Banks. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
4.02. No Implied Waiver; Remedies Cumulative. No delay or failure of
--------------------------------------
the Agent or the Banks, or any of them, in exercising any right or remedy under
this Agreement shall operate as a waiver thereof nor shall any single or partial
exercise of any such right or remedy preclude any other or further exercise
thereof or the exercise of any other right or remedy. The rights and remedies of
the Agent and the Banks under this Agreement are cumulative and not exclusive of
any other rights or remedies available hereunder, under any other agreement or
instrument, by law, or otherwise.
4.03. Notices. Each Guarantor agrees that all notices, statements,
-------
requests, demands and other communications under this Agreement shall be given
to such Guarantor at the address set forth below its name on the signature page
hereof in the manner and with the effect provided in Section 10.6 of the Credit
Agreement. The Agent and the Banks may rely on any notice (whether or not made
in a manner contemplated by this Agreement) purportedly made by
-6-
<PAGE>
or on behalf of a Guarantor, and the Agent and the Banks shall have no duty to
verify the identity or authority of the Person giving such notice.
4.04. Expenses. Each Guarantor unconditionally agrees to pay all costs
--------
and expenses, including reasonable attorney's fees incurred by the Agent and any
of the Banks in enforcing this Agreement against any Guarantor.
4.05. Prior Understandings. This Agreement constitutes the entire
--------------------
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous understandings and agreements.
4.06. Survival. All representations and warranties of the Guarantors
--------
contained in or made in connection with this Agreement shall survive, and shall
not be waived by, the execution and delivery of this Agreement, any
investigation by or knowledge of the Agent and the Banks, or any of them, any
extension of credit, or any other event or circumstance whatsoever.
4.07. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
4.08. Setoff. In the event that at any time any obligation of the
------
Guarantors now or hereafter existing under this Agreement shall have become due
and payable, the Agent and the Banks, or any of them, shall have the right from
time to time, without notice to any Guarantor, to set off against and apply to
such due and payable amount any obligation of any nature of the Agent and the
Banks to any Guarantor, including but not limited to all deposits (whether time
or demand, general or special, provisionally credited or finally credited,
however evidenced) now or hereafter maintained by any Guarantor with the Agent
or the Banks. Such right shall be absolute and unconditional in all
circumstances and, without limitation, shall exist whether or not the Agent
and/or the Banks, or any of them, shall have given any notice or made any demand
under this Agreement or under such obligation to the Guarantor, whether such
obligation to the Guarantor is absolute or contingent, matured or unmatured (it
being agreed that the Agent and the Banks, or any of them, may deem such
obligation to be then due and payable at the time of such setoff), and
regardless of the existence or adequacy of any collateral, guaranty or other
direct or indirect security, right or remedy available to the Agent and the
Banks. The rights of the Agent and the Banks under this Section are in addition
to such other rights and remedies (including, without limitation, other rights
of setoff and banker's lien) which the Agent and the Banks, or any of them, may
have, and nothing in this Agreement or in any other Loan Document shall be
deemed a waiver of or restriction on the right of setoff or banker's lien of the
Agent and the Banks, or any of them. The Guarantors hereby agree that, to the
fullest extent permitted by law, any affiliate of the Agent and the Banks, or
any of them, and any holder of a participation in any obligation of any
Guarantor under this Agreement, shall have the same rights of setoff as the
Agent and the Banks as provided in this Section 4.08 (regardless of whether such
affiliate or participant otherwise would be deemed a creditor of the Guarantor).
-7-
<PAGE>
4.09. Construction. The section and other headings contained in this
------------
Agreement are for reference purposes only and shall not affect interpretation of
this Agreement in any respect. This Agreement has been fully negotiated between
the applicable parties, each party having the benefit of legal counsel, and
accordingly neither any doctrine of construction of guaranties or suretyships in
favor of the guarantor or surety, nor any doctrine of construction of
ambiguities in agreement or instruments against the party controlling the
drafting thereof shall apply to this Agreement.
4.10. Successors and Assigns. This Agreement shall be binding upon
----------------------
each Guarantor, its successors and assigns, and shall inure to the benefit of
and be enforceable by the Agent and the Banks, or any of them, and their
successors and assigns. Without limitation of the foregoing, the Agent and the
Banks, or any of them (and any successive assignee or transferee), from time to
time may assign or otherwise transfer all or any portion of its rights or
obligations under the Loan Documents (including, without limitation, all or any
portion of any commitment to extend credit), or any other Guaranteed
Obligations, to any other person or entity and such Guaranteed Obligations
(including, without limitation, any Guaranteed Obligations resulting from
extension of credit by such other person or entity under or in connection with
the Loan Documents) shall be and remain Guaranteed Obligations entitled to the
benefit of this Agreement, and to the extent of its interest in such Guaranteed
Obligations such other person or entity shall be vested with all the benefits in
respect thereof granted to the Agent and the Banks in this Agreement or
otherwise.
4.11. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------------------------
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
(b) Certain Waivers. EACH GUARANTOR HEREBY IRREVOCABLY:
---------------
(i) CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON
PLEAS OF CHESTER COUNTY, PENNSYLVANIA AND THE UNITED STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF PENNSYLVANIA, AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
CERTIFIED OR REGISTERED MAIL DIRECTED TO THE BORROWER AT THE ADDRESS PROVIDED
FOR IN THE CREDIT AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
UPON ACTUAL RECEIPT THEREOF;
(ii) WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION
INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE
BASED ON LACK OF JURISDICTION OR VENUE; AND
-8-
<PAGE>
(iii) WAIVES TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE CREDIT
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT
PERMITTED BY LAW.
(c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED BY LAW,
-----------------------
NO CLAIM MAY BE MADE BY ANY GUARANTOR OR ANY OTHER PERSON AGAINST THE AGENT AND
THE BANKS, OR ANY OF THEM OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE,
ATTORNEY OR AGENT OF THE AGENT AND THE BANKS FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR
RELATING TO THIS AGREEMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION,
OR EVENT OCCURRING IN CONNECTION HEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT
OR ANY OTHER THEORY OF LIABILITY); AND EACH GUARANTOR HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT
ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
4.12. Severability; Modification to Conform to Law.
--------------------------------------------
(a) It is the intention of the parties that this Agreement be
enforceable to the fullest extent permissible under applicable law, but that the
unenforceability (or modification to conform to such Law) of any provision or
provisions hereof shall not render unenforceable, or impair, the remainder
hereof. If any provision in this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, this Agreement shall, as
to such jurisdiction, be deemed amended to modify or delete, as necessary, the
offending provision or provisions and to alter the bounds thereof in order to
render it or them valid and enforceable to the maximum extent permitted by
applicable Law, without in any matter affecting the validity or enforceability
of such provision or provisions in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
(b) Without limitation of the preceding subsection (a), to the extent
that mandatory applicable law (including but not limited to applicable laws
pertaining to fraudulent conveyance or fraudulent transfer) otherwise would
render the full amount of the Guarantor's obligations hereunder invalid or
unenforceable, the Guarantor's obligations hereunder shall be limited to the
maximum amount which does not result in such invalidity or unenforceability.
(c) Notwithstanding anything to the contrary in this Section 4.12 or
elsewhere in this Agreement, this Agreement shall be presumptively valid and
enforceable to its full extent in accordance with its terms, as if this Section
4.12 (and references elsewhere in this Agreement to enforceability to the
fullest extent permitted by Law) were not a part of this Agreement, and in any
related litigation the burden of proof shall be on the party asserting the
invalidity or unenforceability of any provision hereof or asserting any
limitation on any Guarantor's obligations hereunder as to each element of such
assertion.
-9-
<PAGE>
4.13. Additional Guarantors. At any time after the initial execution
---------------------
and delivery of this Agreement to the Agent and the Banks, additional Obligors
may become parties to this Agreement and thereby acquire the duties and rights
of being Guarantors hereunder by executing and delivering to the Agent and the
Banks a Joinder and Assumption Agreement in the form or Exhibit 1.1(G)(1) to the
-----------------
Credit Agreement. No notice of the addition of any Guarantor shall be required
to be given to any pre-existing Guarantor.
4.14 Joint and Several Obligations. The obligations of each Guarantor
-----------------------------
under this Agreement are joint and several.
4.15 Receipt of Credit Agreement and Other Loan Documents. Each
----------------------------------------------------
Guarantor hereby acknowledges that it has received a copy of the Credit
Agreement and the other Loan Documents and each Guarantor certifies that the
representations and warranties made therein with respect to such Guarantor are
true and correct. Further, each Guarantor acknowledges and agrees to perform,
comply with and be bound by all of the provisions of the Credit Agreement and
the other Loan Documents including, without limitation, those covenants
contained in Sections 7.1 and 7.2 of the Credit Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
-10-
<PAGE>
[SIGNATURE PAGE 1 OF 1 TO THE GUARANTY AND SURETYSHIP AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date first above written.
[INSERT NAME(S) OF GUARANTOR(S)]
By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
EXHIBIT 1.1(I)(2)
FORM OF
INTERCOMPANY SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT is dated as of April ____,1999 and is made by
and among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
---
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations"; ICG
--------------
and ICG Operations being referred to herein individually as a "Borrower" and
--------
collectively as the "Borrowers"), and each direct and indirect Subsidiary of the
---------
Borrower as listed on the signature lines hereto (being collectively referred to
herein together with the Borrower as the "Companies" and individually as a
---------
"Company") and for the benefit of the Agent (as defined below). Each capitalized
-------
term used herein shall, unless otherwise defined herein, have the same meaning
given to such term in the Credit Agreement of even date herewith (as it may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, the BANKS (as defined in the
----------------
Credit Agreement) and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent
for the Banks (the "Agent").
-----
WITNESSETH THAT:
WHEREAS, pursuant to the Credit Agreement, the Banks intend to make Loans
to the Borrower as provided therein;
WHEREAS, the Companies are now or may hereafter become indebted to each
other (all present and future indebtedness of the Companies to each other except
for the Operating Expenses defined below, whether created directly or acquired
by assignment or otherwise, and interest and premiums, if any, thereon and other
amounts payable in respect thereof are hereinafter collectively referred to as
the "Subordinated Debt");
-----------------
WHEREAS, ICG Operations operates the day-to-day activities of ICG, and in
its capacity as ICG's operating company, ICG Operations incurs expenses which
are paid directly to ICG Operations by ICG, or through payables and receivables
between ICG and ICG Operations which are satisfied in the ordinary course of
ICG's and ICG Operations' business (the "Operating Expenses"); and
------------------
WHEREAS, the obligation of the Banks to make Loans is subject to the
condition, among others, that the Companies subordinate the Subordinated Debt to
the Obligations of the Loan Parties to the Banks pursuant to the Loan Documents
(the "Senior Debt") in the manner set forth herein.
-----------
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
1. Subordinated Debt Subordinated to Senior Debt. The recitals set forth
---------------------------------------------
above are hereby incorporated by reference. All Subordinated Debt shall be
subordinate and subject in right of payment to the prior indefeasible payment in
full of all Senior Debt pursuant to the provisions contained herein.
<PAGE>
2. Payment Over of Proceeds Upon Dissolution, Etc. Upon any distribution
----------------------------------------------
of assets of any Company (a) in the event of any insolvency or bankruptcy case
or proceeding, or any receivership, liquidation, reorganization, assignment for
the benefit of creditors or other similar case or proceeding in connection
therewith, relative to any such Company or to its assets, or (b) after the
occurrence and during the continuance of an Event of Default or Potential
Default under the Credit Agreement or any liquidation, dissolution or other
winding up of any such Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) in the event of any assignment
for the benefit of creditors or any marshaling of assets and liabilities of any
such Company (a Company distributing assets as set forth herein being referred
to in such capacity as a "Distributing Company"), then and in any such event the
--------------------
Banks shall be entitled to receive indefeasible payment in full of all amounts
due or to become due (whether or not an Event of Default has occurred under the
terms of the Loan Documents or the Senior Debt has been declared due and payable
prior to the date on which it would otherwise have become due and payable) on or
in respect of any and all Senior Debt before the holder of any Subordinated Debt
owed by the Distributing Company is entitled to receive any payment on account
of the principal of or interest on such Subordinated Debt, and to that end the
Banks shall be entitled to receive, for application to the payment of the Senior
Debt, any payment or distribution of any kind or character, whether in cash,
property or securities, which may be payable or deliverable in respect of the
Subordinated Debt owed by the Distributing Company in any such case, proceeding,
dissolution, liquidation or other winding up or event.
3. No Commencement of any Proceeding. Each Company agrees that, so long
---------------------------------
as the Senior Debt shall remain unpaid, it will not commence, or join with any
creditor other than the Banks or the Agent on behalf of the Banks in commencing,
any collection or enforcement proceeding against any other Company, including,
but not limited to, those described in Section 2 hereof, or any other
enforcement action of any kind against any Company in respect of the
Subordinated Debt.
4. Prior Payment of Senior Debt Upon Acceleration of Subordinated Debt.
------------------------------------------------------------------
If any portion of the Subordinated Debt owed by any Company becomes or is
declared due and payable before its stated maturity, then and in such event the
Banks shall be entitled to receive indefeasible payment in full of all amounts
due and to become due on or in respect of the Senior Debt (whether or not an
Event of Default has occurred under the terms of the Credit Agreement or the
Senior Debt has been declared due and payable prior to the date on which it
would otherwise have become due and payable) before the holder of any such
Subordinated Debt is entitled to receive any payment thereon.
5. No Payment When Senior Debt in Default. If any Event of Default under
--------------------------------------
the Credit Agreement shall have occurred and be continuing or such an Event of
Default would result from or exist after giving effect to a payment with respect
to any portion of the Subordinated Debt, unless the Banks shall have consented
to or waived the same, so long as any of the Senior Debt shall remain
outstanding, no payment shall be made by the Company owing such Subordinated
Debt on account of principal or interest on any portion of the Subordinated
Debt.
2
<PAGE>
6. Payment Permitted if No Default. Nothing contained in this Agreement
-------------------------------
shall prevent any of the Companies, at any time, except during the pendency of
any of the conditions described in Sections 2, 4 and 5 hereof, from making the
regularly scheduled payments of the Subordinated Debt, or the retention thereof
by any of the Companies of any money deposited with it for the regularly
scheduled payments of or on account of the Subordinated Debt.
7. Receipt of Prohibited Payments. If, notwithstanding the foregoing
------------------------------
provisions of Sections 2, 4, 5 and 6 hereof, a Company which is owed
Subordinated Debt by a Distributing Company shall have received any payment or
distribution of assets from the Distributing Company of any kind or character,
whether in cash, property or securities, other than as expressly permitted by
the terms of this Agreement, then and in such event such payment or distribution
shall be held in trust for the benefit of the Banks, shall be segregated from
other funds and property held by such Company, and shall be forthwith paid over
to the Agent for the benefit of the Banks in the same form as so received (with
any necessary endorsement) to be applied (in the case of cash) to or held as
collateral (in the case of non-cash property) for the payment or prepayment of
the Senior Debt in accordance with the terms of the Credit Agreement.
8. Rights of Subrogation. Each Company agrees that no payment or
---------------------
distribution to the Banks pursuant to the provisions of this Agreement shall
entitle the Company to exercise any rights of subrogation in respect thereof
until the Senior Debt shall have been indefeasibly paid in full and the
Commitments under the Credit Agreement shall have terminated.
9. Instruments Evidencing Subordinated Debt. At the request of the Agent,
----------------------------------------
each Company shall cause each instrument, if any, which now or hereafter
evidences all or a portion of the Subordinated Debt to be conspicuously marked
as follows:
"This instrument is subject to the terms of an Intercompany
Subordination Agreement dated as of April ____, 1999 in favor of
PNC Bank, National Association, as Agent, which Intercompany
Subordination Agreement is incorporated herein by reference.
Notwithstanding any contrary statement contained in the within
instrument, no payment on account of the principal thereof or
interest thereon shall become due or payable except in accordance
with the express terms of said Subordination Agreement."
At the Agent's request, each Company will further mark its books of account in
such a manner as shall be effective to give proper notice to the effect of this
Agreement.
10. Agreement Solely to Define Relative Rights. The purpose of this
------------------------------------------
Agreement is solely to define the relative rights of the Companies, on the one
hand, and the Agent and the Banks, on the other hand. Nothing contained in this
Agreement is intended to or shall prevent the Companies from exercising all
remedies otherwise permitted by applicable law upon default under any agreement
pursuant to which the Subordinated Debt is created, subject to Sections 2, 3, 4,
5 and 6 hereof, including, without limitation, the rights under this Agreement
of the Agent or the Banks to receive cash, property or securities otherwise
payable or deliverable with respect to the Subordinated Debt.
3
<PAGE>
11. No Implied Waivers of Subordination. No right of the Banks or the
-----------------------------------
Agent on behalf of the Banks to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act on
the part of any Company, by any act or failure to act by the Agent or any Bank,
or by any non-compliance by any Company with the terms, provisions and covenants
of any agreement pursuant to which the Subordinated Debt is created, regardless
of any knowledge thereof the Agent or any Bank may have or be otherwise charged
with. Each Company by its acceptance hereof agrees that, so long as there is
Senior Debt outstanding or the Commitments are in effect under the Credit
Agreement, such Company shall not agree to sell, assign, pledge, encumber or
otherwise dispose of, the obligations of the Subordinated Debt, other than by
means of payment of such Subordinated Debt according to its terms, without the
prior written consent of the Agent.
Without in any way limiting the generality of the foregoing paragraph, in
accordance with the Credit Agreement, the Agent on behalf of the Banks, the
Banks, or the Required Banks, as the case may be, at any time and from time to
time, without the consent of or notice to the Companies, except to the extent
required by the Credit Agreement or other Loan Documents, without incurring
responsibility to the Companies and without impairing or releasing the
subordination provided in this Agreement or the obligations hereunder of the
Companies to the Banks, may do any one or more of the following: (i) change the
manner, place or terms of payment, or extend the time of payment, renew or alter
the Senior Debt or otherwise amend, restate, supplement or otherwise modify the
Senior Debt or the Credit Agreement; (ii) release any person liable in any
manner for the payment or collection of the Senior Debt; and (iii) exercise or
refrain from exercising any rights against any of the Companies and any other
person or entity.
12. Additional Subsidiaries. The Companies covenant and agree that they
-----------------------
shall not create or acquire any additional Subsidiaries after the date hereof,
except to the extent permitted under the Credit Agreement. Borrower shall cause
each direct or indirect Subsidiary which it creates or acquires after the date
hereof to become a party to this Agreement by executing a joinder to this
Agreement in a form acceptable to and approved by the Agent promptly after
Borrower acquires or creates such Subsidiary.
13. Continuing Force and Effect. This Agreement shall continue in force
---------------------------
until all of the Senior Debt is indefeasibly paid in full and the Commitments
under the Credit Agreement have terminated, it being contemplated that this
Agreement be of a continuing nature.
14. Modification. Amendments or Waivers. Any and all agreements amending
------------
or changing any provision of this Agreement or the rights of the Agent on behalf
of the Banks or the Banks hereunder, and any and all waivers or consents to any
departures from the due performance of the Companies hereunder shall be made
only by written agreement, waiver or consent signed by the Agent.
15. Expenses. Subject to any additional provisions set forth in Section
--------
10.3 of the Credit Agreement, the Companies each unconditionally and jointly and
severally agree upon demand to pay to the Agent on behalf of the Banks the
amount of any and all reasonable and necessary out-of-pocket costs, expenses and
disbursements, including but not limited to
4
<PAGE>
reasonable fees and expenses of counsel, which may be incurred by the Banks in
connection with (a) the exercise or enforcement of any of the rights of the
Banks hereunder, or (b) the failure by the Companies to perform or observe any
of the provisions hereof.
16. Severability. The provisions of this Agreement are intended to be
------------
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
17. Governing Law. This Agreement shall be a contract under the internal
-------------
laws of the Commonwealth of Pennsylvania and for all purposes shall be construed
in accordance with the laws of said Commonwealth without giving effect to its
conflicts of law principles.
18. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
the Agent, the Banks and their respective successors and assigns, and the
obligations of the Companies shall be binding upon their respective successors
and assigns. The duties and obligations of each of the Companies may not be
delegated or transferred by it.
19. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which, when executed and delivered, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
20. Attorneys-in-Fact. Each Company hereby authorizes and empowers the
-----------------
Agent, at its election and in the name of either itself, or in the name of each
Company, to execute and file proofs and documents and take any other action the
Agent may deem advisable to enforce the Banks' interests relating to the
Subordinated Debt created hereunder and their right of enforcement thereof as
set forth herein, and to that end the Companies hereby irrevocably make,
constitute and appoint the Agent, its officers, employees and agents, or any of
them, with full power of substitution, as the true and lawful attorney-in-fact
and agent of such Company and with full power for such Company and in the name,
place and stead of such Company for the purpose of carrying out the provisions
of this Agreement and taking any action and executing, delivering, filing and
recording any instruments which the Agent may deem necessary or advisable to
accomplish the purposes hereof, which power of attorney, being given for
security, is coupled with an interest and irrevocable. Each Company hereby
ratifies and confirms and agrees to ratify and confirm all action taken by the
Agent, its officers, employees or agents pursuant to the foregoing power of
attorney.
21. Application of Payments. In the event any payments are received by the
-----------------------
Agent on behalf of the Banks or any Bank under the terms of this Agreement for
application to the Senior Debt at any time when the Senior Debt has not been
declared due and payable and prior to the date on which it would otherwise
become due and payable, such payment shall constitute a voluntary prepayment of
the Senior Debt for all purposes under the Credit Agreement.
5
<PAGE>
22. Remedies. In the event of a breach by any of the Companies in the
--------
performance of any of the terms of this Agreement, the Agent on behalf of the
Banks or any Bank may demand specific performance of this Agreement and seek
injunctive relief and may exercise any other remedy available at law or in
equity, it being recognized that the remedies of the Banks at law may not fully
compensate the Banks for the damages they may suffer in the event of a breach
hereof.
23. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. EACH COMPANY HEREBY
---------------------------------------------
IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON
PLEAS OF CHESTER COUNTY, PENNSYLVANIA AND THE UNITED STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF PENNSYLVANIA, AND EACH COMPANY WAIVES TRIAL BY JURY IN
ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT TO THE FULL EXTENT
PERMITTED BY LAW.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
6
<PAGE>
WITNESS the due execution hereof as of the day and year first above
written.
COMPANIES:
INTERNET CAPITAL GROUP, INC.
By: ____________________________________
Name:___________________________________
Title:__________________________________
INTERNET CAPITAL GROUP OPERATIONS, INC.
By: ____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
EXHIBIT 1.1(P)(1)
FORM OF
PATENT, TRADEMARK AND COPYRIGHT SECURITY AGREEMENT
This Patent, Trademark and Copyright Security Agreement (the "Agreement"),
---------
dated April ___, 1999, is entered into among INTERNET CAPITAL GROUP, INC., a
Delaware corporation ("ICG"), INTERNET CAPITAL GROUP OPERATIONS, INC., a
---
Delaware corporation ("ICG Operations" ICG and ICG Operations being referred to
--------------
herein individually as an "Assignor" or a "Borrower" and collectively as the
-------- --------
"Assignors" or the "Borrowers"), the BANKS (as defined in the Credit Agreement)
--------- ---------
and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Banks under
the Credit Agreement referred to below (the "Assignee").
--------
WHEREAS, pursuant to that certain Credit Agreement (as the same may be
amended, restated, modified or supplemented from time to time, the "Credit
------
Agreement") of even date herewith by and among ICG, ICG Operations, the
- ---------
Guarantors, the Banks and Assignee, as Agent for the Banks, the Banks have
agreed to provide certain loans to each Borrower and each Assignor has agreed,
among other things, to grant to the Assignee a security interest in, and upon
the occurrence of an Event of Default (as that term is defined in the Credit
Agreement) to conditionally assign to the Assignee for the benefit of the Banks,
certain patents, trademarks and copyrights.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Except as otherwise expressly provided herein, capitalized terms used
in this Agreement shall have the respective meanings given to them in the Credit
Agreement.
2. To secure the payment and performance of all indebtedness and other
obligations of the Assignor now or hereafter existing under the Credit Agreement
and the other Loan Documents, including, without limitation, principal,
interest, fees, expenses, reasonable costs and expenses of enforcement,
reasonable attorney's fees and expenses, and obligations under indemnification
provisions in the Loan Documents (collectively, the "Secured Obligations"), each
-------------------
Assignor hereby grants to the Assignee, its successors and assigns, a security
interest in, and subject to Sections 8 and 9 hereof, assigns and conveys to the
Assignee all of the right, title and interest of such Assignor in and to all
patent applications, patents, federal and state trademark applications,
registered and common law trademarks and logos, servicemarks, tradenames,
copyright registrations and copyrights now owned by such Assignor in the United
States, including, without limitation, those listed on Schedule A hereto,
----------
including all proceeds thereof (such as, by way of example, license royalties
and proceeds of infringement suits), the right to sue for past, present and
future infringements, all rights corresponding thereto throughout the world and
all reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, and the goodwill of the business to which any of
the foregoing relate (collectively, the "Patents, Trademarks and Copyrights").
----------------------------------
<PAGE>
3. Each Assignor covenants and warrants that, except as set forth in
Schedule B:
(a) to the best of each Assignor's knowledge, the Patents, Trademarks
and Copyrights are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part;
(b) to the best of each Assignor's knowledge, each of the Patents,
Trademarks and Copyrights is valid and enforceable;
(c) except for Permitted Liens, each Assignor is the sole and
exclusive owner of the entire and unencumbered right, title and
interest in and to the Patents, Trademarks and Copyrights owned by it,
free and clear of any liens, charges and encumbrances, including,
without limitation, pledges, assignments, licenses, shop rights and
covenants by the Assignor not to sue third persons with respect to
such Patents, Trademarks and Copyrights;
(d) each Assignor has the corporate power and authority to enter into
this Agreement and perform its terms;
(e) no written claim has been made to any Assignor or, to the
knowledge of any Assignor, any other person that the use of any of the
Patents, Trademarks and Copyrights does or may violate the
intellectual property rights of any third party; and
(f) each Assignor has used, and shall continue to use for the
duration of this Agreement, materially consistent standards of quality
in its manufacture of products which use or display the Patents,
Trademarks and Copyrights; and
(g) each Assignor in all material respects has used, and shall
continue to use for the duration of this Agreement, proper statutory
notice in connection with its use of the Patents, Trademarks and
Copyrights.
4. Except as set forth in Section 6 hereof, each Assignor agrees that,
until all of the Obligations shall have been satisfied in full, it will not
enter into any agreement which is inconsistent with such Assignor's obligations
under this Agreement, without the Assignee's prior written consent, which
consent shall not be unreasonably withheld.
5. If, before the Obligations shall have been satisfied in full, any
Assignor shall own any new U.S. applications for any Patents, Trademarks or
Copyrights, the Assignor shall diligently prosecute such applications. The
provisions of this Agreement shall automatically apply to any such registration
or patents which are issued to any Assignor in connection with such new
applications, and such Assignor shall give to the Assignee prompt notice thereof
in writing. Each Assignor and the Assignee agree to modify this Agreement by
amending Schedule A to include any such future patents, trademark registrations,
----------
or copyrights and the provisions of
-2-
<PAGE>
this Agreement shall apply thereto. Any expenses incurred in connection with
such an application shall be borne by the Assignor.
6. Each Assignor shall not abandon any Patent, Trademark or Copyright
without the consent of the Assignee, which consent shall not be unreasonably
withheld.
7. Each Assignor agrees not to assign or sell (except as set forth on
Schedule C) its interests in any of its Patents, Trademarks and Copyrights
without the prior written consent of the Assignee, which consent shall not be
unreasonably withheld. Unless there shall have occurred and be continuing an
Event of Default, each Assignor shall have the right to grant any license under
any of its Patents, Trademarks and Copyrights in the ordinary course of the
Assignor's business. The Assignee reserves the right upon reasonable notice to
the Assignors during normal business hours to inspect the operations and
facilities of the Assignors from time to time for the purpose of ensuring that
the use of each Assignor's Patents, Trademarks and Copyrights are consistent
with such Assignor's obligations under the Credit Agreement and hereunder;
provided that such inspection is not disruptive of the Assignor's business.
8. If and during the period that the Obligations are declared due and
payable pursuant to Section 8.2.1 of the Credit Agreement, the Assignee shall
have the right, in addition to all other rights and remedies given it by this
Agreement, the Credit Agreement, those allowed by Law and the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in any
jurisdiction in which the Patents, Trademarks and Copyrights may be registered,
to transfer or assign, in good faith and without negligence or willful
misconduct, all or from time to time any part of the Patents, Trademarks and
Copyrights, or any interest which any Assignor may have therein, and after
deducting from the proceeds of sale or other disposition of the Patents,
Trademarks and Copyrights all expenses (including reasonable fees and expenses
for brokers and attorneys) relating to such sale or disposition, shall apply the
remainder of such proceeds toward the payment of the Obligations as the
Assignee, in its sole discretion, shall determine. Any remainder of the proceeds
after payment in full of the Obligations shall be paid over to the applicable
Assignor and this Agreement shall terminate. Notwithstanding the foregoing,
notice of any transfer or assignment or other disposition of the Patents,
Trademarks and Copyrights shall be given to the applicable Assignor at least
thirty (30) days before the time that any intended public or private transfer or
assignment or other disposition of the Patents, Trademarks and Copyrights is to
be made, which each Assignor hereby agrees shall be reasonable notice of such
sale or other disposition, and during which period the applicable Assignor shall
have the right to pay to the Assignee the amount of Obligations due and payable
plus any reasonable expenses incurred by the Assignee in connection with any
such proposed transfer, assignment or disposition, and upon such payment the
Assignee shall release all interest in the Patents, Trademarks and Copyrights,
and this Agreement shall terminate. At any such transfer or assignment or other
disposition, the Assignee may, to the extent permissible under applicable Law,
purchase the whole or any part of the Patents, Trademarks and Copyrights sold,
free from any right of redemption on the part of any Assignor, which right is
hereby waived and released.
-3-
<PAGE>
9. Subject to Section 10 hereof, if any Event of Default shall have
occurred and be continuing, each Assignor hereby authorizes and empowers the
Assignee to make, constitute and appoint any officer or agent of the Assignee,
as the Assignee may select in its exclusive discretion, as such Assignor's true
and lawful attorney-in-fact, with the power to endorse such Assignor's name on
all applications, documents, papers and instruments necessary for the Assignee
to use the Patents, Trademarks and Copyrights, or to grant or issue, on
commercially reasonable terms, any exclusive or nonexclusive license under the
Patents, Trademarks and Copyrights to any third person, or necessary for the
Assignee to assign, pledge, convey or otherwise transfer title in or dispose, on
commercially reasonable terms, of the Patents, Trademarks and Copyrights to any
third Person. Each Assignor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof other than acts or omissions
which are grossly negligent or constitute willful misconduct. This power of
attorney, being coupled with an interest, shall be irrevocable for the life of
this Agreement.
10. At such time as any Assignor shall have indefeasibly paid in full all
of the Obligations and the Commitments shall have terminated, this Agreement
shall terminate and the Assignee shall execute and deliver to the applicable
Assignor all deeds, assignments and other instruments as may be necessary or
proper as reasonably requested by such Assignor to release the security interest
created hereby and to reassign to such Assignor any and all rights granted to
the Assignee in and to the Patents, Trademarks and Copyrights, pursuant to this
Agreement.
11. Each Assignor shall preserve and maintain all rights in the Patents,
Trademark and Copyrights, including without limitation the payment of all
maintenance fees, renewal fees or taxes. Each Assignor may elect not to preserve
or maintain its rights in certain Patents, Trademarks and Copyrights provided
such election is with the prior consent of the Assignee, which consent will not
be unreasonably withheld.
12. Any and all fees, costs and expenses, of whatever kind or nature,
including reasonable attorney's fees and reasonable expenses incurred by the
Assignee in connection with the preparation of this Agreement and all other
documents relating hereto and the consummation of this transaction, the filing
or recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
fees, encumbrances, the protection, maintenance or preservation of the Patents,
Trademarks and Copyrights (in the event that any Assignor fails to discharge its
duty pursuant to Section 10 or otherwise), or the defense or prosecution of any
actions or proceedings arising out of or related to the Patents, Trademarks and
Copyrights, shall be borne and paid by the Assignor within thirty (30) days of
demand by the Assignee, and if not paid within such time, shall be added to the
principal amount of the Obligations and shall bear interest at the highest rate
prescribed in the Credit Agreement.
13. Each Assignor shall have the right, with the consent of the Assignee,
which shall not be unreasonably withheld, to bring suit, action or other
proceeding in its own name, to enforce the Patents, Trademarks and Copyrights
and any licenses thereunder. The Assignee shall cooperate with such Assignor, at
such Assignor's reasonable request and expense, in the
-4-
<PAGE>
prosecution or defense of any suit, action or proceeding with respect to the
Patents, Trademarks and Copyrights. Each Assignor shall promptly, upon demand,
reimburse and indemnify the Assignee for all damages, costs and expenses,
including reasonable legal fees, incurred by the Assignee at the request of the
Assignor as a result of such suit.
14. No course of dealing between any Assignor and the Assignee, nor any
failure to exercise nor any delay in exercising, on the part of the Assignee,
any right, power or privilege hereunder or under the Credit Agreement or other
Loan Documents shall operate as a waiver of such right, power or privilege, nor
shall any single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
15. All of the Assignee's rights and remedies with respect to the Patents,
Trademarks and Copyrights, whether established hereby or by the Credit Agreement
or by any other agreements or by Law, shall be cumulative and may be exercised
singularly or concurrently.
16. The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any clause
or provision of this Agreement in any jurisdiction.
17. This Agreement is subject to modification only by a writing signed by
the parties, except as provided in Paragraph 5.
18. The benefits and burdens of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties.
19. This Agreement shall be governed by and construed in accordance with
the internal Laws of the Commonwealth of Pennsylvania without regard to its
conflicts of law principles.
20. EACH ASSIGNOR HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF CHESTER COUNTY, PENNSYLVANIA AND
THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND
EACH ASSIGNOR WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT TO THE FULL EXTENT PERMITTED BY LAW.
[SIGNATURES BEGIN ON NEXT PAGE]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized, as of
the date first above written.
INTERNET CAPITAL GROUP, INC.
By: ____________________________________
Name:___________________________________
Title:__________________________________
INTERNET CAPITAL GROUP OPERATIONS, INC.
By: ____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
SCHEDULE A
TO
PATENT, TRADEMARK AND COPYRIGHT COLLATERAL SECURITY AGREEMENT
-------------------------------------------------------------
LIST OF PATENTS, TRADEMARKS,
TRADE NAMES AND COPYRIGHTS
1. A federal trademark application for the mark "Internet Capital
Group" was filed on March 18, 1997 (Serial No. 75/259,155) and is
presently pending
<PAGE>
SCHEDULE B
TO
PATENT, TRADEMARK AND COPYRIGHT COLLATERAL SECURITY AGREEMENT
-------------------------------------------------------------
LIST OF LIENS, CHARGES AND ENCUMBRANCES
OTHER THAN PERMITTED LIENS
1. A federal trademark application for the mark "Internet Capital
Group" was filed on March 18, 1997 (Serial No. 75/259,155) and is
presently pending
<PAGE>
SCHEDULE C
TO
PATENT, TRADEMARK AND COPYRIGHT COLLATERAL SECURITY AGREEMENT
-------------------------------------------------------------
PERMITTED SALES
None
<PAGE>
EXHIBIT 1.1(P)(2)
Form of
PLEDGE AGREEMENT
PLEDGE AGREEMENT, made as of this 30th day of April, 1999, between INTERNET
CAPITAL GROUP, INC. ("ICG" or the "Pledgor"), a Delaware corporation with an
office at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA 19087 and
PNC BANK, NATIONAL ASSOCIATION, in its capacity as Agent for the Banks referred
to below (in such capacity, "Pledgee").
W I T N E S S E T H :
---------------------
WHEREAS, the Pledgor has entered into a Credit Agreement, dated as of April
30, 1999 (said Credit Agreement, as the same may from time to time be amended or
supplemented, is referred to as the "Credit Agreement"), with the Pledgee and
the Banks referred to therein, the terms of which are incorporated herein by
reference, pursuant to which the Banks have agreed, on the terms set forth in
the Credit Agreement, to make certain loans and extend credit to the Pledgor;
WHEREAS, in order to secure the due payment and performance of all of the
Obligations (as defined in the Credit Agreement), the Pledgor has agreed to
grant to the Pledgee a first lien on and security interest in, and pledge with
the Pledgee, the Pledged Securities, as hereinafter defined;
WHEREAS, all terms used in this Agreement which are not defined herein, but
are defined in the Credit Agreement, shall have the respective meanings ascribed
to them therein; and
WHEREAS, it is a condition precedent to the obligations of the Pledgee and
the Banks under the Credit Agreement that the Pledgor shall execute and deliver
this Pledge Agreement.
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound, the Pledgor hereby agrees with the Pledgee as follows:
1. (a) The term "Pledged Securities" as used herein shall mean and
include:
(i) Any and all shares of capital stock, options, warrants and
other securities now, heretofore or at any time hereafter issued by any present
and future Investment Entities (including but not limited to the corporations
set forth on Exhibit A hereto, the securities of which are more specifically set
---------
forth on Annex A to the Letter Agreement which is incorporated herein and made a
part hereof) in which the Pledgor now or hereafter has any interest (the
"Securities"); and
(ii) Any Securities or other rights issued by any issuer of the
foregoing (whether or not certificated) as an addition to, in substitution of or
in exchange for, or resulting from the conversion of any such shares or other
securities, and, subject to the provisions of
<PAGE>
Section 3 hereof, any and all proceeds, including without limitation, all cash
dividends and stock dividends thereof, now or hereafter owned or acquired by the
Pledgor.
(b) Notwithstanding the foregoing, for so long as no Event of Default
shall have occurred and be continuing under the Credit Agreement, Excluded
Pledged Securities (as defined hereinafter) shall not be deemed to be Pledged
Securities for the purposes of this Agreement. "Excluded Pledged Securities"
shall mean:
(i) The 24,000 shares of common stock of Excite, Inc. pledged by
ICG to Silicon Valley Bank in connection with ICG's guaranty of certain
obligations of E-Chemicals, Inc., until such time as such pledge is no longer
required under such guaranty; and the 22,374 shares of common stock Lycos, Inc.
owned of record by ICG as of the date hereof; and
(ii) Restricted Securities owned by the Pledgor issued by one or
more Investment Entities provided that the class of such securities is not
listed on a recognized national securities exchange, on the Nasdaq National
Market or Nasdaq SmallCap Market or on the over-the-counter market; provided,
however that the value of such Restricted Securities excluded from the
definition of Pledged Securities hereunder shall not exceed Ten Million Dollars
($10,000,000) calculated on a cost basis in accordance with Section 2.9 of the
Credit Agreement.
The Excluded Pledged Securities shall be set forth on Annex B to the Letter
Agreement, as amended from time to time, which is incorporated herein and made a
part hereof.
(c) The Pledged Securities are sometimes collectively referred to
herein as the "Collateral".
2. (a) As collateral security for the due payment and performance of all
Obligations, the Pledgor hereby pledges, assigns, hypothecates, delivers and
sets over to Pledgee, and grants a security interest to Pledgee in, the
Collateral.
(b) If the Pledgor shall become entitled to receive or shall receive
any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital), option, warrant or other
rights, whether as an addition to, in substitution of, or in exchange for any
shares of the Pledged Securities or otherwise, the Pledgor shall accept any such
instruments as the Pledgee's agent, shall hold them in trust for the Pledgee and
shall deliver them forthwith to the Pledgee in the exact form received, with the
Pledgor's endorsement when necessary and/or appropriate stock powers duly
executed in blank, to be held by the Pledgee as "Pledged Securities" subject to
the terms hereof, as further collateral security for the Obligations.
(c) Any or all of the Pledged Securities held by the Pledgee
hereunder may, at the option of the Pledgee, following an Event of Default under
the Credit Agreement that is continuing, be registered in the name of the
Pledgee or its nominee, and the Pledgee or its nominee may thereafter, with
notice, after the occurrence of any Event of Default defined or specified in the
Credit Agreement exercise all voting and corporate rights at any meeting of any
-2-
<PAGE>
corporation issuing any of the shares included in the Pledged Securities and
exercise any and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the Pledged Securities
as if it were the absolute owner thereof, including, without limitation, the
right to exchange, at its discretion, any or all of the Pledged Securities upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of any corporation issuing any of such shares or upon the exercise
by any such issuer of any right, privilege or option pertaining to any of the
Pledged Securities, and in connection therewith, to deposit and deliver any or
all of the Pledged Securities with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine, all without liability except to account for property actually
received by it, but the Pledgee shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
(d) Subject to Section 3 hereof, all cash dividends payable with
respect to any part of the Pledged Securities shall be paid to the Pledgee to be
held by the Pledgee as additional collateral security hereunder until applied to
the Obligations, whether or not the Pledgee shall have caused any of the Pledged
Securities to be registered in its or its nominee's name, and any such cash
dividends received by the Pledgors shall be held in trust for the Pledgee by the
Pledgor and shall be promptly delivered to the Pledgee.
(e) In the event of the occurrence of any Event of Default defined or
specified in the Credit Agreement that is continuing, following requisite notice
and after the expiration of any applicable cure period provided therein,
(i) the Pledgee without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Pledgor or any other person
(all and each of which demands, advertisements and/or notices are, to the extent
permitted by law, hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give an option or options to purchase, contract to sell
or otherwise dispose of and deliver said Collateral, or any part thereof, in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or at any of the Pledgee's offices or elsewhere at such prices and on such
terms (including, without limitation, a requirement that any purchaser of all or
any part of the Collateral shall be required to purchase the Pledged Securities
for investment and without any intention to make a distribution thereof) as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk, with the right to the Pledgee or any purchaser upon such
sale or sales whether public or private to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Pledgor,
which right or equity is hereby expressly waived and released; and
(ii) The Pledgor hereby authorizes the Pledgee and does hereby
make, constitute and appoint the Pledgee and any officer or agent of the
Pledgee, with full power of substitution, as the Pledgor's true and lawful
attorney-in-fact, with power, in its own name or in the name of the Pledgor, to
endorse any notes, checks, drafts, money orders, or other instruments of payment
in respect of the Collateral that may come into possession of the Pledgee; to
demand, collect, receipt for, compromise, settle and sue for monies due in
respect of any or all of the
-3-
<PAGE>
Collateral; and, generally, to do, at the Pledgee's option and at Pledgor's
expense, at any time, or from time to time, all acts and things which Pledgee
deems necessary to protect, preserve and realize upon the Collateral and the
Pledgee's security interest therein in order to effect the intent of this Pledge
Agreement and the Credit Agreement, all as fully and effectually as the Pledgor
might or could do; and the Pledgor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof This power of attorney shall be
irrevocable as long as any of the Obligations shall be outstanding.
(f) The proceeds of any collection, recovery, receipt, appropriation,
realization or sale as aforesaid, shall be applied as follows:
First, to the costs and expenses of every kind incurred in connection
therewith or incidental to the care, safekeeping or otherwise of any and all of
the Collateral or in any way relating to the rights of the Pledgee hereunder,
including attorneys' fees and legal expenses;
Second, to the Obligations;
Third, to the payment of any other amounts required by applicable law
(including without limitation, Section 9-504(1) of the Uniform Commercial Code;
and
Fourth, to the Pledgors or to whomsoever is legally entitled thereto,
to the extent of the surplus proceeds, if any.
(g) The Pledgee need not give more than five days' (or less, if
commercially reasonable) notice of the time and place of any public sale or of
the time after which a private sale may take place and the Pledgor agrees such
notice shall be reasonable notification of such matters.
(h) In the event that the proceeds of any collection, recovery,
receipt, appropriation, realization, or sale as aforesaid are insufficient to
pay all amounts to which the Pledgee is legally entitled, the Pledgor will be
liable for the deficiency, together with interest thereon, at the rate
prescribed in the Credit Agreement, and the reasonable fees of any attorneys
employed by the Pledgee to collect such deficiency, provided that the foregoing
is not intended to restrict Pledgee's right to proceed against the Pledgor or
any other assets of Pledgor prior to proceeding against the Collateral hereunder
or otherwise enforcing its rights in any order and against any property as
Pledgee may in its discretion determine.
3. So long as no Event of Default under the Credit Agreement shall have
occurred and be continuing:
(a) Pledgor shall be entitled to exercise any and all voting and
other consensual rights and powers pertaining to the Collateral of Pledgor or
any part thereof for any purpose not inconsistent with the terms of this
Agreement; provided, however, that Pledgor shall not exercise or refrain from
-------- -------
exercising any such right if such action could reasonably be expected to result
in a Material Adverse Change in the value of the Collateral or any part thereof;
(b) The Pledgor shall be entitled to receive and retain any and all
cash dividends and distributions and interest payable on the Collateral but any
and all stock and/or
-4-
<PAGE>
liquidating dividends, distributions in property, returns of capital or other
distributions made on or in respect of the Collateral, whether resulting from a
subdivision, combination or reclassification of the outstanding capital stock of
any issuer thereof or received in exchange for Collateral or any part thereof or
as a result of any merger, consolidation, acquisition or other exchange of
assets to which any such issuer may be a party or otherwise, and any and all
cash and other property received in payment of the principal of or in redemption
of or in exchange for any Collateral (either at maturity, upon call for
redemption or otherwise), shall be and become part of the Collateral and, if
received by the Pledgor, shall be held in trust for the benefit of the Pledgee
and shall forthwith be delivered to the Pledgee or its designated agent
(accompanied by proper instruments of assignment and/or stock and/or bond powers
executed by such in accordance with the Pledgee's instructions) to be held
subject to the terms of this Agreement, pursuant to Section 2(d) hereof and
except as otherwise required under the Credit Agreement and shall, if received
by Pledgor, be received in trust for the benefit of the Pledgee, be segregated
from the other property or funds of Pledgor and be forthwith delivered to the
Pledgee as Collateral in the same form as so received (with any necessary
endorsement); and
(c) The Pledgee shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies, dividend orders, interest coupons
and other instruments as Pledgor may reasonably request for the purpose of
enabling Pledgor to exercise the voting and other consensual rights and powers
that it is entitled to exercise pursuant to paragraph (c) above and to receive
the dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
4. The Pledgor represents and warrants that:
(a) ICG is the direct and beneficial owner of all of the Pledged
Securities; and
(b) The Pledged Securities listed on Annex A to the Letter Agreement
constitute all of the outstanding Securities of the Investment Entities owned by
ICG (not including the Excluded Pledged Securities);
(c) All of the Pledged Securities have been duly and validly issued
and are fully paid and non-assessable and the Collateral is owned by the
Pledgors free and clear of any Liens except for the pledge of such shares to the
Pledgee and the grant to the Pledgee of a security interest therein pursuant to
this Agreement, the contractual restrictions applicable to the transfer of the
Pledged Securities disclosed in the Letter Agreement, and Permitted Liens; and
(d) Upon delivery of the Pledged Securities to the Pledgee (or an
agent for the Pledgee), this Pledge Agreement creates and grants a valid first
lien on and perfected security interest in the Collateral and the proceeds
thereof, subject to no prior security interest, lien, charge or encumbrance or
to any agreement purporting to grant to any third party a security interest in
the property or assets of the Pledgor which would include the Collateral,
subject to Section 4(c) above.
5. (a) The Pledgor hereby covenants that so long as the Obligations
shall be outstanding and unpaid, in whole or in part, the Pledgor will not,
except as provided in Section
-5-
<PAGE>
5(c) herein, sell, convey or otherwise dispose of any of the Collateral or any
interest therein, nor will the Pledgor create, incur or permit to exist any
Liens except Permitted Liens with respect to any of the Collateral or the
proceeds thereof other than that created hereby.
(b) The Pledgor warrants and will defend the Pledgee's right, title,
special property and security interest in and to the Collateral against the
claims of any person, firm, corporation or other entity.
(c) Provided there does not exist and there is not continuing an
Event of Default under the Credit Agreement, Pledgor may sell Pledged
Securities, with contemporaneous notice to the Pledgee, as long as Pledgor
maintains with Pledgee, the Pledged Collateral in compliance with the Borrowing
Base as provided in the Credit Agreement. Following an Event of Default under
the Credit Agreement that is continuing, the proceeds of the sale of any Pledged
Securities sold pursuant hereto shall be used solely to repay amounts due under
the Credit Agreement. After the Expiration Date and repayment in full of the
Obligations other than the aggregate withdrawn face amount of issued and
outstanding letters of credit and all expenses and interest and fees thereon,
Pledgor may, except as next set forth, withdraw all Pledged Securities from the
pledge hereof, provided that Pledgor provides Pledgee with cash collateral,
satisfactory to Pledgee in its sole discretion, in an amount equal to 100% of
the face amount of all issued and outstanding letters of credit issued by the
Agent under the Credit Agreement.
(d) The Pledgor will update Annex A and Annex B to the Letter
Agreement, incorporated herein, in accordance with Sections 7.1.13 and 7.1.15 of
the Credit Agreement.
(e) The Pledgor hereby covenants that the cost basis of Excluded
Pledged Securities shall not exceed $10,000,000 in the aggregate, at any time.
6. (a) If the Pledgee shall determine to exercise its right to sell all
or any part of the Pledged Securities after the occurrence of an Event of
Default, and if in the opinion of counsel for the Pledgee it is necessary to
have the Pledged Securities, or that portion thereof to be sold, registered
under the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Pledgor will use its best commercial efforts to cause each issuer of
shares included in the Pledged Securities contemplated to be sold to execute and
deliver, and cause the directors and officers of each such issuer to execute and
deliver, all at the Pledgor's expense, all such instruments and documents, and
to do or cause to be done all such other acts and things as may be necessary to
register the Pledged Securities, or that portion thereof to be sold, under the
provisions of the Securities Act and to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Securities, or
that portion thereof so to be sold, and to make all amendments thereto and/or to
the related prospectus which, in the opinion of the Pledgee or its counsel, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto; to cause each such issuer to comply with the
provisions of the "Blue Sky" law of any jurisdiction which the Pledgee shall
designate; and to cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) covering a period of twelve months, but not more than eighteen months,
beginning with the first month after the effective date
-6-
<PAGE>
of any such registration statement, which earnings statement will satisfy the
provisions of Section 11(a) of the Securities Act.
(b) The Pledgor acknowledges that a breach of any of the covenants
contained in subparagraph (a) above will cause irreparable injury to the
Pledgee, that the Pledgee shall have no adequate remedy at law in respect of
such breach and, as a consequence, the covenants of the Pledgor contained in the
said subparagraph 5(a) shall be specifically enforceable against the Pledgor,
and the Pledgor hereby waives, and shall not assert any defenses against an
action for specific performance of such covenants, except for a defense that no
Event of Default defined or specified in the Credit Agreement has occurred.
(c) Notwithstanding the foregoing, the Pledgor recognizes that the
Pledgee may be unable to effect a public sale of all or a part of the Pledged
Securities, and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges that
any such private sales may be at prices and on terms less favorable to the
seller than if sold at public sales and agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner, and that the
Pledgee has no obligation to delay sale of any such securities for the period of
time necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act.
7. The Pledgor shall at any time and from time to time upon the written
request of the Pledgee, execute and deliver such further documents and do such
further acts and things as the Pledgee may reasonably request in order to
effectuate the purposes of this Pledge Agreement including without limitation,
delivering to the Pledgee at any time hereafter irrevocable proxies in respect
of the Pledged Securities, exercisable upon the occurrence and during the
continuance of an Event of Default, in a form reasonably satisfactory to the
Pledgee.
8. (a) Beyond the exercise of reasonable care to assure the safe custody
of the Collateral while held hereunder, the Pledgee shall have no duty or
liability to preserve rights pertaining thereto, and shall be relieved of all
responsibility for the Collateral upon surrendering it to the Pledgor.
(b) No course of dealing between the Pledgor and the Pledgee, nor any
failure to exercise, nor any delay in exercising, on the part of the Pledgee,
any right, power or privilege hereunder or under, arising out of, or in any way
connected with the Credit Agreement or the Notes, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(c) The rights and remedies herein provided, and provided in, arising
out of, or in any way connected with the Credit Agreement or the Notes, and in
all other agreements, instruments and documents delivered pursuant thereto, are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law including, without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code.
-7-
<PAGE>
(d) The provisions of this Pledge Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision in this Pledge Agreement.
9. The rights of the Pledgee hereunder shall not be impaired or in any
way affected, nor shall the Pledgor have any rights against the Pledgee by
reason of the fact that the Pledgee fails to preserve any rights in the
Collateral or fails to take any other action whatsoever in regard to the
Collateral; nor by reason of the fact that a valid lien in any of the Collateral
may not be conveyed to, or created in favor of the Pledgee; nor by reason of the
fact that any of the Obligations may be invalid or unenforceable against the
Pledgor or any obligor thereon for any reason whatsoever; nor by reason of the
release, in whole or in part, with or without consideration, of the Collateral
or any part of it.
10. Any notice or other communication given hereunder to the Pledgor shall
be deemed sufficient if given in accordance with the Credit Agreement.
11. This Pledge Agreement shall inure to the benefit of and be binding
upon, the successors and assigns of the parties hereto.
12. This Pledge Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania
relating to contracts executed and to be performed therein. The Pledgor hereby
irrevocably consents to the jurisdiction of the Courts of Common Pleas of
Philadelphia, Pennsylvania in all actions and proceedings in connection with
this Agreement, the Pledged Securities or the Loan Documents. The Pledgor agrees
that in any action or proceeding brought by it in such connection, exclusive
jurisdiction shall lie in the Courts of Common Pleas of Philadelphia,
Pennsylvania and the United States District Court for the Eastern District of
Pennsylvania.
13. All agreements, representations and warranties made herein shall
survive the delivery of this Agreement. THE PLEDGORS AND THE PLEDGEE IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF, THIS AGREEMENT, THE NOTES, THE SECURITY
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
******
-8-
<PAGE>
IN WITNESS WHEREOF, the parties intending this to take effect as an
instrument under seal have caused these presents to be duly executed and
delivered the day and year first above written.
ATTEST: INTERNET CAPITAL GROUP, INC.
Name:_____________________ BY:_____________________________________
Title:_____________________ Name:________________________________
Title:_______________________________
PNC BANK, NATIONAL ASSOCIATION,
as Agent
BY:_____________________________________
Name:________________________________
Title:_______________________________
-9-
<PAGE>
EXHIBIT A
(AS OF APRIL 30, 1999)
(1) Bencbmarking Partners, Inc. ("Bencbmarking")
(2) BidCom, Inc. ("BidCom")
(3) Blackboard, Inc. ("Blackboard")
(4) Breakaway Solutions, Inc. ("Breakaway")
(5) ClearCommerce Corporation ("ClearCommerce"), formerly Outreach
(6) Collabria, Inc. ("Collabria")
(7) Commerx, Inc. ("Commerx") d/b/a Plastics Net
(8) The ComputerJobs Store, Inc. ("ComputerJobs")
(9) Context Integration, Inc. ("Context")
(10) Deja News, Inc. ("Deja News")
(11) E-Chemicals, Inc. ("E-Chemicals")
(12) Entegrity Solutions Corporation ("Entegrity")
(13) Internet Commerce Systems, Inc. ("ICS")
(14) Vivant! ("Vivant")
(15) LinkShare Corporation ("LinkShare")
(16) MegaDepot.com, Inc. ("MegaDepot")
(17) MessageQuest, Inc. ("MessageQuest")
(18) PlanSponsor.com, Inc. ("PlanSponsor")
(19) PrivaSeek, Inc. ("PrivaSeek")
(20) RapidAutoNet Corporation ("RapidAutoNet")
(21) SageMaker, Inc. ("SageMaker") formerly E-Volve
(22) ServiceSoft Corporation ("ServiceSoft")
(23) Sky Alland Marketing, Inc. ("Sky Alland")
<PAGE>
(24) Syncra Software, Inc. ("Syncra Software")
(25) Universal Access, Inc. ("Universal Access")
(26) VerticalNet, Inc. ("VerticalNet")
<PAGE>
EXHIBIT 1.1(R)
FORM OF
REVOLVING CREDIT NOTE
$______________ Pittsburgh, Pennsylvania
April __, 1999
FOR VALUE RECEIVED, the undersigned, INTERNET CAPITAL GROUP, INC., a
Delaware corporation ("ICG"), and INTERNET CAPITAL GROUP OPERATIONS, INC., a
---
Delaware corporation ("ICG Operations"; ICG and ICG Operations being referred to
--------------
herein individually as a "Borrower" and collectively as the "Borrowers"),
-------- ---------
hereby, jointly and severally, promise to pay to the order
of________________________________ (the "Bank") the lesser of(i) the principal
----
sum of_________________ U.S. Dollars (U.S. $______________), or (ii) the
aggregate unpaid principal balance of all Revolving Credit Loans made by the
Bank to the Borrowers pursuant to Section 2 of the Credit Agreement, dated as of
April ___, 1999, by and among the Borrowers, each of the Guarantors, the Banks,
and PNC Bank, National Association, in its capacity as agent for the Banks (the
"Agent") (as hereafter amended, supplemented or modified from time to time (the
-----
"Credit Agreement")), whichever is less, payable on the earlier of the
----------------
Expiration Date, the acceleration hereby or as otherwise provided in the Credit
Agreement.
The Borrowers shall pay interest on the unpaid principal balance
hereof from time to time outstanding from the date hereof at the rate or rates
per annum specified by the Borrowers pursuant to Section 3.1 of, or as otherwise
provided in, the Credit Agreement.
Upon the occurrence and during the continuation of an Event of
Default, the Borrowers shall pay interest on the entire principal amount of the
then outstanding Revolving Credit Loans made by the Bank and evidenced by this
Revolving Credit Note at an increased rate of interest as more fully set forth
in Section 3.3 of the Credit Agreement. Such interest rate will accrue before
and after any judgment has been entered.
Interest on this Revolving Credit Note will be payable as set forth in
Section 4.3 of the Credit Agreement, on the Expiration Date and at such other
times as are specified in the Credit Agreement.
Subject to the provisions of the Credit Agreement, payments of both
principal and interest shall be made without setoff, counterclaim or other
deduction of any nature at the office of the Agent for the benefit of the Banks
located at 249 Fifth Avenue, Pittsburgh, Pennsylvania, 15222-2707, in lawful
money of the United States of America in immediately available funds.
This Note is one of the Revolving Credit Notes referred to in, and is
entitled to the benefits of, the Credit Agreement and other Loan Documents,
including the representations, warranties, covenants, conditions, security
interests or Liens contained or granted therein. The Credit Agreement, among
other things, contains provisions for acceleration of the maturity
<PAGE>
hereof upon the happening of certain stated events and also for prepayment, in
certain circumstances, on account of principal hereof prior to maturity upon the
terms and conditions therein specified.
All capitalized terms used herein shall, unless otherwise defined
herein, have the same meanings given to such terms in the Credit Agreement.
Except as otherwise provided in the Credit Agreement, each Borrower
waives presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.
This Note shall bind each Borrower and its successors and assigns, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns.
This Note and any other documents delivered in connection herewith and
the rights and obligations of the parties hereto and thereto shall for all
purposes be governed by and construed and enforced in accordance with the
internal laws of the Commonwealth of Pennsylvania without giving effect to its
conflicts of law principles.
IN WITNESS WHEREOF, the undersigned have each executed this Note by
its duly respective authorized officers with the intention that it constitute a
sealed instrument.
ATTEST/WITNESS: INTERNET CAPITAL GROUP, INC.
By:___________________________________ By:___________________________________
Name:_________________________________ Name:_________________________________
Title:________________________________
[SEAL]
ATTEST/WITNESS: INTERNET CAPITAL GROUP OPERATIONS,
INC.
By:___________________________________ By:___________________________________
Name:_________________________________ Name:_________________________________
Title:________________________________
[SEAL]
-2-
<PAGE>
EXHIBIT 1.1(S)
form of
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is dated as of April 30, 1999, and is made by and
among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
---
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations"; ICG
--------------
and ICG Operations being referred to herein individually as a "Borrower" and
--------
collectively as the "Borrowers"), and each of the wholly-owned Subsidiaries of
---------
each Borrower listed on Schedule 1 hereto (the "Grantor Subsidiaries") (each
---------- --------------------
Borrower and the Grantor Subsidiaries being collectively referred to herein as
the "Grantors" and each as a "Grantor") and PNC BANK, NATIONAL ASSOCIATION, in
-------- -------
its capacity as agent for the Banks under that certain Credit Agreement referred
to below (the "Agent").
-----
WITNESSETH THAT:
WHEREAS, pursuant to that certain Credit Agreement (as it may hereafter be
amended or otherwise modified from time to time, the "Credit Agreement") of even
----------------
date herewith among the Borrowers, the Guarantors party thereto, the Banks party
thereto and the Agent, the Banks have agreed to make certain loans to the
Borrowers and the Guarantors have guaranteed such loans and other obligations;
WHEREAS, the obligations of the Banks to make Loans under the Credit
Agreement are subject to the condition; among others, that each Borrower secure
its obligations to the Agent and the Banks under the Credit Agreement and each
Guarantor secure its obligations to the Agent and the Banks under the Guaranty
Agreement by the grant of security interests in the Collateral, as defined and
more frilly set forth herein; and
WHEREAS, each Grantor is (or will be with respect to after-acquired
property) the legal and beneficial owner and holder of its respective Collateral
(as defined in Section 1 hereof), and has agreed to grant a security interest in
such Collateral to the Agent on the terms and conditions set forth herein.
NOW, THEREFORE, intending to be legally bound hereby and for value
received, the parties hereto covenant and agree as follows:
1. Definitions. Terms which are defined in the Credit Agreement and not
-----------
otherwise defined herein are used herein as defined therein. In addition to the
words and terms defined elsewhere in this Security Agreement, the following
words and terms shall have the following meanings, respectively, unless the
context otherwise clearly requires:
(a) "Code" shall mean the Uniform Commercial Code of each state as
enacted and in effect on the date hereof in each applicable jurisdiction,
and as the same may subsequently be amended from time to time.
<PAGE>
(b) "Collateral" shall mean, in the case of each Grantor, all of its
fight, title and interest in, to and under the following described property,
whether now owned or hereafter acquired (words and terms defined in the Code
shall have the same meanings when used herein):
(i) all general intangibles of the Grantor, including general
intangibles now in existence and those that shall hereafter arise;
(ii) all accounts of the Grantor, including accounts now in
existence and those that shall hereafter arise;
(iii) all inventory of the Grantor, including inventory which it
now owns and that which it shall hereafter acquire;
(iv) all chattel paper of the Grantor, including chattel paper
which it now owns and that which it shall hereafter acquire;
(v) all investment property of the Grantor, including (i)
Pledged Securities and (ii) any other investment property which it now
owns and that which it shall hereafter acquire; provided, however that
--------- -------
for so long as no Event of Default shall have occurred and be
continuing, the Collateral shall not be deemed to include any Excluded
Pledged Securities (as such term is defined in Section 1(a) of the
Pledge Agreement);
(vi) all equipment (including fixtures) of the Grantor, including
equipment which it now owns and that which it shall hereafter acquire;
(vii) all documents of the Grantor, including documents which it
now owns and those which it shall hereafter acquire;
(viii)all instruments, letters of credit and advices of credit
of the Grantor, including those which it now owns and those which it
shall hereafter acquire;
(ix) all other property of the Grantor at any time delivered to
or in the possession of the Agent;
(x) any other real and personal property of the Grantor
including, without limitation, any real or personal property which the
Grantor has given or may give in the future to the Agent to secure the
Secured Indebtedness; and
(xi) all additions to and substitutions for, and products and
proceeds (including insurance proceeds whether or not the Agent is the
loss payee thereof) of, any of the properties mentioned in clauses (i)
through (x) above, or any indemnity, warranty or guaranty payable by
reason of loss or damage to or otherwise with respect to any of such
properties.
Without limiting the generality of the foregoing, the term
"Collateral" shall expressly include all royalty, licensing and
know-how agreements, all patents,
2
<PAGE>
copyrights, trademarks, tradenames, service marks, trade secrets,
know-how, goodwill, computer software, computer programs, tapes, discs
and other documents or transcribed information of any type, whether
expressed in ordinary or machine readable language; provided, however
-------- -------
that the grant of a Lien herein shall not extend to, and the term
"Collateral" shall not include, any chattel paper, contract rights or
other general intangibles which are now held or hereafter acquired by
any Borrower to the extent that such chattel paper, contract rights or
other general intangibles are not assignable or capable of being
encumbered (A) as a matter of law or (B) under the terms of any
agreement applicable thereto (but solely to the extent that any such
restriction is enforceable under applicable law) without the consent
of the other party to such agreement where such consent has not been
obtained. Each Borrower hereby represents and warrants to Agent that
any contract rights and other general intangibles acquired after the
date hereof which are excluded from the definition of Collateral
pursuant hereto will not involve payments owed to each Borrower in
excess of $100,000 per year in the aggregate for all such excluded
contact rights and other general intangibles.
(c) "Secured Indebtedness" shall mean, collectively, (i) all
Obligations, including all Indebtedness, whether of principal, interest, fees,
expenses or otherwise, of any Borrower or any Guarantor to the Banks, whether
now existing or hereafter incurred under the Credit Agreement or any of the Loan
Documents, as any of the same may from time to time be amended, modified or
supplemented, together with any and all extensions, renewals, refinancings or
refundings thereof in whole or in part by the Banks, (ii) all out-of-pocket
costs, expenses and disbursements, including reasonable attorneys' fees and
legal expenses, incurred by the Banks or any one of them, or the Agent, in the
collection of any of the obligations referred to in clause (i) above; and (iii)
any advances made, subsequent to an Event of Default which is continuing, by the
Banks or any one of them, or the Agent, for the reasonable maintenance,
preservation, protection or enforcement of, or realization upon, the Collateral,
including advances for taxes, insurance, repairs and the like and reasonable
expenses incurred to sell or otherwise realize on, or prepare for sale or other
realization on, any of the Collateral.
2. Assignment and Grant of Security Interests. As security for the due
------------------------------------------
and punctual payment and performance of the Secured Indebtedness in fill, each
Grantor hereby agrees that the Agent shall have, and each Grantor hereby grants
to and creates in favor of the Agent, for the benefit of the Agent and the Banks
as their respective interests may appear, a continuing first priority security
interest in and to each Grantor's respective Collateral (except for Motor
Vehicles) subject only to Permitted Liens. Without limiting the generality of
Section 4 below, each Grantor further agrees that with respect to each item of
Collateral as to which (i) the creation of a valid and enforceable security
interest is not governed exclusively by the Code or (ii) the perfection of a
valid and enforceable security interest therein under the Code cannot be
accomplished either by the Agent or the Banks taking possession thereof or by
the filing in appropriate locations of appropriate Code financing statements
executed by the Grantor, such Grantor shall at its expense execute and deliver
to the Agent such documents, agreements, notices, assignments and instruments
and take such further actions as may be requested by the Agent from time to time
for the purpose of creating a valid and perfected first priority Lien on
3
<PAGE>
such item, subject only to Permitted Liens, enforceable against the Grantor and
all third parties to secure the Secured Indebtedness.
3. Representations and Warranties. Each Grantor jointly and severally
------------------------------
represents, warrants and covenants to the Agent that:
(a) Such Grantor is the legal and beneficial owner and holder of its
respective Collateral and such Grantor has and shall continue to have good and
marketable title to the Collateral which such Grantor purports to own or which
is reflected as owned in its books and records.
(b) Each Grantor has received value from each of the Banks for such
Grantor's grant of a security interest hereunder and, except for the security
interest granted to and created in favor of the Agent hereunder and any
Permitted Liens, all of such Collateral is and shall continue to be free and
clear of all Liens.
(c) Such Grantor has full power to enter into, execute, deliver and
carry out this Security Agreement and to perform its obligations hereunder and
all such actions have been duly authorized by all necessary proceedings on its
part. This Security Agreement has been duly and validly executed and delivered
by such Grantor. This Security Agreement constitutes the legal, valid and
binding obligations of such Grantor, enforceable against it in accordance with
its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
(d) Neither the execution and delivery of this Security Agreement nor
compliance with the terms and provisions hereof (i) shall conflict with or
result in any breach of the terms and conditions of the declaration of trust,
articles of incorporation, by-laws, partnership agreement, limited liability
company agreement or equivalent documents of such Grantor or of any Law or of
any material agreement or instrument to which such Grantor is a party or by
which it is bound or to which it is subject, (ii) shall constitute a default
thereunder or (iii) shall result in the creation or enforcement of any Lien
whatsoever upon any property (now or hereafter acquired) of such Grantor (other
than Liens granted to the Agent on behalf of the Banks under the Loan
Documents).
4. Further Assurances. Each Grantor shall, from time to time, at its
------------------
expense, faithfully preserve and protect the Agent's security interest in such
Grantor's Collateral as a continuing first priority perfected security interest,
subject only to Permitted Liens, and shall do all such other acts and things and
shall, upon request therefor by the Agent, execute, deliver, file and record all
such other documents and instruments, including financing statements, security
agreements, pledges, assignments, documents and powers of attorney with respect
to such Grantor's Collateral, and pay all filing fees and taxes related thereto
as the Agent in its sole discretion may deem necessary or advisable from time to
time in order to preserve, perfect or protect any security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any of the Collateral. Without
limiting the generality of the foregoing, to the extent Article 9 of the Code
does not
4
<PAGE>
govern the creation and/or perfection of the security interests intended to be
created hereunder, each Grantor agrees to execute and deliver such further
documents and instruments and do such further acts as the Agent may from time to
time require.
5. Covenants. Each Grantor jointly and severally covenants and agrees that
---------
(a) it shall maintain in good condition and repair, ordinary wear and tear
excepted, and shall protect and preserve its Collateral and such Collateral
shall be insured in accordance with Section 7.1.3 of the Credit Agreement; (b)
it shall not sell, assign or otherwise dispose of any portion of its Collateral
except sales or dispositions as permitted in Section 7.2.7 of the Credit
Agreement; it is acknowledged that the Secured Party's Security Interest
hereunder is released when such a sale or disposition occurs if it is permitted
under such Section, (c) it shall obtain and maintain sole and exclusive
possession of its Collateral except to the extent such Collateral shall now or
hereafter be in the Agent's possession, (d) it shall maintain and keep its chief
executive office, the location of the Collateral and the location of the records
pertaining thereto, at the location(s) specified on Schedule 1 hereto, or at
----------
such other location as it may reasonably designate from time to time by prior
written notice to the Agent; (e) it shall keep materially accurate and complete
books and records concerning its Collateral and such other books and records as
may be required under the Credit Agreement; (f) it shall promptly furnish to
each Bank such information and documents relating to its Collateral as the Agent
may reasonably request in order to confirm the status of the Agent's security
interest in such Collateral; (g) it shall not take or omit to take any actions,
the taking or the omission of which might result in a material adverse
alteration or impairment of its Collateral or in a violation of this Security
Agreement; (h) it shall not, without the prior written consent of the Agent,
waive or release any material obligation of any party to any material part of
its Collateral, except in the ordinary course of Grantor's business or in
connection with the disposition of assets permitted under the Credit Agreement;
(i) it shall execute and deliver to the Agent and record such supplements to
this Security Agreement and additional assignments as the Agent reasonably may
request to evidence and confirm the security interest herein contained; and (j)
it shall cause each of its Subsidiaries which may hereafter be created or
acquired to enter into and become a party and signatory to this Security
Agreement and do all such acts and things and execute, deliver and file all such
documents and instruments as the Agent may deem necessary and desirable to
create and perfect a first priority perfected security interest in the
Collateral of such Subsidiary.
6. Preservation of Security Interests. Each Grantor assumes full
----------------------------------
responsibility for taking and hereby agrees to take any and all necessary steps
to preserve and defend the Agent's right, title and security interest in and to
such Grantor's Collateral against the claims and demands of all persons. The
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of a Grantor's Collateral in the Agent's possession if, prior to
the existence of an Event of Default or Potential Default, the Agent takes such
action for that purpose as such Grantor shall reasonably request in writing,
provided that such requested action shall not, in the judgment of the Agent,
- --------
impair the security interest in such Grantor's Collateral created hereby or the
Agent's rights in, or the value of, such Collateral, and provided further that
-------- -------
such written request is received by the Agent in sufficient time to permit the
Agent to take the requested action.
5
<PAGE>
7. Agent's Rights with Respect to the Collateral. At any time and from
---------------------------------------------
time to time, whether or not an Event of Default shall have occurred, and
without notice to or consent of the Grantors, the Agent may, at its option, do
any or all of the following: (a) do anything which the Grantors are required but
fail to do hereunder, and in particular the Agent may, if any of the Grantors
fail to do so, (i) insure or take any reasonable steps to protect the Collateral
of any Grantor, (ii) pay any or all taxes, levies, expenses and costs arising
with respect to the Collateral of any Grantor, or (iii) pay any or all premiums
payable on any policy of insurance required to be obtained or maintained
hereunder, and add any amounts paid under this Section 7 to the principal amount
of any of the Notes and other liabilities of any Borrower secured by this
Security Agreement; (b) inspect the Collateral of any Grantor at any reasonable
time, in accordance with the terms set forth in Section 7.1.6 of the Credit
Agreement; and (c) pay any amounts which the Grantors are required but fail to
pay hereunder, and in particular the Agent may, if any of the Grantors fails to
do so, pay any amounts the Agent reasonably elects to pay or advance hereunder
on account of insurance, taxes or other costs, fees or charges arising in
connection with the Collateral of any Grantor, either directly to the payee(s)
of such cost, fee or charge, directly to the Grantor or Grantors in question, or
to such payee(s) and such Grantor or Grantors jointly.
8. Remedies on Default. If there shall have occurred and be continuing an
-------------------
Event of Default under the terms of the Credit Agreement, then the Agent shall
have such rights and remedies with respect to the Collateral or any part thereof
and the proceeds thereof as are provided by the Code and such other rights and
remedies with respect thereto which it may have at law or in equity or under
this Security Agreement, including to the extent not inconsistent with the
provisions of the Code, the right to take over and collect all or any of
Grantor's accounts and all or any of the other Collateral which consists of
amounts owing to any Grantor. To this end, the Agent shall have the right to (a)
transfer all or any part of any of Grantor's Collateral into the Agent's name or
into the name of its nominee or nominees and thereafter receive all cash, stock
and other dividends or distributions paid or payable in respect thereof, and
otherwise act with respect thereto as the absolute owner thereof; (b) notify the
obligors on any of Grantor's Collateral, whether accounts or otherwise, to make
payment thereon directly to the Agent, whether or not the Grantor was
theretofore making collections thereon; (c) take control of and manage all or
any Collateral of any Grantor; (d) apply to the payment of the Secured
Indebtedness, whether it be due and payable or not, any moneys, including cash
dividends and income from any Collateral of any Grantor, now or hereafter in the
hands of the Agent, on deposit or otherwise, belonging to any Grantor, in
accordance with Section 9 hereof; (e) direct any insurer to make payment of any
insurance proceeds, directly to the Agent, and apply such moneys to the payment
of the Secured Indebtedness in accordance with Section 9 hereof; receive, open
and dispose of all mail addressed to any Grantor and notify postal authorities
to change the address for delivery thereof to such address as the Agent may
designate; (g) endorse the name of the Grantor upon any checks or other
evidences of payment or any document or instrument that may come into the
possession of the Agent as proceeds of or relating to such Grantor's Collateral;
(h) demand, sue for, collect, compromise and give acquittances for any and all
Collateral of any Grantor; (i) prosecute, defend or compromise any action, claim
or proceeding with respect to any Collateral of any Grantor; (j) notify the
debtors of any Grantor of the assignment of their debts and direct them to make
payment to the Agent; and (k) take such other action as the Agent may deem
appropriate, including extending or modifying the terms of payment of the
debtors of any
6
<PAGE>
Grantors. In addition, upon the occurrence and during the continuance of an
Event of Default, each Grantor, at the request of the Agent, shall assemble all
or any portion of such Grantor's Collateral at such locations as the Agent shall
designate which are reasonably convenient to such Grantor, and the Agent may,
with the consent of the Required Banks, sell, assign, give an option or options
to purchase or otherwise dispose of all or any part of the Collateral at any
public or private sale at such place or places and at such time or times and
upon such terms, whether for cash or on credit, and in such manner, as the Agent
may determine, and apply the proceeds so received in accordance with Section 9
hereof. Written notice of sale mailed by certified mail, return receipt
requested, to the Grantor whose Collateral is to be sold, at least fifteen (15)
days prior to such sale shall be deemed reasonable notice.
In the event of a breach by any of the Grantors in the performance of
any of the terms of this Security Agreement, the Agent may demand specific
performance of this Security Agreement and seek injunctive relief and may
exercise any other remedy, available at law or in equity, it being recognized
that the remedies of each of the Agent and the Banks at law may not fully
compensate each of the Agent and the Banks for the damages they may suffer in
the event of a breach hereof.
9. Application of Proceeds. The security interests in the Collateral
-----------------------
granted to and created in favor of the Agent by this Security Agreement shall be
for the benefit of the each of the Agent and the Banks as their respective
interests in the Secured Indebtedness may appear. Each of the rights, privileges
and remedies provided to the Agent hereunder or otherwise by law with respect to
the Collateral shall be exercised by the Agent only for the benefit of each of
the Agent and the Banks as such interests may appear, and any Collateral or
proceeds thereof held or realized upon at any time by the Agent shall inure to
the benefit of each of the Agent and the Banks as their respective interests in
the Secured Indebtedness may appear and shall be applied after the occurrence of
an Event of Default as set forth in Section 8.2.5 of the Credit Agreement. The
Borrower shall be liable for any deficiency if the proceeds of any sale,
assignment, giving of an option or options to purchase or other disposition of
the Collateral is insufficient to pay all amounts to which the any of the Agent
or the Banks are entitled.
10. Attorneys-in-Fact. Each of the Grantors hereby irrevocably appoints
-----------------
the Agent, its officers, employees and agents, or any of them, as attorneys-in-
fact, with full power of substitution, for such Grantor for the purpose of
carrying out the provisions of this Security Agreement and taking any action and
executing, delivering, filing and recording any instruments which the Agent may
deem necessary or advisable to accomplish the purposes hereof; which power of
attorney being given for security is coupled with an interest and irrevocable.
Each Grantor hereby ratifies and confirms and agrees to ratify and confirm all
action taken by the Agent, its officers, employees or agents pursuant to the
foregoing power of attorney.
11. Indemnity and Expenses.
----------------------
(a) The Grantors unconditionally and jointly and severally agree to
indemnify each of the Agent and the Banks from and against any and all claims,
losses and liabilities arising out of or resulting from this Security Agreement
(including enforcement of this Security
7
<PAGE>
Agreement), except claims, losses or liabilities resulting from the gross
negligence or willful misconduct of the Agent, the Banks or the Agent on behalf
of the Banks.
(b) The Grantors unconditionally and jointly and severally agree upon
demand to pay to each of the Agent and the Banks the amount of any and all
reasonable and necessary out-of-pocket costs, expenses and disbursements for
which reimbursement is customarily obtained, including fees and expenses of
their counsel, which the Agent or any of the Banks may incur in connection with
(i) the administration of this Security Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent or the Banks hereunder or (iv) the failure by the
Grantors to perform or observe any of the provisions hereof.
12. Security Interest Absolute; Waiver of Notices. All rights of the Agent
---------------------------------------------
and the Banks hereunder, all security interests hereunder, and all obligations
of the Grantors hereunder shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement, the Notes or
any of the other Loan Documents; (b) any change in the time, manner or place or
payment of, or in any other term of, all or any of the Secured Indebtedness or
any other amendment or waiver of or any consent to any departure from the Credit
Agreement, the Notes or any of the other Loan Documents; (c) any exchange,
release or non-perfection of any other Collateral, or any release or amendment
or waiver of or consent to departure from any guaranty, for all or any of the
Secured Indebtedness; or (d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, any Grantor or any third
party mortgagors, pledgors or grantors of security interests. Each Grantor
(other than the Borrower with respect to notices otherwise provided for in the
Credit Agreement) waives any and all notice with respect to acceptance by the
Banks of this Security Agreement, the provisions of the Credit Agreement, the
Notes or any of the other Loan Documents or any other note, instrument or
agreement relating to the Secured Indebtedness, and any default in connection
with the Secured Indebtedness. Each Grantor (other than any Borrower with
respect to notices otherwise provided for in the Credit Agreement) waives any
presentment, demand, notice of dishonor or nonpayment, protest, notice of
protest and any other notice of any kind in connection with the Secured
Indebtedness.
Each Grantor (other than any Borrower) waives and agrees not to enforce any
of the rights of such Grantor against any Borrower or any other Grantor,
including: (i) any right of such Grantor to be subrogated in whole or in part to
any right or claim with respect to any Secured Indebtedness or any portion
thereof to any of the Agent or the Banks which might otherwise arise from
payment by any Grantor to any of the Agent or the Banks on the account of the
Secured Indebtedness or any portion thereof; and (ii) any right of any Grantor
to require the marshalling of assets of any Borrower or any other Grantor which
might otherwise arise from payment by any Grantor to any of the Agent or the
Banks on account of the Secured Indebtedness or any portion thereof If any
amount shall be paid to any Grantor in violation of the preceding sentence, such
amount shall be deemed to have been paid to such Grantor for the benefit of, and
held in trust for the benefit of, the Agent on behalf of the Banks and shall
forthwith be paid to the Agent to be credited and applied upon the Secured
Indebtedness, whether matured or unmatured in accordance with the terms of the
Credit Agreement. Each Grantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by the Credit
8
<PAGE>
Agreement and that the waivers set forth in this Section are knowingly made in
contemplation of such benefits.
13. Termination. Upon payment in full of the Secured Indebtedness and
-----------
termination of the Credit Agreement and the Revolving Credit Commitments, this
Security Agreement shall terminate and be of no further force and effect, and
the Agent, at the Grantors' expense, shall thereupon promptly return to each
Grantor such of its Collateral and such other documents delivered by each
Grantor hereunder as may then be in the Agent's possession. Upon any such
termination, the Agent will, at the Grantor's expense, execute and deliver to
the Grantor such documents as that Grantor shall reasonably request to evidence
such termination. The Agent, upon request of any Grantor, shall release the
Agent's security interest in any of such Grantor's Collateral which is sold
prior to the occurrence of an Event of Default (but not the proceeds thereof),
provided such sale is permitted by, and made in accordance with, the provisions
- --------
of the Credit Agreement.
14. Modifications, Amendments and Waivers. Any and all agreements amending
-------------------------------------
or changing any provision of this Security Agreement or the rights of any of the
Agent, the Banks or the Grantors hereunder, and any and all waivers or consents
to Events of Default or other departures from the due performance of the
Grantors hereunder shall be made only pursuant to the provisions of Section 10.1
of the Credit Agreement, except that any amendment or change that affects less
than all of the Grantors shall be effective with the written consent of the
affected Grantors.
15. No Implied Waivers; Cumulative Remedies. No course of dealing and no
---------------------------------------
failure or delay on the part of the Agent in exercising any right, remedy, power
or privilege hereunder shall operate as a waiver thereof or of any other right,
remedy, power or privilege of the Agent hereunder; and no single or partial
exercise of any such right, remedy, power or privilege shall preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights and remedies of the Agent under this Security Agreement
are cumulative and not exclusive of any rights or remedies which it may
otherwise have.
16. Notices. All notices, statements, requests, demands and other
-------
communications given to or made upon the Grantors, any of the Agent or the Banks
in accordance with the provisions of this Security Agreement shall be given or
made as provided in Section 10.7 of the Credit Agreement.
17. Severability.
------------
(a) Each Grantor agrees that the provisions of this Agreement are
severable, and in an action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally:
(i) if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such
9
<PAGE>
clause or provision in any other jurisdiction, or any other clause or provision
in this Agreement in any jurisdiction, and
(ii) if this Agreement would be held or determined to be void,
invalid or unenforceable on account of the amount of the aggregate liability of
a Grantor (other than the Borrower) under this Agreement, then, notwithstanding
any other provision of this Agreement to the contrary, the aggregate amount of
such liability shall, without any further action by any of the Agent or the
Banks, such Grantor or any other person, be automatically limited and reduced to
the highest amount which is valid and enforceable as determined in such action
or proceeding.
(b) If the grant of a security interest hereunder by any one or more
Grantors is held or determined to be void, invalid or unenforceable, in whole or
in part, such holding or determination shall not impair or affect:
(i) the validity and enforceability of the security interest
granted hereunder by any other Grantor, which shall continue in full force and
effect in accordance with its terms; or
(ii) the validity and enforceability of any clause or provision
not so held to be void, invalid or unenforceable.
18. Governing Law. This Security Agreement shall be deemed to be a
-------------
contract under the laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed in accordance with the internal laws of said
Commonwealth, without reference to its conflicts of law principles, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of security interests hereunder, or remedies hereunder
with respect to any particular Collateral, is governed by the laws of a
jurisdiction other than the law of the Commonwealth of Pennsylvania.
19. Successors and Assigns. This Security Agreement shall be freely
----------------------
assignable and transferable by the Agent in connection with the assignment or
transfer of the Secured Indebtedness; provided, however the duties and
-------- -------
obligations of the Grantors may not be delegated or transferred by the Grantors,
without the written consent of the Required Banks. The rights and privileges of
the Agent and each of the Banks shall inure to their benefit and the benefit of
their respective successors and assigns (as permitted under the Credit
Agreement), and the duties and obligations of the Grantors shall bind the
Grantors and their respective successors and assigns. Except to the extent
otherwise required by the context of this Security Agreement, the word "Banks"
where used in this Security Agreement shall include, without limitation, any
holder of a Note, or assignee of an interest therein, originally issued to a
Bank under the Credit Agreement, and each such holder of a Note, or assignee of
an interest therein, shall be bound by and have the benefits of this Security
Agreement to the same extent as if such holder had been a signatory hereto.
20. Election. Each Grantor acknowledges that the Agent may, in its sole
--------
discretion, elect to exercise its rights under this Security Agreement against
any one or more of the Grantors, or the Collateral of any one or more of the
Grantors, without any duty or responsibility to pursue
10
<PAGE>
any other Grantor, and that such an election by the Agent shall not be a defense
to any action the Agent may elect to take against any one or more of the
Grantors.
21. Counterparts. This Security Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered shall be deemed an original, but all
such counterparts shall constitute but one and the same instrument.
22. Consent to Jurisdiction; Waiver of Jury Trial. Each of the Grantors
---------------------------------------------
hereby irrevocably consents to the non-exclusive jurisdiction of the Court of
Common Pleas of Chester County, Pennsylvania and the United States District
Court for the Eastern District of Pennsylvania, and waives personal service of
any and all process upon it and consents that all such service of process be
made by certified or registered mail directed to the Grantors at the addresses
set forth or referred to in Section 16 hereof and service so made shall be
deemed to be completed upon actual receipt thereof Each of the Grantors waives
any objection to jurisdiction and venue of any action instituted against it as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue, AND THE AGENT AND THE BANKS AND EACH OF THE GRANTORS
WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM WITH RESPECT
TO THIS SECURITY AGREEMENT TO THE FULL EXTENT PERMITTED BY LAW.
[SIGNATURES BEGIN ON NEXT PAGE]
11
<PAGE>
[SIGNATURE PAGE 1 OF 1 TO THE SECURITY AGREEMENT]
WITNESS the due execution hereof as of the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION, as
Agent for the Banks
By:_____________________________________
Title:
INTERNET CAPITAL GROUP, INC.
By:____________________________________
Name:___________________________________
Title:__________________________________
INTERNET CAPITAL GROUP
OPERATIONS, INC.
By:____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
SCHEDULE 1
TO
SECURITY AGREEMENT
List of Grantors; Collateral Information
----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. INTERNET CAPITAL GROUP, INC.
Collateral and books and records located at offices at 800 The Safeguard
Building, 435 Devon Park Drive, Wayne, PA 19087.
All real and personal properties are located in the following counties:
State/County/City Assets (Brief Description)
----------------- --------------------------
Pennsylvania/Chester/Wayne See description of Collateral in
Delaware/New Castle/Wilmington Security Agreement
California/SanFrancisco/SanFrancisco
Massachusetts/Suffolk/Boston
B. INTERNET CAPITAL GROUP OPERATIONS, INC.
Collateral and books and records located at offices at 800 The Safeguard
Building, 435 Devon Park Drive, Wayne, PA 19087.
All real and personal properties are located in the following counties:
State/County Assets (Brief Description)
------------ --------------------------
Pennsylvania/Chester/Wayne See description of Collateral in
Delaware/New Castle/Wilmington Security Agreement
California/SanFrancisco/SanFrancisco
Massachusetts/Suffolk/Boston
<PAGE>
EXHIBIT 2.5
FORM OF
REVOLVING CREDIT LOAN REQUEST
TO: PNC Bank, National Association, as Agent
One PNC Plaza
22nd Floor
Pittsburgh, PA 15222
Telephone No.: (412) 762-3627
Telecopier No.: (412) 762-8672
Attn: Arlene Ohler
FROM: Internet Capital Group, Inc. ("Borrower")
--------
RE: Credit Agreement, dated as of April __, 1999, by and among Internet
Capital Group, Inc., Internet Capital Group Operations, Inc., the
Banks and PNC Bank, National Association, in its capacity as agent for
the Banks (the "Agent"), as hereafter amended, supplemented or
-----
modified from time to time (the "Credit Agreement").
----------------
Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to them by the Agreement.
A. Pursuant to Section 2.5 of the Credit Agreement, the Administrative
Borrower irrevocably requests [check one box under 1(a) below and fill
in blank space next to box as appropriate]:
1.(a) [_] A new Revolving Credit Loan OR
[_] A renewal of an outstanding Revolving Credit Loan now under the
Euro-Rate Option, OR
[_] A conversion of an outstanding Loan now under the Base Rate
Option, OR
[_] A conversion of an outstanding Loan now under the Euro-Rate
Option,
SUCH NEW, RENEWED OR CONVERTED LOAN SHALL BEAR INTEREST:
(Check one box under (b)(i) below and fill in blank spaces in line next to
box):
(b)(i) [_] Under the Base Rate Option. Such Loan shall have a Borrowing
Date of __________, __ (which date shall (i) be the
proposed Borrowing Date if the Agent shall have received
this Revolving Credit Loan Request by 12:00 noon
(Pittsburgh time) on the proposed Borrowing Date; and (ii)
shall be the last day of the preceding Interest Period if a
Euro-Rate Loan is being converted into a Base Rate Loan)
<PAGE>
OR
(ii) [_] Under the Euro-Rate Option. Such Loan shall have a Borrowing
Date of_____________________,__ (which date shall (i) be
three (3) Business Days after the Business Day of receipt
by the Agent by 12:00 noon (Pittsburgh time) of this Loan
Request, and (ii) be the last day of the preceding Interest
Period if a Revolving Credit Euro-Rate Option Loan is being
renewed as a Revolving Credit Euro-Rate Option Loan)
2. Such Loan is in the principal amount of US $__________.
3. Such Loan shall have an Interest Period of (fill out blank below if
the Administrative Borrower is selecting the Euro-Rate Option):
____________________________________________________
[one, two, thee or six months]
B. As of the date hereof and the date of making of the above-requested
Loan (and after giving effect thereto): each Borrower has performed
and complied with all covenants and conditions of the Credit
Agreement; each Borrower's representations and warranties therein are
true and correct (except representations and watranties which
expressly relate solely to an earlier date or time, which
representations and warranties were true and correct on and as of the
specific dates or times referred to therein); no Event of Default or
Potential Default has occurred and is continuing or shall exist; and
the making of such Loan shall not contravene any Law applicable to any
Borrower.
The Administrative Borrower certifies to the Agent for the benefit of the
Banks as to the accuracy of the foregoing.
Date: ________________,__ INTERNET CAPITAL GROUP, INC.
By: __________________________________
Name: ________________________________
Title ________________________________
<PAGE>
EXHIBIT 6.1.4
Form of
COMPLIANCE CERTIFICATE
April 30, 1999
PNC BANK, NATIONAL ASSOCIATION
as Agent for the Banks Party
to the Credit Agreement Referred to Below
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Ladies and Gentlemen:
I refer to the Credit Agreement, dated as of April 30, 1999 (as amended,
supplemented, restated or modified from time to time, the "Credit Agreement"),
among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations"; ICG
--------------
and ICG Operations being referred to herein individually as a "Borrower" and
--------
collectively as the "Borrowers"), the Banks party thereto and PNC BANK, NATIONAL
---------
ASSOCIATION, in its capacity as agent for the Banks under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings and all references to section numbers are to the
Credit Agreement. All calculations herein are performed according to the
conditions set forth in Section 1.3 of the Credit Agreement.
I, John N. Nickolas, Assistant Treasurer of the Administrative Borrower, do
hereby certify on behalf of each Borrower as set forth below as of the date
hereof, which date constitutes the Closing Date under the Credit Agreement:
1. MAXIMUM LEVERAGE RATIO (Section 7.2.17).
The ratio of (A) consolidated total indebtedness on the Closing Date
to (B) Consolidated Tangible Net Worth on the Closing Date is _____ to
1.0, calculated as set forth below, which does not exceed .50 to 1.0.
(A) Consolidated Total Indebtedness for the Borrowers and their respective
-------------------------------
Subsidiaries as of the Closing Date, without duplication, is computed
as follows:
(i) Loans under the Credit Agreement $____________
(ii) Borrowed money and amounts raised under or
liabilities in respect of any note purchase or
acceptance credit facility $____________
(iii) Reimbursement obligations under any letter of
credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other
interest rate management device $____________
<PAGE>
(iv) Any other transaction (including forward sale
or purchase agreements, capitalized leases
and conditional sales agreements) having the
commercial effect of a borrowing of money entered
into by such Person to finance its operations or
capital requirements $_________
(v) All other obligations, indebtedness or
liabilities (and guaranties of any of the
foregoing) defined as "Indebtedness" in
the Credit Agreement $_________
(vi) Sum of Items (A)(i) though (A)(v) equals
consolidated total indebtedness of the
Borrowers and their respective Subsidiaries
on the Closing Date $_________
(B) Consolidated Tangible Net Worth for the Borrowers and their respective
Subsidiaries as of the Closing Date is computed as follows, in each
case determined on a consolidated basis in accordance with GAAP:
(i) total stockholders' equity for the Borrowers
and their respective Subsidiaries $____________
(ii) minority interests in net assets of each
Borrower's Subsidiaries $____________
(iii) intangible assets for the Borrowers and
their respective Subsidiaries $____________
(iv) Sum of(x) (Items (B)(i) and (B)(ii)) minus (y)
Item (B)(iii) equals Consolidated Tangible
Net Worth as of the Closing Date $____________
2. INVESTMENTS (Section 7.1.15).
At no time did any Loan Party make an Investment in any Person, whether as
further Investment in a Person in which an Investment has previously been
made or as a new Investment in a new Person, in excess of $25,000,000 per
annum.
3. EVENTS OF DEFAULT OR POTENTIAL DEFAULT.
The Loan Parties are in compliance with all of the covenants under the
Credit agreement and no event exists and is continuing which constitutes an
Event of Default or Potential Default.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 30th
day of April, 1999.
INTERNET CAPITAL GROUP, NC.
By:________________________
Name: John N. Nickolas
Title: Assistant Treasurer
<PAGE>
Exhibit 6.1.5
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "AGREEMENT") is executed this 30th day of
April, 1999 by INTERNET CAPITAL GROUP, INC., a Delaware corporation (the
"Company"), in favor of PNC BANK, NATIONAL ASSOCIATION ("PNC Bank"), BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, COMERICA BANK-CALIFORNIA,
IMPERIAL BANK and PROGRESS CAPITAL, INC. (collectively the "Banks") and PNC Bank
in its capacity as agent for the Banks (the "AGENT").
Pursuant to that certain Credit Agreement of even date herewith among
the Company, the Agent, and the Banks (the "CREDIT AGREEMENT"), the Banks have
agreed to provide credit to the Company in the aggregate principal amount not to
exceed $50,000,000. In consideration of the extension of credit to the Company,
the Company has agreed to issue to the Banks (referred to herein as the "BANK
HOLDERS"), warrants (each a "WARRANT") to purchase up to One Hundred Seventy
Thousand (170,000) shares in the aggregate or such other number of shares which
shall equal the Applicable Percentage, as defined hereinafter (the "EXERCISE
QUANTITY"), subject to the adjustments herein provided, of the common stock of
the Company, par value $.01 per share (the "COMMON STOCK").
Capitalized terms used but not defined herein shall the meanings
ascribed to them in the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the Company and the Bank Holders agree as follows:
1. GRANT OF WARRANT. In consideration for the extension of credit by the
----------------
Banks to the Company under the Credit Agreement, the Company hereby grants to
the Bank Holders a Warrant to purchase up to that number of shares which
constitute the Exercise Quantity of the Common Stock on the date of such
purchase. The Bank Holders and any subsequent registered holders of the Warrants
have the rights and obligations provided for in the form of warrant and in this
Agreement.
The Company shall deliver to the Bank Holders Warrants exercisable
into an aggregate of 170,000 shares of Common Stock of the Company at the
Exercise Price (as defined hereinafter). All Warrants granted to the Bank
Holders pursuant to this Agreement shall be allocated among such Bank Holders
according to Schedule I attached hereto.
----------
2. WARRANT CERTIFICATE.
--------------------
(a) Form of Warrant Certificate. The Warrants shall each be
---------------------------
evidenced by a certificate ("WARRANT CERTIFICATE"), which Warrant Certificate
(and the form of election to purchase Common Stock and of assignment to be
attached thereto) shall be substantially the same as Exhibit A hereto and may
have such marks of identification or designations and such legends,
<PAGE>
summaries, or endorsements printed thereon as the Company may deem appropriate
and which are not inconsistent with the provisions of this Agreement, or as may
be required to comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange on
which the Warrant may from time to time be listed. The Warrant Certificate shall
entitle the' holder thereof to purchase such number of shares of Common Stock as
shall be set forth therein at the Exercise Price (as set forth herein) at such
time or times as the holder may elect in its sole discretion, but the number of
such shares of Common Stock and the Exercise Price shall be subject to
adjustment as provided herein. The Warrants shall also provide for a net
issuance option allowing each holder thereof to surrender such Warrant and
receive in exchange therefor shares of Common Stock having a fair market value
equal to the product of (i) the number of shares of Common Stock into which such
Warrant is then exercisable multiplied by (ii) the difference of (A) current
market value of each share of Common Stock on the date of surrender less (B) the
per share exercise price of such Warrant on the date of surrender.
(b) Countersignature and Registration.
---------------------------------
(i) The Warrant Certificates shall be executed on behalf of the
Company by its Authorized Officer, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile
thereof, and shall be attested by the Secretary or Assistant Secretary of
the Company, either manually or by facsimile signature.
(ii) The Company will keep or cause to be kept, at its principal
office, books for the registration and transfer of the Warrant Certificate
issued hereunder.
(c) Transfer, Split-Up, Combination and Exchange of Warrant
-------------------------------------------------------
Certificates. At any time prior to the close of business on the Final Expiration
- ------------
Date (as defined hereinafter), the Warrant Certificate may be transferred, split
up, combined or exchanged for another Warrant Certificate or Warrant
Certificates, entitling the registered holder to purchase a like number of
shares of Common Stock as the Warrant Certificate or Warrant Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Warrant Certificate or
Warrant Certificates shall make such request in writing delivered to the
Company, and shall surrender the Warrant Certificate or Warrant Certificates to
be transferred, split up, combined or exchanged at the principal office of the
Company. Thereupon the Company shall deliver to the person entitled thereto a
Warrant Certificate or Warrant Certificates, as the case may be, as so
requested.
(d) Subsequent Issue of Warrant Certificates. Subsequent to their
----------------------------------------
original issuance, no Warrant Certificates shall be issued except (a) Warrant
Certificates issued upon any transfer, combination, split up or exchange of
Warrants pursuant to Section 2(c) hereof, (b) Warrant Certificates issued in
replacement of mutilated, destroyed, lost or stolen Warrant Certificates, and
(c) Warrant Certificates issued pursuant to Section 3(d) hereof upon the partial
exercise of any Warrant Certificate to evidence the unexercised portion of such
Warrant Certificate.
2
<PAGE>
3. EXERCISE OF WARRANTS; EXERCISE PRICE; EXPIRATION DATE OF WARRANTS.
-----------------------------------------------------------------
(a) The registered holder of any Warrant Certificate may exercise the
Warrants evidenced thereby (except as otherwise provided herein) in whole
or in part upon surrender of the Warrant Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the
Company at its principal office, together with payment of the Exercise
Price for each share of Common Stock as to which the Warrants are
exercised, at or prior to the close of business on April 30, 2006 (the
"FINAL EXPIRATION DATE"), or if such day is not a Business Day (as defined
below), then on the next succeeding day that shall be a Business Day. For
the purposes of this Section 3(a), "Business Day" means any day except a
Saturday, Sunday or other day on which commercial banking institutions in
New York City are authorized by law or executive order to close.
(b) The exercise price for each share of Common Stock pursuant to the
exercise of a Warrant shall initially be $10.00 per share of Common Stock
issuable upon exercise of the Warrant (the "EXERCISE PRICE"), shall be
subject to adjustment from time to time as provided in Section 7 hereof and
shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Warrant Certificate representing exercisable
Warrants, with the form of election to purchase duly executed, accompanied
by payment of the Exercise Price for the shares to be purchased and an
amount equal to any applicable transfer tax required to be paid by the
holder of such Warrant Certificate in accordance with Section 6 hereof in
cash, or by certified check or cashier's check payable to the order of the
Company, the Company shall as soon as practicable (i) requisition from any
transfer agent of the Common Stock certificates for the number of shares of
Common Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 8 hereof, (iii)
after receipt of such certificates, cause the same to be delivered to or
upon the order of the registered holder of such Warrant Certificate,
registered in such name or names as may be designated by such holder
(assuming that such transfer is made in accordance with the Securities Act
of 1933, as amended, and applicable state securities law and Sections 5 and
11 hereof) and (iv) subject to Section 8 hereof, after receipt, deliver
such cash to or upon the order of the registered holder of such Warrant
Certificate.
(d) In case the registered holder of any Warrant Certificate shall
exercise less than all the Warrants evidenced thereby, a new Warrant
Certificate evidencing Warrants equivalent to the Warrants remaining
unexercised shall be issued by the Company to the registered holder of such
Warrant Certificate or to its duly authorized assigns, subject to the
provisions of Section 8 hereof.
4. CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All Warrant
----------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall when
3
<PAGE>
surrendered to the Company be canceled by it, and no Warrant Certificates shall
be issued in lieu thereof except as expressly permitted by any of the provisions
of this Agreement.
5. RESTRICTIVE LEGEND. Certificates representing shares of Common Stock
------------------
issued upon exercise of the Warrants, to the extent that and for so long as
required pursuant to the Securities Act of 1933, as amended, and applicable
state securities law, shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL, SATISFACTORY TO INTERNET CAPITAL GROUP,
INC., THAT SUCH REGISTRATION IS NOT REQUIRED."
6. RESERVATION AND AVAILABILITY OF COMMON STOCK.
--------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Common Stock or any shares of Common Stock held in its treasury, that
number of shares of Common Stock that will from time to time be sufficient
to permit the exercise in full of all outstanding Warrants.
(b) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock
delivered upon the exercise of Warrants shall, at the time of delivery of
the certificates for such shares of Common Stock (subject to payment of the
Exercise Price), be duly authorized, validly issued, fully paid and
nonassessable shares.
(c) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Warrant
Certificates or of any shares of Common Stock upon the exercise of
Warrants, except that if the shares of Common Stock or new Warrant
Certificates shall be registered in a name or names other than the name of
the holder, funds sufficient to pay all transfer taxes shall be paid by the
holder of the Warrant at the time of delivery of the executed election to
purchase or promptly upon receipt of a written request of the Company for
payment.
7. NO DILUTION OR IMPAIRMENT.
-------------------------
(a) Calculation and Adjustment of Exercise Quantity. The Company
-----------------------------------------------
acknowledges that the initial Exercise Quantity was calculated based upon an
intention that the full exercise of the Warrant would result in the Bank Holders
obtaining shares of Common Stock constituting 0.1849% (the "Applicable
Percentage") of the Company's Common Stock, options,
4
<PAGE>
warrants (including the Warrants), convertible securities, securities and other
rights (in each case whether now existing or hereafter issued or arising) to
acquire from the Company shares of Common Stock ("Common Stock Equivalents")
outstanding as of the date of exercise of the Warrant (based on Ninety-One
Million Nine Hundred Thirty-Nine Thousand Nine Hundred Fifty (91,939,950) shares
of Common Stock currently issued or reserved for issuance upon conversion of
outstanding Common Stock Equivalents as of the date hereof). It is the intent of
the parties hereto that after giving effect to the exercise in full of the
Warrants, the Bank Holders' share ownership of the Common Stock will be equal to
the Applicable Percentage. The Exercise Quantity shall be adjusted upon each
additional issuance of shares of Common Stock or Common Stock Equivalents in
order to maintain the Applicable Percentage. Notwithstanding the foregoing,
neither the Exercise Quantity nor the Exercise Price shall be adjusted pursuant
to this Section 7(a) as a consequence of (i) an issuance or grant of Common
Stock or Common Stock Equivalents at an issuance, conversion or exercise price
per share greater than or equal to the then current Exercise Price, (ii) an
issuance, grant or award of Common Stock or Common Stock Equivalents pursuant to
any employee compensation plan or program of the Company or its Subsidiaries
provided, however, that such additional issuances, grants or awards shall not
exceed 10,353,500 shares in the aggregate, or (iii) an issuance of shares in
connection with the Company's underwritten initial public offering of its Common
Stock, or any issuances of Common Stock or Common Stock Equivalents subsequent
to such offering.
(b) Adjustment of Exercise Price and Number of Shares.
-------------------------------------------------
In addition to the foregoing, the Exercise Quantity and the Exercise Price
shall be subject to adjustment from time to time upon the occurrence of certain
events as follows:
(i) Reclassification, Consolidation or Merger. In case of any
-----------------------------------------
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any consolidation or merger of the Company with
or into another corporation, or in case of any sale of all or substantially all
of the assets of the Company, or in case of a share exchange in which 80% or
more of the outstanding capital stock of the Company is exchanged for capital
stock of another corporation, any of which transactions shall be referred to
hereinafter as a "Corporate Transaction," the holder shall have the right to
receive the type and amount of shares of stock and other securities and property
to which such holder would have been entitled if it had received Common Stock by
exercise of the Warrants immediately prior to such Corporate Transaction, and
the Exercise Price shall be adjusted accordingly. Notwithstanding anything to
the contrary herein, in the case of a Corporate Transaction, the Company may, at
its option, elect to purchase the Warrants from the holder thereof, upon written
notice to the holder, for cash in an amount equal to the dollar value of the
Common Stock that the holder would have been entitled to receive had (i) the
Warrants been exercised immediately prior to the Corporate Transaction, and (ii)
such shares of Common Stock been exchanged in the Corporate Transaction.
(ii) Subdivision or Combination of Shares. If the Company at any
------------------------------------
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common
5
<PAGE>
Stock, the Exercise Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination.
(iii) Stock Dividends. If the Company at any time while this
---------------
Warrant is outstanding and unexpired shall pay a dividend of Common Stock with
respect to Common Stock payable in, or make any other distribution with respect
to Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(iv) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Exercise Price, the number of shares of Common Stock purchasable hereunder shall
be adjusted, to the nearest whole share, to the product obtained by multiplying
the number of shares purchasable immediately prior to such adjustment of the
Exercise Price by a fraction, the numerator of which shall be the Exercise Price
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price immediately thereafter.
(v) No Impairment. The Company will not, by amendment of any of
-------------
its organizational documents or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Agreement or the Warrant or impair the ability of the Bank Holders to
realize the full intended economic value thereof, but will at all times in good
faith assist in the carrying out of all such terms, and of the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Bank Holders against dilution or other impairment.
8. FRACTIONAL SHARES. The Company shall not be required to issue
-----------------
fractions of shares of Common Stock upon exercise of the Warrants or to
distribute certificates which evidence fractional shares of Common Stock. If any
fraction of a share would be issuable upon exercise of the Warrant, but for this
Section 8, in lieu of fractional shares of Common Stock, the Company shall pay
to the registered holders of Warrant Certificates at the time such Warrants are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one share of Common Stock computed to the nearest cent.
9. DETERMINATION OF MARKET VALUE. For purposes of this Agreement, the
-----------------------------
current market value of a share of Common Stock shall be the closing price per
share of Common Stock on the date of determination. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Common Stock is not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock is listed or admitted to
6
<PAGE>
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by NASDAQ or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, the average of the closing
bid and asked prices as fUrnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors. If the Common Stock is
not publicly held or so listed or traded, the current market value shall mean
the current value per share as determined in good faith by the Board of
Directors of the Company at its expense. If a Bank Holder or Holders object to
the current market value as so determined, an independent investment banker
reasonably acceptable to such Bank Holder(s) and the Company shall make a
determination of current market value which shall be conclusive. If such
determination is five percent (5%) or more greater than the current value as
determined by the Board of Directors, then the Company shall pay the reasonable
costs and expenses of such independent investment banker, otherwise the Bank
Holder(s) shall pay such costs and expenses.
10. "PIGGYBACK" REGISTRATION. If at any time after the consummation of an
-----------------------
initial public offering of the Company's equity securities in which the gross
proceeds to the Company equal at least $20 million, the Company determines to
register under the Securities Act of 1933, as amended (including pursuant to a
demand of any security holder of the Company exercising registration rights but
other than on a Registration Statement on Form S-4 or Form S-8 or any similar or
successor form or any other registration statement relating to an exchange offer
or offering of securities solely to the Company's existing security holders or
employees), any of its Common Stock (except securities to be issued solely in
connection with any acquisition of any entity or business, shares issuable
solely upon exercise of stock options, shares issuable solely pursuant to
employee benefit plans or shares to be registered on any registration form that
does not permit secondary sales), it must give each Bank, written notice of such
determination at least thirty (30) days prior to each such filing. If, within
fifteen (15) days after receipt of such notice, any Bank Holder so requests in
writing, the Company must include in such registration statement (to the extent
permitted by applicable regulation) all or any part of such Bank Holders'
Warrants and the shares of Common Stock (or other securities representing Common
Stock) purchasable or purchased from time to time under such Bank Holders'
Warrants (collectively, "REGISTRABLE SECURITIES") that such Bank Holder requests
to be registered. Any Registrable Securities which are included in any
underwritten offering under this Section 10 shall be sold upon such terms as the
managing underwriters reasonably request. If such managing underwriter
determines that a cutback in the number of shares to be registered is necessary,
such cut back shall be effected on a pro rata basis among the shareholders of
the Company requesting registration and the Bank Holders. If any Bank Holder
disapproves of the terms of such underwriting, such Bank Holder may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Nothing in this Section 10 shall preclude the Company from
discontinuing the registration of its securities being effected on its behalf
under this Section 10 at any time prior to the effective date of the
registration statement relating thereto.
Each of the Bank Holders hereby agree that, if so requested by the Company
or any representative of the underwriters ("Managing Underwriter") in connection
with the registration of a public offering of equity securities of the Company
under the Securities Act of 1933, as
7
<PAGE>
amended ("Securities Act"), the Bank Holder shall not sell or otherwise transfer
Warrants or any shares of Common Stock or other securities of the Company
(including a sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act) during the ten (10) day period prior to and the
180-day period (or such other lesser period as may be requested in writing by
the Managing Underwriter and agreed to in writing by the Company) ("Market
Standoff Period") following the effective date of a registration statement of
the Company filed under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.
11. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant, by accepting
----------------------------
the same, consents and agrees with the Company and with every other holder of a
Warrant that:
(a) the Warrant Certificates are transferable only on the registry
books of the Company if surrendered at its principal offices, duly endorsed
or accompanied by a proper instrument of transfer in accordance with
restrictions on transfer contained herein or in the Warrant Certificates;
and
(b) the Company may deem and treat the person in whose name the
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership or
writing on the Warrant Certificates made by anyone other than the Company)
for all purposes whatsoever, and the Company shall not be affected by any
notice to the contrary.
12. WARRANT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder, as
---------------------------------------------------
such, of any Warrant Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the shares of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Warrants represented thereby, nor shall anything contained herein or in any
Warrant Certificate be construed to confer upon the holder of any Warrant
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders of the Company at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders of the Company, or to receive dividends or
subscription rights, or otherwise, until the Warrant or Warrants evidenced by
such Warrant Certificate shall have been exercised in accordance with the
provisions hereof
13. ISSUANCE OF NEW WARRANT CERTIFICATES. Notwithstanding any of the
------------------------------------
provisions of this Agreement or of the Warrants to the contrary, the Company
may, at its option, issue new Warrant Certificates evidencing Warrants in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price and the number or kind or class of shares or other
securities or property purchasable under the Warrant.
14. SUCCESSORS AND ASSIGNS. The terms of this Agreement shall be binding
----------------------
upon the Company and the Bank Holders and their respective successors and
assigns.
15. GOVERNING LAW: CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS
------------------------------------------------------------
AGREEMENT AND ALL RELATED INSTRUMENTS AND AGREEMENTS SHALL BE
8
<PAGE>
DEEMED TO BE CONTRACTS MADE IN THE COMMONWEALTH OF PENNSYLVANIA, AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA (WITHOUT GIVING EFFECT TO CONFLICT OF LAWS) AND THE UNITED STATES
OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BANK HOLDERS AND THE
COMPANY AGREE THAT THE STATE AND FEDERAL COURTS OF PENNSYLVANIA LOCATED IN
ALLEGHENY COUNTY, PENNSYLVANIA SHALL HAVE NON-EXCLUSIVE JURISDICTION OVER
PROCEEDINGS IN CONNECTION HEREWITH. THE COMPANY HEREBY WAlVES ANY RIGHT THAT IT
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT,
EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY RELATED
MATTERS, AND AGREE THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which together constitute one instrument.
* * * * *
9
<PAGE>
WITNESS the due execution of this Warrant Agreement as of the date first
above written.
ATTEST: INTERNET CAPITAL GROUP, INC.
By: ______________________________ By: _______________________________
Print Name: ______________________ Print Name: _______________________
Title: ___________________________ Title: ____________________________
PNC BANK,
NATIONAL ASSOCIATION,
both individually and as Agent
By: _______________________________
Print Name: _______________________
Title: ____________________________
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: _______________________________
Print Name: _______________________
Title: ____________________________
COMERICA BANK - CALIFORNIA
By: _______________________________
Print Name: _______________________
Title:_____________________________
10
<PAGE>
IMPERIAL BANK
By: _______________________________
Print Name: _______________________
Title: ____________________________
PROGRESS CAPITAL, INC.
By: _______________________________
Print Name: _______________________
Title: ____________________________
11
<PAGE>
SCHEDULE I
ALLOCATION OF WARRANTS
<TABLE>
<CAPTION>
SHARES AS OF
BANK % OF TOTAL WARRANTS CLOSING DATE
- ---- ------------------- ------------
<S> <C> <C>
PNC Bank, National Association 35.0% 59,500
Bank of America National Trust and
Savings Association 20.0% 34,000
Comerica Bank-California 20.0% 34,000
Imperial Bank 15.0% 25,500
Progress Capital, Inc. 10.0% 17,000
------- --------
Total: 100.0% 170,000
</TABLE>
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
________________
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF THAT WARRANT AGREEMENT DATED AS OF APRIL 30, 1999
AMONG INTERNET CAPITAL GROUP, INC. (THE "COMPANY") AND PNC BANK, NATIONAL
ASSOCIATION, AS AGENT, AND THE BANKS PARTY THERETO (THE "BANKS") (AS THE SAME
MAY BE SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME,
THE "WARRANT AGREEMENT"). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS
PROVISIONS FOR PUTS, RESTRICTIONS ON TRANSFER AND REGISTRATION RIGHTS. A COPY OF
THE WARRANT AGREEMENT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
APRIL 30, 1999
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred to
in the legend above and in that certain Credit Agreement dated as of April 30,
1999 among the Company, the Agent and the Banks, as the same has been or may be
supplemented, modified, amended, renewed or restated from time to time (the
"CREDIT AGREEMENT"). The Company certifies and agrees that PNC BANK, NATIONAL
ASSOCIATION and its successors and assigns (referred to herein as the "Holder")
are entitled to purchase from the Company an Exercise Quantity initially equal
to an aggregate of 59,500 shares of the Company's Common Stock, par value $.0l
per share (the "COMMON STOCK"), all upon the terms and provisions and subject to
adjustment as provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "WARRANT"). The exercise price per share of Common Stock for which
this Warrant is exercisable shall be $10.00 per share, as adjusted from time to
time pursuant to the terms of this Warrant and the Warrant Agreement (the
"EXERCISE PRICE").
________________
<PAGE>
1. Exercise of Warrant.
--------------------
1.1 This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time
(but not for fractional shares), by presentation and surrender of this
Warrant to the Company, together with the Exercise Form, in the form
attached hereto as Exhibit A-1 (the "EXERCISE FORM"), duly completed
-----------
and executed and payment in the aggregate amount equal to the Exercise
Price multiplied by the number of shares of Common Stock being
purchased. At the option of Holder, payment of the Exercise Price may
be made either by (i) check payable to the order of the Company, (ii)
surrender of certificates then held representing, or deduction from
the number of shares issuable upon exercise of this Warrant, that
number of shares which has an aggregate fair market value on the date
of exercise equal to the aggregate Exercise Price for all shares to be
purchased pursuant to this Warrant or (iii) by any combination of the
foregoing methods. Upon the Company's receipt of this Warrant, the
completed and signed Exercise Form and the requisite payment, the
Company shall as soon as practicable issue and deliver (or cause to be
delivered) to the exercising Holder stock certificates aggregating the
number of shares of Common Stock purchased. In the event of a partial
exercise of this Warrant, the Company shall issue and deliver to the
Holder a new Warrant at the same time such stock certificates are
delivered, which new Warrant shall entitle the Holder to purchase the
balance of the Exercise Quantity not purchased in that partial
exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
1.2 In the event the Holder of this Warrant desires that any or all of the
stock certificates to be issued upon the exercise hereof be registered
in a name or names other than that of the Holder of this Warrant, the
Holder must so request in writing at the time of exercise, and pay to
the Company funds sufficient to pay all stock transfer taxes (if any)
payable in connection with the transfer and delivery of such stock
certificates.
1.3 Upon the due exercise by the Holder of this Warrant, whether in whole
or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to
have become the Holder of record of the shares of Common Stock for
which this Warrant has been so exercised, effective immediately prior
to the close of business on the date this Warrant, the completed and
signed Exercise Form and the requisite payment are duly delivered to
the Company, irrespective of the date of actual delivery of
certificates representing such shares of Common Stock so issued.
2. Surrender of Warrant: Expenses.
------------------------------
2.1 Whether in connection with the exercise, exchange, registration of
transfer, replacement or put of this Warrant, surrender of this
Warrant shall be made to the
2
<PAGE>
Company during normal business hours on a Business Day (unless the
Company otherwise permits) at the executive offices of the Company
located at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA
19087, or to such other office or duly authorized representative of
the Company as from time to time may be designated by the Company by
written notice given to the Holder of this Warrant.
2.2 The Company shall pay all costs and expenses incurred in connection
with the exercise, registering, exchange, transfer, replacement or put
of this Warrant, including the costs of preparation, execution and
delivery of warrants and stock certificates, and shall pay all taxes
(other than any taxes measured by the income of any Person other than
the Company) and other charges (subject to Section 1.2 hereof) imposed
by law payable in connection with the transfer or replacement of this
Warrant.
3. Warrant Register, Exchange, Transfer, Loss.
------------------------------------------
3.1 The Company at all times shall maintain at its chief executive offices
an open register for the Warrant, in which the Company shall record
the name and address of each Holder to whom a Warrant has been issued
or transferred, the number of shares of Common Stock or other
securities purchasable thereunder and the corresponding purchase
prices.
3.2 This Warrant may be exchanged for two or more warrants entitling the
Holder hereof to purchase the same aggregate Exercise Quantity at the
same Exercise Price per share and otherwise having the same terms and
provisions as this Warrant. The Holder may request such an exchange by
surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and
allocation of the Exercise Quantity purchasable under the existing
Warrant.
3.3 Subject to the provisions of Section 11 of the Warrant Agreement, this
Warrant may be transferred, in whole or in part, by the Holder or any
duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant,
together with an Assignment Form, in the form of Exhibit A-2 (the
-----------
"ASSIGNMENT FORM"), duly completed and executed. Within five (5)
Business Days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and
deliver to the transferee a new Warrant representing the portion of
the Exercise Quantity transferred at the same Exercise Price per share
and otherwise having the same terms and provisions as this Warrant,
which the Company will register in the new Holder's name.
3.4 In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new Warrant to the
Holder in substitution therefor
3
<PAGE>
upon the Company's receipt of (i) evidence reasonably satisfactory to
the Company of such event (with the affidavit of an institutional
Holder being sufficient evidence), and (ii) if requested by the
Company, an indemnity agreement from any institutional Holder or an
indemnity bond from anyone else reasonably satisfactory in form and
amount to the Company.
4. Rights and Obligations of the Company and the Warrant Holder. The Company
------------------------------------------------------------
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein.
* * * * *
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
INTERNET CAPITAL GROUP, INC.
By________________________________
Its_______________________________
Attest:
_________________________________
Secretary
5
<PAGE>
Exhibit A-1
-----------
COMMON STOCK WARRANT
--------------------
EXERCISE FORM
-------------
Internet Capital Group, Inc.
Attention: President
_________________________________
_________________________________
The undersigned Holder of the attached Warrant hereby irrevocably elects to
exercise the within Warrant for the purchase of_____ shares of Common Stock,
$.01 par value per share, of Internet Capital Group, Inc. (the "Company"), and
herewith (please check as applicable) tenders payment for such shares of Common
Stock to the order of the Company in the amount of $_____ per share (the
Exercise Price currently in effect pursuant to this Warrant) in accordance with
the terms hereof, as follows:
[_] by enclosing a check (payable to the order of the Company) in the
amount of $______________ in payment of the purchase price thereof; and/or
[_] by authorizing the deduction of _____ shares in payment of the
Exercise Price.
The undersigned hereby surrenders this Warrant Certificate and all right, title
and interest therein to the Company and requests that a certificate for such
shares of Common Stock be registered on the stock transfer books of the Company
as follows:
Name of Transferee: ____________________________________________
State of Organization (if applicable):__________________________
Federal Tax Identification or
Social Security Number:________________________________________
Address: _______________________________________________________
<PAGE>
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor (exercisable
for the balance of the shares of Common Stock underlying this Warrant) be issued
and delivered to the undersigned Holder at the address on the warrant register
of the Company.
Dated:__________________________ ___________________________________________
(Name of Registered Holder - Please Print)
By_________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title______________________________________
2
<PAGE>
Exhibit A-2
-----------
COMMON STOCK WARRANT
--------------------
ASSIGNMENT FORM
---------------
For Value Received, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers to the transferee whose name and address are set
forth below all of the rights of the undersigned under the within Warrant (to
the extent of the portion of the within Warrant being transferred hereby, which
portion is ___________________________).
Name of Transferee: ________________________________________________
State of Organization (if applicable):______________________________
Federal Tax Identification or
Social Security Number:_____________________________________________
Address: ___________________________________________________________
If this transfer is not a transfer of the Warrant in full, then the
undersigned hereby requests that, as provided in the within Warrant, a new
Warrant of like tenor respecting the balance of the Exercise Quantity not being
transferred pursuant hereto be issued in the name of and delivered to, the
undersigned.
The undersigned does hereby irrevocably constitute and appoint
_____________________________________ attorney to register the foregoing
transfer on the books of the Company maintained for that purpose, with full
power of substitution in the premises.
Dated:_________________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________________
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
________________________________
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF THAT WARRANT AGREEMENT DATED AS OF APRIL 30, 1999
AMONG INTERNET CAPITAL GROUP, INC. (THE "COMPANY") AND PNC BANK, NATIONAL
ASSOCIATION, AS AGENT, AND THE BANKS PARTY THERETO (THE "BANKS") (AS THE SAME
MAY BE SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME,
THE "WARRANT AGREEMENT"). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS
PROVISIONS FOR PUTS, RESTRICTIONS ON TRANSFER AND REGISTRATION RIGHTS. A COPY OF
THE WARRANT AGREEMENT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
APRIL 30, 1999
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred to
in the legend above and in that certain Credit Agreement dated as of April 30,
1999 among the Company, the Agent and the Banks, as the same has been or may be
supplemented, modified, amended, renewed or restated from time to time (the
"CREDIT AGREEMENT"). The Company certifies and agrees that BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION and its successors and assigns (referred
to herein as the ("Holder") are entitled to purchase from the Company an
Exercise Quantity initially equal to an aggregate of 34,000 shares of the
Company's Common Stock, par value $.01 per share (the "COMMON STOCK"), all upon
the terms and provisions and subject to adjustment as provided in the Warrant
Agreement and this Common Stock Purchase Warrant (the "WARRANT"). The exercise
price per share of Common Stock for which this Warrant is exercisable shall be
$10.00 per share, as adjusted from time to time pursuant to the terms of this
Warrant and the Warrant Agreement (the "EXERCISE PRICE").
_________________________________
<PAGE>
1. Exercise of Warrant.
-------------------
1.1 This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time
(but not for fractional shares), by presentation and surrender of this
Warrant to the Company, together with the Exercise Form, in the form
attached hereto as Exhibit A-1 (the "EXERCISE FORM"), duly completed
-----------
and executed and payment in the aggregate amount equal to the Exercise
Price multiplied by the number of shares of Common Stock being
purchased. At the option of Holder, payment of the Exercise Price may
be made either by (i) check payable to the order of the Company, (ii)
surrender of certificates then held representing, or deduction from
the number of shares issuable upon exercise of this Warrant, that
number of shares which has an aggregate fair market value on the date
of exercise equal to the aggregate Exercise Price for all shares to be
purchased pursuant to this Warrant or (iii) by any combination of the
foregoing methods. Upon the Company's receipt of this Warrant, the
completed and signed Exercise Form and the requisite payment, the
Company shall as soon as practicable issue and deliver (or cause to be
delivered) to the exercising Holder stock certificates aggregating the
number of shares of Common Stock purchased. In the event of a partial
exercise of this Warrant, the Company shall issue and deliver to the
Holder a new Warrant at the same time such stock certificates are
delivered, which new Warrant shall entitle the Holder to purchase the
balance of the Exercise Quantity not purchased in that partial
exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
1.2 In the event the Holder of this Warrant desires that any or all of the
stock certificates to be issued upon the exercise hereof be registered
in a name or names other than that of the Holder of this Warrant, the
Holder must so request in writing at the time of exercise, and pay to
the Company funds sufficient to pay all stock transfer taxes (if any)
payable in connection with the transfer and delivery of such stock
certificates.
1.3 Upon the due exercise by the Holder of this Warrant, whether in whole
or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to
have become the Holder of record of the shares of Common Stock for
which this Warrant has been so exercised, effective immediately prior
to the close of business on the date this Warrant, the completed and
signed Exercise Form and the requisite payment are duly delivered to
the Company, irrespective of the date of actual delivery of
certificates representing such shares of Common Stock so issued.
2. Surrender of Warrant; Expenses.
------------------------------
2.1 Whether in connection with the exercise, exchange, registration of
transfer, replacement or put of this Warrant, surrender of this
Warrant shall be made to the
2
<PAGE>
Company during normal business hours on a Business Day (unless the
Company otherwise permits) at the executive offices of the Company
located at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA
19087, or to such other office or duly authorized representative of
the Company as from time to time may be designated by the Company by
written notice given to the Holder of this Warrant.
2.2 The Company shall pay all costs and expenses incurred in connection
with the exercise, registering, exchange, transfer, replacement or put
of this Warrant, including the costs of preparation, execution and
delivery of warrants and stock certificates, and shall pay all taxes
(other than any taxes measured by the income of any Person other than
the Company) and other charges (subject to Section 1.2 hereof) imposed
by law payable in connection with the transfer or replacement of this
Warrant.
3. Warrant Register, Exchange, Transfer, Loss.
------------------------------------------
3.1 The Company at all times shall maintain at its chief executive offices
an open register for the Warrant, in which the Company shall record
the name and address of each Holder to whom a Warrant has been issued
or transferred, the number of shares of Common Stock or other
securities purchasable thereunder and the corresponding purchase
prices.
3.2 This Warrant may be exchanged for two or more warrants entitling the
Holder hereof to purchase the same aggregate Exercise Quantity at the
same Exercise Price per share and otherwise having the same terms and
provisions as this Warrant. The Holder may request such an exchange by
surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and
allocation of the Exercise Quantity purchasable under the existing
Warrant.
3.3 Subject to the provisions of Section 11 of the Warrant Agreement, this
Warrant may be transferred, in whole or in part, by the Holder or any
duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant,
together with an Assignment Form, in the form of Exhibit A-2 (the
-----------
"ASSIGNMENT FORM"), duly completed and executed. Within five (5)
Business Days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and
deliver to the transferee a new Warrant representing the portion of
the Exercise Quantity transferred at the same Exercise Price per share
and otherwise having the same terms and provisions as this Warrant,
which the Company will register in the new Holder's name.
3.4 In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new Warrant to the
Holder in substitution therefor
3
<PAGE>
upon the Company's receipt of (i) evidence reasonably satisfactory to
the Company of such event (with the affidavit of an institutional
Holder being sufficient evidence), and (ii) if requested by the
Company, an indemnity agreement from any institutional Holder or an
indemnity bond from anyone else reasonably satisfactory in form and
amount to the Company.
4. Rights and Obligations of the Company and the Warrant Holder. The Company
------------------------------------------------------------
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein.
* * * * *
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
INTERNET CAPITAL GROUP, INC.
By____________________________________
Its__________________________________
Attest:
__________________________________
Secretary
5
<PAGE>
Exhibit A-1
-----------
COMMON STOCK WARRANT
--------------------
EXERCISE FORM
-------------
Internet Capital Group, Inc.
Attention: President
__________________________________
__________________________________
The undersigned Holder of the attached Warrant hereby irrevocably elects to
exercise the within Warrant for the purchase of _____ shares of Common Stock,
$.01 par value per share, of Internet Capital Group, Inc. (the "Company"), and
herewith (please check as applicable) tenders payment for such shares of Common
Stock to the order of the Company in the amount of $_____ per share (the
Exercise Price currently in effect pursuant to this Warrant) in accordance with
the terms hereof, as follows:
[_] by enclosing a check (payable to the order of the Company) in the
amount of $ __________in payment of the purchase price thereof; and/or
[_] by authorizing the deduction of______ shares in payment of the Exercise
Price.
The undersigned hereby surrenders this Warrant Certificate and all right, title
and interest therein to the Company and requests that a certificate for such
shares of Common Stock be registered on the stock transfer books of the Company
as follows:
Name of Transferee: _________________________________________________
State of Organization (if applicable):_______________________________
Federal Tax Identification or
Social Security Number:____________________________________________
Address: _________________________________________________________
<PAGE>
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor (exercisable
for the balance of the shares of Common Stock underlying this Warrant) be issued
and delivered to the undersigned Holder at the address on the warrant register
of the Company.
Dated:__________________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________________
2
<PAGE>
Exhibit A-2
-----------
COMMON STOCK WARRANT
--------------------
ASSIGNMENT FORM
---------------
For Value Received, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers to the transferee whose name and address are set
forth below all of the rights of the undersigned under the within Warrant (to
the extent of the portion of the within Warrant being transferred hereby, which
portion is ___________________).
Name of Transferee: ________________________________________________
State of Organization (if applicable):______________________________
Federal Tax Identification or
Social Security Number:___________________________________________
Address: ___________________________________________________________
If this transfer is not a transfer of the Warrant in full, then the
undersigned hereby requests that, as provided in the within Warrant, a new
Warrant of like tenor respecting the balance of the Exercise Quantity not being
transferred pursuant hereto be issued in the name of and delivered to, the
undersigned.
The undersigned does hereby irrevocably constitute and appoint
_____________________________________ attorney to register the foregoing
transfer on the books of the Company maintained for that purpose, with full
power of substitution in the premises.
Dated:___________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________________
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
_______________________________
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF THAT WARRANT AGREEMENT DATED AS OF APRIL 30, 1999
AMONG INTERNET CAPITAL GROUP, INC. (THE "COMPANY") AND PNC BANK, NATIONAL
ASSOCIATION, AS AGENT, AND THE BANKS PARTY THERETO (THE "BANKS") (AS THE SAME
MAY BE SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME,
THE "WARRANT AGREEMENT"). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS
PROVISIONS FOR PUTS, RESTRICTIONS ON TRANSFER AND REGISTRATION RIGHTS. A COPY OF
THE WARRANT AGREEMENT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
APRIL 30, 1999
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred to
in the legend above and in that certain Credit Agreement dated as of April 30,
1999 among the Company, the Agent and the Banks, as the same has been or may be
supplemented, modified, amended, renewed or restated from time to time (the
"Credit Agreement"). The Company certifies and agrees that Bank of America
National Trust and Savings Association and its successors and assigns (referred
to herein as the "Holder") are entitled to purchase from the Company an Exercise
Quantity initially equal to an aggregate of 34,000 shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), all upon the terms
and provisions and subject to adjustment as provided in the Warrant Agreement
and this Common Stock Purchase Warrant (the "Warrant"). The exercise price per
share of Common Stock for which this Warrant is exercisable shall be $10.00 per
share, as adjusted from time to time pursuant to the terms of this Warrant and
the Warrant Agreement (the "Exercise Price").
_____________________
<PAGE>
1. Exercise of Warrant.
-------------------
1.1 This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time
(but not for fractional shares), by presentation and surrender of this
Warrant to the Company, together with the Exercise Form, in the form
attached hereto as Exhibit A-1 (the "EXERCISE FORM"), duly completed
-----------
and executed and payment in the aggregate amount equal to the Exercise
Price multiplied by the number of shares of Common Stock being
purchased. At the option of Holder, payment of the Exercise Price may
be made either by (i) check payable to the order of the Company, (ii)
surrender of certificates then held representing, or deduction from
the number of shares issuable upon exercise of this Warrant, that
number of shares which has an aggregate -fair market value on the date
of exercise equal to the aggregate Exercise Price for all shares to be
purchased pursuant to this Warrant or (iii) by any combination of the
foregoing methods. Upon the Company's receipt of this Warrant, the
completed and signed Exercise Form and the requisite payment, the
Company shall as soon as practicable issue and deliver (or cause to be
delivered) to the exercising Holder stock certificates aggregating the
number of shares of Common Stock purchased. In the event of a partial
exercise of this Warrant, the Company shall issue and deliver to the
Holder a new Warrant at the same time such stock certificates are
delivered, which new Warrant shall entitle the Holder to purchase the
balance of the Exercise Quantity not purchased in that partial
exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
1.2 In the event the Holder of this Warrant desires that any or all of the
stock certificates to be issued upon the exercise hereof be registered
in a name or names other than that of the Holder of this Warrant, the
Holder must so request in writing at the time of exercise, and pay to
the Company funds sufficient to pay all stock transfer taxes (if any)
payable in connection with the transfer and delivery of such stock
certificates.
1.3 Upon the due exercise by the Holder of this Warrant, whether in whole
or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to
have become the Holder of record of the shares of Common Stock for
which this Warrant has been so exercised, effective immediately prior
to the close of business on the date this Warrant, the completed and
signed Exercise Form and the requisite payment are duly delivered to
the Company, irrespective of the date of actual delivery of
certificates representing such shares of Common Stock so issued.
2. Surrender of Warrant; Expenses.
------------------------------
2.1 Whether in connection with the exercise, exchange, registration of
transfer, replacement or put of this Warrant, surrender of this
Warrant shall be made to the
2
<PAGE>
Company during normal business hours on a Business Day (unless the
Company otherwise permits) at the executive offices of the Company
located at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA
19087, or to such other office or duly authorized representative of
the Company as from time to time may be designated by the Company by
written notice given to the Holder of this Warrant.
2.2 The Company shall pay all costs and expenses incurred in connection
with the exercise, registering, exchange, transfer, replacement or put
of this Warrant, including the costs of preparation, execution and
delivery of warrants and stock certificates, and shall pay all taxes
(other than any taxes measured by the income of any Person other than
the Company) and other charges (subject to Section 1.2 hereof) imposed
by law payable in connection with the transfer or replacement of this
Warrant.
3. Warrant Register, Exchange, Transfer, Loss.
------------------------------------------
3.1 The Company at all times shall maintain at its chief executive offices
an open register for the Warrant, in which the Company shall record
the name and address of each Holder to whom a Warrant has been issued
or transferred, the number of shares of Common Stock or other
securities purchasable thereunder and the corresponding purchase
prices.
3.2 This Warrant may be exchanged for two or more warrants entitling the
Holder hereof to purchase the same aggregate Exercise Quantity at the
same Exercise Price per share and otherwise having the same terms and
provisions as this Warrant. The Holder may request such an exchange by
surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and
allocation of the Exercise Quantity purchasable under the existing
Warrant.
3.3 Subject to the provisions of Section 11 of the Warrant Agreement, this
Warrant may be transferred, in whole or in part, by the Holder or any
duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant,
together with an Assignment Form, in the form of Exhibit A-2 (the
-----------
"ASSIGNMENT FORM"), duly completed and executed. Within five (5)
Business Days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and
deliver to the transferee a new Warrant representing the portion of
the Exercise Quantity transferred at the same Exercise Price per share
and otherwise having the same terms and provisions as this Warrant,
which the Company will register in the new Holder's name.
3.4 In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new Warrant to the
Holder in substitution therefor
3
<PAGE>
upon the Company's receipt of (i) evidence reasonably satisfactory to
the Company of such event (with the affidavit of an institutional
Holder being sufficient evidence), and (ii) if requested by the
Company, an indemnity agreement from any institutional Holder or an
indemnity bond from anyone else reasonably satisfactory in form and
amount to the Company.
4. Rights and Obligations of the Company and the Warrant Holder. The Company
------------------------------------------------------------
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein.
* * * * *
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
INTERNET CAPITAL GROUP, INC.
By____________________________________
Its___________________________________
Attest:
___________________________________
Secretary
5
<PAGE>
Exhibit A-1
-----------
COMMON STOCK WARRANT
--------------------
EXERCISE FORM
-------------
Internet Capital Group, Inc.
Attention: President
___________________________________
___________________________________
The undersigned Holder of the attached Warrant hereby irrevocably elects to
exercise the within Warrant for the purchase of _____ shares of Common Stock,
$.0l par value per share, of Internet Capital Group, Inc. (the "Company"), and
herewith (please check as applicable) tenders payment for such shares of Common
Stock to the order of the Company in the amount of $_____ per share (the
Exercise Price currently in effect pursuant to this Warrant) in accordance with
the terms hereof, as follows:
[_] by enclosing a check (payable to the order of the Company) in the
amount of $__________ in payment of the purchase price thereof; and/or
[_] by authorizing the deduction of ____________ shares in payment of the
Exercise Price.
The undersigned hereby surrenders this Warrant Certificate and all right, title
and interest therein to the Company and requests that a certificate for such
shares of Common Stock be registered on the stock transfer books of the Company
as follows:
Name of Transferee: _________________________________________________
State of Organization (if applicable):_______________________________
Federal Tax Identification or
Social Security Number:____________________________________________
Address: ____________________________________________________________
<PAGE>
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor (exercisable
for the balance of the shares of Common Stock underlying this Warrant) be issued
and delivered to the undersigned Holder at the address on the warrant register
of the Company.
Dated:__________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________________
2
<PAGE>
Exhibit A-2
-----------
COMMON STOCK WARRANT
--------------------
ASSIGNMENT FORM
---------------
For Value Received, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers to the transferee whose name and address are set
forth below all of the rights of the undersigned under the within Warrant (to
the extent of the portion of the within Warrant being transferred hereby, which
portion is ___________________).
Name of Transferee: ______________________________________________
State of Organization (if applicable):____________________________
Federal Tax Identification or
Social Security Number:_________________________________________
Address: _________________________________________________________
If this transfer is not a transfer of the Warrant in full, then the
undersigned hereby requests that, as provided in the within Warrant, a new
Warrant of like tenor respecting the balance of the Exercise Quantity not being
transferred pursuant hereto be issued in the name of and delivered to, the
undersigned.
The undersigned does hereby irrevocably constitute and appoint
_____________________________________ attorney to register the foregoing
transfer on the books of the Company maintained for that purpose, with full
power of substitution in the premises.
Dated:____________________ _____________________________________________
(Name of Registered Holder - Please Print)
By___________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title________________________________________
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
________________________
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF THAT WARRANT AGREEMENT DATED AS OF APRIL 30, 1999
AMONG INTERNET CAPITAL GROUP, INC. (THE "COMPANY") AND PNC BANK, NATIONAL
ASSOCIATION, AS AGENT, AND THE BANKS PARTY THERETO (THE "BANKS") (AS THE SAME
MAY BE SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME,
THE "WARRANT AGREEMENT"). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS
PROVISIONS FOR PUTS, RESTRICTIONS ON TRANSFER AND REGISTRATION RIGHTS. A COPY OF
THE WARRANT AGREEMENT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
APRIL 30, 1999
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred to
in the legend above and in that certain Credit Agreement dated as of April 30,
1999 among the Company, the Agent and the Banks, as the same has been or may be
supplemented, modified, amended, renewed or restated from time to time (the
"CREDIT AGREEMENT"). The Company certifies and agrees that Bank of America
National Trust and Savings Association and its successors and assigns (referred
to herein as the "Holder") are entitled to purchase from the Company an Exercise
Quantity initially equal to an aggregate of 34,000 shares of the Company's
Common Stock, par value $.01 per share (the "COMMON STOCK"), all upon the terms
and provisions and subject to adjustment as provided in the Warrant Agreement
and this Common Stock Purchase Warrant (the "WARRANT"). The exercise price per
share of Common Stock for which this Warrant is exercisable shall be $10.00 per
share, as adjusted from time to time pursuant to the terms of this Warrant and
the Warrant Agreement (the "EXERCISE PRICE").
________________________
<PAGE>
1. Exercise of Warrant.
--------------------
1.1 This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time
(but not for fractional shares), by presentation and surrender of this
Warrant to the Company, together with the Exercise Form, in the form
attached hereto as Exhibit A-1 (the "EXERCISE FORM"), duly completed
-----------
and executed and payment in the aggregate amount equal to the Exercise
Price multiplied by the number of shares of Common Stock being
purchased. At the option of Holder, payment of the Exercise Price may
be made either by (i) check payable to the order of the Company, (ii)
surrender of certificates then held representing, or deduction from
the number of shares issuable upon exercise of this Warrant, that
number of shares which has an aggregate -fair market value on the date
of exercise equal to the aggregate Exercise Price for all shares to be
purchased pursuant to this Warrant or (iii) by any combination of the
foregoing methods. Upon the Company's receipt of this Warrant, the
completed and signed Exercise Form and the requisite payment, the
Company shall as soon as practicable issue and deliver (or cause to be
delivered) to the exercising Holder stock certificates aggregating the
number of shares of Common Stock purchased. In the event of a partial
exercise of this Warrant, the Company shall issue and deliver to the
Holder a new Warrant at the same time such stock certificates are
delivered, which new Warrant shall entitle the Holder to purchase the
balance of the Exercise Quantity not purchased in that partial
exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
1.2 In the event the Holder of this Warrant desires that any or all of the
stock certificates to be issued upon the exercise hereof be registered
in a name or names other than that of the Holder of this Warrant, the
Holder must so request in writing at the time of exercise, and pay to
the Company funds sufficient to pay all stock transfer taxes (if any)
payable in connection with the transfer and delivery of such stock
certificates.
1.3 Upon the due exercise by the Holder of this Warrant, whether in whole
or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to
have become the Holder of record of the shares of Common Stock for
which this Warrant has been so exercised, effective immediately prior
to the close of business on the date this Warrant, the completed and
signed Exercise Form and the requisite payment are duly delivered to
the Company, irrespective of the date of actual delivery of
certificates representing such shares of Common Stock so issued.
2. Surrender of Warrant; Expenses.
------------------------------
2.1 Whether in connection with the exercise, exchange, registration of
transfer, replacement or put of this Warrant, surrender of this
Warrant shall be made to the Company during normal business hours on a
Business Day (unless the Company
2
<PAGE>
otherwise permits) at the executive offices of the Company located at
800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA 19087, or
to such other office or duly authorized representative of the Company
as from time to time may be designated by the Company by written
notice given to the Holder of this Warrant.
2.2 The Company shall pay all costs and expenses incurred in connection
with the exercise, registering, exchange, transfer, replacement or put
of this Warrant, including the costs of preparation, execution and
delivery of warrants and stock certificates, and shall pay all taxes
(other than any taxes measured by the income of any Person other than
the Company) and other charges (subject to Section 1.2 hereof) imposed
by law payable in connection with the transfer or replacement of this
Warrant.
3. Warrant Register, Exchange, Transfer, Loss.
------------------------------------------
3.1 The Company at all times shall maintain at its chief executive offices
an open register for the Warrant, in which the Company shall record
the name and address of each Holder to whom a Warrant has been issued
or transferred, the number of shares of Common Stock or other
securities purchasable thereunder and the corresponding purchase
prices.
3.2 This Warrant may be exchanged for two or more warrants entitling the
Holder hereof to purchase the same aggregate Exercise Quantity at the
same Exercise Price per share and otherwise having the same terms and
provisions as this Warrant. The Holder may request such an exchange by
surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and
allocation of the Exercise Quantity purchasable under the existing
Warrant.
3.3 Subject to the provisions of Section 11 of the Warrant Agreement, this
Warrant may be transferred, in whole or in part, by the Holder or any
duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant,
together with an Assignment Form, in the form of Exhibit A-2 (the
-----------
"ASSIGNMENT FORM"), duly completed and executed. Within five (5)
Business Days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and
deliver to the transferee a new Warrant representing the portion of
the Exercise Quantity transferred at the same Exercise Price per share
and otherwise having the same terms and provisions as this Warrant,
which the Company will register in the new Holder's name.
3.4 In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new Warrant to the
Holder in substitution therefor upon the Company's receipt of (i)
evidence reasonably satisfactory to the
3
<PAGE>
Company of such event (with the affidavit of an institutional Holder
being sufficient evidence), and (ii) if requested by the Company, an
indemnity agreement from any institutional Holder or an indemnity bond
from anyone else reasonably satisfactory in form and amount to the
Company.
4. Rights and Obligations of the Company and the Warrant Holder. The Company
------------------------------------------------------------
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein.
* * * * *
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
INTERNET CAPITAL GROUP, INC.
By____________________________________
Its___________________________________
Attest:
____________________________
Secretary
5
<PAGE>
Exhibit A-1
-----------
COMMON STOCK WARRANT
-------------------
EXERCISE FORM
-------------
Internet Capital Group, Inc.
Attention: President
_______________________________
_______________________________
The undersigned Holder of the attached Warrant hereby irrevocably elects to
exercise the within Warrant for the purchase of _____ shares of Common Stock,
$.0l par value per share, of Internet Capital Group, Inc. (the "Company"), and
herewith (please check as applicable) tenders payment for such shares of Common
Stock to the order of the Company in the amount of $_____ per share (the
Exercise Price currently in effect pursuant to this Warrant) in accordance with
the terms hereof, as follows:
[_] by enclosing a check (payable to the order of the Company) in the
amount of $__________ in payment of the purchase price thereof; and/or
[_] by authorizing the deduction of ____________ shares in payment of the
Exercise Price.
The undersigned hereby surrenders this Warrant Certificate and all right, title
and interest therein to the Company and requests that a certificate for such
shares of Common Stock be registered on the stock transfer books of the Company
as follows:
Name of Transferee: ______________________________________
State of Organization (if applicable):____________________
Federal Tax Identification or
Social Security Number:_________________________________
Address: _________________________________________________
<PAGE>
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor (exercisable
for the balance of the shares of Common Stock underlying this Warrant) be issued
and delivered to the undersigned Holder at the address on the warrant register
of the Company.
Dated:_________________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________________
2
<PAGE>
Exhibit A-2
-----------
COMMON STOCK WARRANT
--------------------
ASSIGNMENT FORM
---------------
For Value Received, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers to the transferee whose name and address are set
forth below all of the rights of the undersigned under the within Warrant (to
the extent of the portion of the within Warrant being transferred hereby, which
portion is ___________________________).
Name of Transferee: ________________________________________________
State of Organization (if applicable):______________________________
Federal Tax Identification or
Social Security Number:____________________________________________
Address: ___________________________________________________________
If this transfer is not a transfer of the Warrant in full, then the
undersigned hereby requests that, as provided in the within Warrant, a new
Warrant of like tenor respecting the balance of the Exercise Quantity not being
transferred pursuant hereto be issued in the name of and delivered to, the
undersigned.
The undersigned does hereby irrevocably constitute and appoint
_____________________________________ attorney to register the foregoing
transfer on the books of the Company maintained for that purpose, with full
power of substitution in the premises.
Dated:_________________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________________
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
_________________________
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF THAT WARRANT AGREEMENT DATED AS OF APRIL 30, 1999
AMONG INTERNET CAPITAL GROUP, INC. (THE "COMPANY") AND PNC BANK, NATIONAL
ASSOCIATION, AS AGENT, AND THE BANKS PARTY THERETO (THE "BANKS") (AS THE SAME
MAY BE SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME,
THE "WARRANT AGREEMENT"). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS
PROVISIONS FOR PUTS, RESTRICTIONS ON TRANSFER AND REGISTRATION RIGHTS. A COPY OF
THE WARRANT AGREEMENT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
APRIL 30, 1999
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred to
in the legend above and in that certain Credit Agreement dated as of April 30,
1999 among the Company, the Agent and the Banks, as the same has been or may be
supplemented, modified, amended, renewed or restated from time to time (the
"CREDIT AGREEMENT"). The Company certifies and agrees that PNC Bank, National
Association and its successors and assigns (referred to herein as the "Holder")
are entitled to purchase from the Company an Exercise Quantity initially equal
to an aggregate of 59,500 shares of the Company's Common Stock, par value $.0l
per share (the "COMMON STOCK"), all upon the terms and provisions and subject to
adjustment as provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "WARRANT"). The exercise price per share of Common Stock for which
this Warrant is exercisable shall be $10.00 per share, as adjusted from time to
time pursuant to the terms of this Warrant and the Warrant Agreement (the
"EXERCISE PRICE").
_________________________
<PAGE>
1. Exercise of Warrant.
-------------------
1.1 This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time
(but not for fractional shares), by presentation and surrender of this
Warrant to the Company, together with the Exercise Form, in the form
attached hereto as Exhibit A-1 (the "EXERCISE FORM"), duly completed
-----------
and executed and payment in the aggregate amount equal to the Exercise
Price multiplied by the number of shares of Common Stock being
purchased. At the option of Holder, payment of the Exercise Price may
be made either by (i) check payable to the order of the Company, (ii)
surrender of certificates then held representing, or deduction from
the number of shares issuable upon exercise of this Warrant, that
number of shares which has an aggregate fair market value on the date
of exercise equal to the aggregate Exercise Price for all shares to be
purchased pursuant to this Warrant or (iii) by any combination of the
foregoing methods. Upon the Company's receipt of this Warrant, the
completed and signed Exercise Form and the requisite payment, the
Company shall as soon as practicable issue and deliver (or cause to be
delivered) to the exercising Holder stock certificates aggregating the
number of shares of Common Stock purchased. In the event of a partial
exercise of this Warrant, the Company shall issue and deliver to the
Holder a new Warrant at the same time such stock certificates are
delivered, which new Warrant shall entitle the Holder to purchase the
balance of the Exercise Quantity not purchased in that partial
exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
1.2 In the event the Holder of this Warrant desires that any or all of the
stock certificates to be issued upon the exercise hereof be registered
in a name or names other than that of the Holder of this Warrant, the
Holder must so request in writing at the time of exercise, and pay to
the Company funds sufficient to pay all stock transfer taxes (if any)
payable in connection with the transfer and delivery of such stock
certificates.
1.3 Upon the due exercise by the Holder of this Warrant, whether in whole
or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to
have become the Holder of record of the shares of Common Stock for
which this Warrant has been so exercised, effective immediately prior
to the close of business on the date this Warrant, the completed and
signed Exercise Form and the requisite payment are duly delivered to
the Company, irrespective of the date of actual delivery of
certificates representing such shares of Common Stock so issued.
2. Surrender of Warrant: Expenses.
------------------------------
2.1 Whether in connection with the exercise, exchange, registration of
transfer, replacement or put of this Warrant, surrender of this
Warrant shall be made to the
2
<PAGE>
Company during normal business hours on a Business Day (unless the
Company otherwise permits) at the executive offices of the Company
located at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA
19087, or to such other office or duly authorized representative of
the Company as from time to time may be designated by the Company by
written notice given to the Holder of this Warrant.
2.2 The Company shall pay all costs and expenses incurred in connection
with the exercise, registering, exchange, transfer, replacement or put
of this Warrant, including the costs of preparation, execution and
delivery of warrants and stock certificates, and shall pay all taxes
(other than any taxes measured by the income of any Person other than
the Company) and other charges (subject to Section 1.2 hereof) imposed
by law payable in connection with the transfer or replacement of this
Warrant.
3. Warrant Register, Exchange, Transfer, Loss.
------------------------------------------
3.1 The Company at all times shall maintain at its chief executive offices
an open register for the Warrant, in which the Company shall record
the name and address of each Holder to whom a Warrant has been issued
or transferred, the number of shares of Common Stock or other
securities purchasable thereunder and the corresponding purchase
prices.
3.2 This Warrant may be exchanged for two or more warrants entitling the
Holder hereof to purchase the same aggregate Exercise Quantity at the
same Exercise Price per share and otherwise having the same terms and
provisions as this Warrant. The Holder may request such an exchange by
surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and
allocation of the Exercise Quantity purchasable under the existing
Warrant.
3.3 Subject to the provisions of Section 11 of the Warrant Agreement, this
Warrant may be transferred, in whole or in part, by the Holder or any
duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant,
together with an Assignment Form, in the form of Exhibit A-2 (the
-----------
"ASSIGNMENT FORM"), duly completed and executed. Within five (5)
Business Days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and
deliver to the transferee a new Warrant representing the portion of
the Exercise Quantity transferred at the same Exercise Price per share
and otherwise having the same terms and provisions as this Warrant,
which the Company will register in the new Holder's name.
3.4 In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new Warrant to the
Holder in substitution therefor
3
<PAGE>
upon the Company's receipt of (i) evidence reasonably satisfactory to
the Company of such event (with the affidavit of an institutional
Holder being sufficient evidence), and (ii) if requested by the
Company, an indemnity agreement from any institutional Holder or an
indemnity bond from anyone else reasonably satisfactory in form and
amount to the Company.
4. Rights and Obligations of the Company and the Warrant Holder. The Company
------------------------------------------------------------
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein.
* * * *
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
INTERNET CAPITAL GROUP, INC.
By________________________________
Its_______________________________
Attest:
_________________________________
Secretary
5
<PAGE>
Exhibit A-1
-----------
COMMON STOCK WARRANT
--------------------
EXERCISE FORM
-------------
Internet Capital Group, Inc.
Attention: President
_________________________________
_________________________________
The undersigned Holder of the attached Warrant hereby irrevocably elects to
exercise the within Warrant for the purchase of _____ shares of Common Stock,
$.01 par value per share, of Internet Capital Group, Inc. (the "Company"), and
herewith (please check as applicable) tenders payment for such shares of Common
Stock to the order of the Company in the amount of $_____ per share (the
Exercise Price currently in effect pursuant to this Warrant) in accordance with
the terms hereof as follows:
[_] by enclosing a check (payable to the order of the Company) in the
amount of $______________ in payment of the purchase price thereof;
and/or
[_] by authorizing the deduction of _____ shares in payment of the
Exercise Price.
The undersigned hereby surrenders this Warrant Certificate and all right, title
and interest therein to the Company and requests that a certificate for such
shares of Common Stock be registered on the stock transfer books of the Company
as follows:
Name of Transferee: _________________________________________________
State of Organization (if applicable):_______________________________
Federal Tax Identification or
Social Security Number:_____________________________________________
Address: ____________________________________________________________
<PAGE>
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor (exercisable
for the balance of the shares of Common Stock underlying this Warrant) be issued
and delivered to the undersigned Holder at the address on the warrant register
of the Company.
Dated:__________________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________
2
<PAGE>
Exhibit A-2
-----------
COMMON STOCK WARRANT
--------------------
ASSIGNMENT FORM
---------------
For Value Received, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers to the transferee whose name and address are set
forth below all of the rights of the undersigned under the within Warrant (to
the extent of the portion of the within Warrant being transferred hereby, which
portion is ___________________).
Name of Transferee: ____________________________________________
State of Organization (if applicable):__________________________
Federal Tax Identification or
Social Security Number:_______________________________________
Address: _______________________________________________________
If this transfer is not a transfer of the Warrant in full, then the
undersigned hereby requests that, as provided in the within Warrant, a new
Warrant of like tenor respecting the balance of the Exercise Quantity not being
transferred pursuant hereto be issued in the name of and delivered to, the
undersigned.
The undersigned does hereby irrevocably constitute and appoint
_____________________________________ attorney to register the foregoing
transfer on the books of the Company maintained for that purpose, with full
power of substitution in the premises.
Dated:_________________________ __________________________________________
(Name of Registered Holder - Please Print)
By________________________________________
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title_____________________________________
<PAGE>
EXHIBIT 6.1.6
Form of
COLLATERAL ASSIGNMENT OF CONTRACT RIGHTS
THIS ASSIGNMENT is made and entered into the 30th day of April, 1999, by
INTERNET CAPITAL GROUP, INC., a Delaware corporation, and INTERNET CAPITAL GROUP
OPERATIONS, INC., a Delaware corporation, (each an "Assignor", and together the
--------
"Assignors"), in favor of PNC BANK, NATIONAL ASSOCIATION, in its capacity as
---------
agent for the Banks under the Credit Agreement (as hereinafter defined) (the
"Agent" or "Assignee").
----- --------
WITNESSETH:
----------
WHEREAS, pursuant to that certain $50,000,000 Secured Revolving Credit
Facility Credit Agreement (as it may hereafter from time to time be restated,
amended, modified or supplemented, the "Credit Agreement") of even date herewith
----------------
by and among the Assignors as Borrowers, Assignee as Agent for the Banks named
therein, the Banks named therein and the Guarantors named therein, the Banks
have agreed to provide certain loans to the Assignors; and
WHEREAS, in order to provide additional security for the repayment of such
loans, the parties hereto desire that Assignee be granted an assignment and
security interest in all registration rights of the Assignors under those
certain Material Contracts (as defined in the Credit Agreement), listed on
Schedule A attached hereto (collectively referred to as the "Assigned
- ---------- --------
Contracts") relating to the securities of the Investment Entities (as defined in
- ---------
the Credit Agreement) owned by the Assignors, pursuant to which the Assignors
have been granted by each of the Investment Entities certain demand and/or
piggy-back registration rights, among other rights, if any.
NOW, THEREFORE, in consideration of the promises and covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by each Assignor, and intending to be legally bound, each
Assignor assigns to Assignee for the benefit of the Assignee all of its right,
title and interest in and to the Assigned Contracts to the extent assignable and
to the fullest extent permitted by Law.
1. Except as otherwise expressly provided herein, capitalized terms used
in this Assignment shall have the respective meanings given to them in the
Credit Agreement.
2. Each Assignor does hereby assign, transfer and set over unto Assignee
for the benefit of the Banks, its respective successors and assigns, all the
rights, interests and privileges which each such Assignor has or may have in or
under the Assigned Contracts, including without limiting the generality of the
foregoing, the present and continuing right with full power and authority, in
its own name, or in the name of the Assignor, or otherwise, but subject to the
provisions and limitations of Section 3 hereof, (i) to make claim for, enforce,
perform, collect and receive any and all rights under the Assigned Contracts,
(ii) to do any and all things which Assignor is or may become entitled to do
under the Assigned Contracts, and
<PAGE>
(iii) to make all waivers and agreements, give all notices, consents and
releases and other instruments and to do any and all other things whatsoever
which Assignor is or may become entitled to do under the Assigned Contracts.
3. The acceptance of this Assignment and the payment or performance under
the Assigned Contracts shall not constitute a waiver of any rights of Assignee
under the terms of the Credit Agreement or any other Loan Documents, it being
understood that this Assignment is for security purposes only. Accordingly,
notwithstanding anything to the contrary set forth herein, each Assignor shall
retain all rights with respect to the Assigned Contracts, including without
limitation, the right to enforce all rights of each such Assignor thereunder,
except in each case during a period when an Event of Default (as such term is
defined in the Credit Agreement) has occurred and is continuing.
4. Each Assignor, upon the occurrence and continuation of an Event of
Default, hereby authorizes Assignee, at Assignee's option, to do all acts
required or permitted under the Assigned Contracts as Assignee in its sole
discretion may deem proper. Each Assignor hereby irrevocably constitutes and
appoints Assignee, while this Assignment remains in force and effect and, in
each instance, to the full extent permitted by applicable Law, its true and
lawful attorney-in-fact, coupled with an interest and with full power of
substitution and revocation, for Assignor and in its name, place and stead, to
demand and enforce compliance with all the terms and conditions of the Assigned
Contracts and all benefits accrued thereunder, whether at law, in equity or
otherwise; provided, however, that Assignee shall not exercise any such power
-------- -------
unless and until an Event of Default shall have occurred and is continuing.
5. Assignee shall not be obligated to perform or discharge any obligation
or duty to be performed or discharged by any Assignor under the Assigned
Contracts, and each Assignor hereby agrees to indemnify Assignee for, and to
hold Assignee harmless from, any and all liability arising under the Assigned
Contracts, other than arising or resulting from Assignee's (or its agents,
employees or contractors) gross negligence or willful misconduct.
6. Each Assignor agrees that this Assignment and the designation and
directions herein set forth are irrevocable.
7. Neither this Assignment nor any action or inaction on the part of
Assignee shall constitute an assumption on the part of Assignee of any
obligations or duties under the Assigned Contracts.
-2-
<PAGE>
8. Each Assignor covenants and warrants that:
(a) it has the power and authority to assign its Assigned Contracts and
there have been no prior assignments of its Assigned Contracts;
(b) each of its Assigned Contracts is a valid contract, and that there
are, to the extent ascertainable by Assignor, no defaults on the part of any of
the parties thereto;
(c) it will not further assign, pledge or otherwise encumber its
Assigned Contracts without the prior written consent of Assignee;
(d) it will not cancel, terminate or accept any surrender of its
Assigned Contracts, or (except as may otherwise be permitted by the Loan
Documents) amend or modify the same directly or indirectly in any respect
whatsoever, without having obtained the prior written consent of Assignee
thereto;
(e) it will not waive or give any consent with respect to any material
default or material variation in the performance under its Assigned Contracts,
it will at all times take proper steps to enforce all of the provisions and
conditions thereof, and it will forthwith notify Assignee of any material
default under its Assigned Contracts;
(f) it will perform and observe, or cause to be performed and observed,
all of the terms, covenants and conditions on its part to be performed and
observed with respect to its Assigned Contracts;
(g) it will execute from time to time any and all additional
assignments or instruments of further assurance to Assignee, as Assignee may at
any time reasonably request;
(h) each of the Assigned Contracts permits Assignor to assign its
rights hereunder, and all consents from third parties, if required, have been
obtained prior to the execution hereof; and
(i) the Assignor has no other registration rights relating to its
securities of the Investment Entities other than those set forth in the Assigned
Contracts.
9. At such time as the Loans are indefeasibly paid in full, this
Assignment and all of each Assignee's right, title and interest hereunder with
respect to its Assigned Contracts shall terminate.
10. This Assignment shall inure to the benefit of Assignee, its respective
successors and assigns, and shall be binding upon each Assignor, its successors,
successors in title and assigns.
-3-
<PAGE>
11. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania without regard to its
conflicts of law principles.
[SIGNATURES BEGIN ON NEXT PAGE]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this instrument as of the day
and year first above written.
INTERNET CAPITAL GROUP, INC.
By:_______________________________
Name: John Nickolas
Title: Managing Director and Assistant Treasurer
[Seal]
INTERNET CAPITAL GROUP OPERATIONS,
INC.
By:_______________________________
Name: John N. Nickolas
Title: Managing Director, Operations and
Assistant Secretary
PNC BANK, NATIONAL ASSOCIATION,
As Agent
By:_______________________________
Name: Gregory M. Cote
Title: Vice President/Team Leader
<PAGE>
SCHEDULE A
[LIST OF MATERIAL CONTRACTS TO BE PROVIDED.
<PAGE>
Exhibit 6.1.7
-------------
[LETTERHEAD OF DECHERT PRICE & RHOADS]
April 30, 1999
PNC Bank, National Association,
as Agent
One PNC Plaza - 22nd Floor
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2797
and each of the Banks from time to time parties
to the Credit Agreement referred to below
Re: Internet Capital Group. Inc. and Internet Capital Group,
--------------------------------------------------------
Operations, Inc.
---------------
Ladies and Gentlemen:
We have served as special counsel to Internet Capital Group, Inc. ("ICG")
and Internet Capital Group Operations, Inc. ("ICGO" and together with ICG, each
a "Borrower" and collectively the "Borrowers"), each a Delaware corporation, in
connection with the $50,000,000 Secured Revolving Credit Facility Credit
Agreement dated as of the date hereof (the "Agreement"), by and among the
Borrowers, the Banks (as defined in the Agreement), and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as agent for the Banks under the Agreement
(hereinafter referred to in such capacity as the "Agent"). This opinion is
delivered pursuant to the requirements set forth in Section 6.1.7 of the
Agreement. Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Loan Documents (as defined below).
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 2
In connection with our representation as described above; we have reviewed
executed copies of the following documents, each dated on or about the date
hereof (the "Loan Documents"):
1. the Agreement;
2. the Revolving Credit Notes;
3. the Pledge Agreement;
4. the Intercompany Subordination Agreement;
5. the Patent, Trademark and Copyright Assignment;
6. the Security Agreement;
7. the Warrant Agreement;
8. the Collateral Assignment of Contract Rights; and
9. the Letter Agreement.
In rendering this opinion we have examined, in addition to the Loan
Documents (i) certified copies of the applicable organizational documents and
resolutions of each Borrower (ii) certificates of good standing for each
Borrower issued by the jurisdiction of its incorporation or formation, and (iii)
such other documents and records pertaining to each Borrower as in our judgment
are necessary or appropriate to enable us to render the opinions expressed
below.
For purposes of this opinion, we have assumed that:
(a) The execution and delivery of the Loan Documents and other
documents reviewed by us, and the entry into and performance of the transactions
contemplated by the Loan Documents by all parties other than the Borrowers have
been duly authorized by all necessary corporate action and constitute the valid
and binding obligations of all such parties other than the Borrowers.
(b) All natural persons who are signatories to the Loan
Documents were legally competent at the time of execution and delivery; all
signatures on the Loan Documents and other documents reviewed by us on behalf of
parties other than the Borrowers are genuine; the copies of all documents
submitted to us are accurate and complete and conform to originals; and all
material terms and conditions of the relationship among the Borrowers, the Agent
and the Banks are correctly and completely reflected in the Loan Documents.
<PAGE>
PNC Bank, National Association,
Agent for the Banks
April 30, 1999
Page 3
(c) Each Borrower has rights in each item of its respective
collateral existing on the date hereof and will have rights in each such item of
collateral arising after the date hereof
(d) As to matters of fact material to our opinions, we have
relied upon representations of ICG or ICGO or both, as applicable, in the Loan
Documents, and on, certificates of officers of ICG or 1CGO or both, as
applicable, delivered to the Agent, and of public officials, and we have made no
independent inquiry into the accuracy of such representations.
Our opinions set forth herein are based on our consideration of only those
statutes, rules, regulations and judicial decisions which, in our experience,
are normally applicable to, normally relevant in connection with, a transaction
of the type contemplated in the Loan Documents. Whenever our opinion with
respect to the existence or absence of facts is indicated to be based on our
knowledge or awareness, we are referring to the current actual knowledge of the
Dechert Price & Rhoads' attorneys who have rendered legal services to the
Borrowers connection with the transactions contemplated by the Loan Documents,
which knowledge has, been obtained by such attorneys in their capacity as such.
Except as expressly set forth herein, we have not undertaken any independent
investigation to determine the existence or absence of such facts and no
inference as to our knowledge concerning such facts should be drawn from the
fact that such representation has been undertaken by us.
Based upon the foregoing, but subject to the assumptions, limitations, and
qualificaions set forth below, we are of the opinion that:
1. Each Borrower is a corporation validly existing and in good
standing under the laws of the State of Delaware. Each Borrower has the
requisite corporate power to own or lease its properties and to engage in the
business it presently conducts or presently proposes to conduct. Each Borrower
has the requisite corporate power and authority to execute and deliver each Loan
Document to which it is a party and to borrow under the Agreement, perform its
obligations thereunder and grant the security interests to be granted by it
pursuant to the applicable Loan Documents.
2. Each Borrower has taken all necessary corporate action to
authorize its execution, delivery and performance of the Loan Documents, to
grant the security interests granted by it pursuant to the Loan Documents and to
borrow under the Agreement. Each Loan Document to which a Borrower is a party
has been duly executed and delivered by such Borrower.
3. The execution and delivery by each Borrower of the Loan
Documents, each Borrower's borrowings in accordance with the terms of the Loan
Documents, performance
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 4
of each Borrower's obligations thereunder and granting of the security interests
to be granted by each Borrower pursuant to the Loan Documents (a) will not
result in any breach or violation of any of the terms or provisions of, or
constitute a default under (1) the Certificate of Incorporation or By-Laws of
such Borrower, or (2) assuming that proceeds of borrowings will be used in
accordance with the terms of the Loan Documents, any federal or Pennsylvania
statute or the Delaware General Corporation Law or any rule or regulation issued
pursuant to any Pennsylvania or federal statute or the Delaware General
Corporation Law or any order known to us issued by any court or governmental
agency or body applicable to such Borrower and (b) will not result in a breach
of, constitute a default under, require any consent under, or result in the
acceleration or required prepayment of any indebtedness pursuant to the terms of
any agreement or instrument of which we have knowledge to which such Borrower is
a party or by which such Borrower is bound or to which such Borrower is subject,
or (except for the liens created pursuant to the Loan Documents) result in the
creation or imposition of any lien upon any property of such Borrower pursuant
to the terms of any such agreement or instrument.
4. No consent, approval, authorization, order, filing, registration
or qualification of or with any federal or Pennsylvania governmental agency or
body or Delaware governmental agency or body acting pursuant to the Delaware
General Corporation Law is required for the execution and delivery by the
Borrowers of the Loan Document borrowings by the Borrowers in accordance with
the terms of the Loan Documents or the performance by the Borrowers of their
respective payment and other obligations under the Loan Documents or the
granting of any security interests under the Loan Documents, except for the
filing of any Financing Statements and a Federal Reserve Form U-l. We express no
opinion with respect to the Investment Company Act of 1940, as amended, which
opinion we understand will be provided to the Agent, for the benefit of the
Banks, by Davis Polk & Wardwell.
5. Each Loan Document to which a Borrower is a party is the valid
and legally binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms.
6. To our knowledge, (a) there is no action, suit or proceeding now
pending before or by any court, arbitrator or governmental agency, body or
official to which either Borrower is a party or to which the business, assets or
property of either Borrower is subject, and (b) no such action, suit or
proceeding is threatened to which either Borrower or the business, assets or
property of either Borrower would be subject, that in the case of either (a) or
(b), questions the validity of the Loan Documents or the transactions
contemplated thereby.
7. Assuming that each Borrower will comply the provisions of the
Loan Documents relating to the use of proceeds and the maintenance of collateral
levels required
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 5
under the Pledge Agreement, the making of loans under the Loan Documents on the
date hereof will not violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System.
8. The Pledge Agreement creates in favor of the Agent, for the
benefit of the Banks, a security interest under the Pennsylvania Uniform
Commercial Code (the "Pennsylvania UCC") in the Securities of the Investment
Entities identified on Schedule l.l(A-l), (A-2) and (A-3) to the Agreement (the
"Pledged Securities").
9. The Agent for the benefit of the Banks will have a perfected
security interest in the Pledged Securities under the Pennsylvania UCC upon
delivery to the Agent in the Commonwealth of Pennsylvania of the certificates
representing the Pledged Securities in registered form, endorsed in blank by an
effective endorsement or accompanied by undated stock, warrant, debenture or
note powers, as applicable, with respect thereto duly endorsed in blank by an
effective endorsement. Assuming the Agent does not have notice of any adverse
claim to the Pledged Securities, the Agent for the benefit of the Banks will
acquire the security interest in the Pledged Securities prior to any other lien
or security interest therein.
10. The Security Agreement creates in favor of the Agent for the
benefit of the Banks a security interest in the collateral described therein in
which a security interest may be created under Article 9 of the Pennsylvania UCC
(the "Article 9 Collateral").
11. Upon the proper filing of each financing statement in the
applicable offices, assuming the representations made by each Loan Party ,in the
Security Agreement with respect to the location of its Article 9 Collateral are
and remain true and correct, the security interest in favor of the Agent for the
benefit of the Banks in the Article 9 Collateral described in such financing
statement will be perfected to the extent a security interest in such Article 9
Collateral can be perfected by filing a financing statement under the provisions
of the Pennsylvania UCC.
12. Based solely upon our review of the Borrowers' stock record
books, all of the shares of capital stock described on Schedule 5.1.2 to the
Agreement are owned of record by the Persons set forth on Schedule 5.1.2 to the
Agreement.
13. The shares of Common Stock of ICG issuable upon the exercise of
the Warrant, and upon payment therefor in accordance with the terms of the
Warrant will be validly issued, fully paid and non-assessable. The shares have
been duly reserved for issuance by ICG.
Our opinions are subject to the following further qualifications:
(a) The opinions expressed herein are limited by principles of
equity which may limit the availability of certain rights and remedies and do
not reflect the effect of
<PAGE>
PNC Bank, National Association,
as Agent for the Banks
April 30, 1999
Page 6
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws or decisions relating to or affecting debtors' obligations or
creditors' rights generally. The opinions expressed above also do not reflect
the effect of laws and equitable doctrines (including requirements that the
parties to agreements act reasonably and in good faith and, with respect to
collateral, in a commercially reasonable manner, and give reasonable notice
prior to exercising rights and remedies) which may limit the availability of any
particular remedy but which will not, in our judgment, make the remedies
available to the Agent or the Banks under the Loan Documents inadequate for the
practical realization of the benefits of the security provided for in the Loan
Documents, except for the economic consequence of any delay which may be imposed
thereby or result therefrom, and except that we express no opinion as to the
rights of any of the parties to the Loan Documents to accelerate the due dates
of any payment due thereunder or to exercise other remedies available to them on
the happening of a non-material breach of any such document or agreement.
(b) Without limiting the generality of the foregoing, we express no
opinion with respect to: (1) the availability of specific performance or other
equitable remedies for noncompliance with any of the provisions contained in the
Loan Documents; or (2) the enforceability of provisions contained in Loan
Documents relating to the effect of laws which may be enacted in the future.
(c) We have made no examination and express no opinion with respect
to: (1) the title to or ownership of the Pledged Securities; (2) the accuracy of
any descriptions of Collateral in any security agreement or financing
statements; (3) the existence or absence of an liens, charges or encumbrances on
any Pledged Securities; and (4) except as set forth in the last sentence of
paragraph 9 hereof, the priority of any lien or security interest.
(d) Without limiting the generality of the foregoing, we express no
opinion as to the legality, validity, binding nature or enforceability of (1)
any self-help provisions; (2) provisions in the Loan Documents purporting to
waive the effect of applicable laws; (3) provisions that purport to establish
evidentiary standards; (4) provisions that provide for the enforceability of the
remaining terms and provisions of the applicable Loan Document in circumstances
in which certain other terms and provisions of such Loan Documents are illegal
or unenforceable; (5) provisions that provide that certain rights or obligations
are absolute or unconditional; (6) provisions related to waivers of remedies (or
the delay or omission of enforcement of remedies), disclaimers, liability
limitations or limitations on the obligations of the Bank in circumstances in
which a failure of condition or default by any Loan Party is not material; (7)
provisions related to releases or waivers of legal or equitable rights,
discharges of defenses, or reimbursement or indemnification in circumstances in
which the person seeking reimbursement or indemnification has breached its
duties under the applicable Loan Document, or otherwise, or itself has been
negligent; (8) provisions which purport to authorize any person to sign or file
financing statements without the signature of the debtor (except to the extent
that a
<PAGE>
PNC Bank. National Association,
as Agent for the Banks
April 30, 1999
Page 7
secured party may execute and file financing statements without the signature of
the debtor under Section 9-402(2) of the UCC); or (9) any power-of-attorney
given under the- Loan Documents which is intended to bind successors and assigns
which have not granted such powers by a power-of-attorney specifically executed
by them.
(e) In giving the opinion set forth in paragraph 9 above, we have
assumed that (1) the Agent maintains possession and control of certificates
representing the Pledged Securities accompanied by appropriate executed stock
powers; (2) no part of the Pledged Securities is subject to a security interest
that is perfected under the laws of another jurisdiction by means other than
possession and control, or constitutes the proceeds of any property subject to a
third party security interest; and (3) the Pledged Securities or the proceeds
thereof are not subject to (i) any lien of any government or any agency or
instrumentality thereof, including without limitation, any federal, state or
local tax lien, (ii) any claims of any federal priority statute (31 U.S.C. ss.
3713), (iii) any lien arising under the Employee Retirement Income Security Act
of 1974, as amended or (iv) any lien arising by operation of law other than
under the Pennsylvania UCC (including without limitation any attachment or
execution lien) or other lien which does not require possession or control to
take priority over other security interests.
We are qualified to practice law in the Commonwealth of Pennsylvania. We do
not express any opinion herein concerning any laws of any jurisdiction other
than the laws of the Commonwealth of Pennsylvania, the General Corporation Law
of the State of Delaware and the federal laws of the United States of America.
Our opinions are limited to the specific issues addressed and are limited
in all respects to laws and facts existing on the date hereof. By rendering our
opinions, we do not undertake to advise you of any changes in such laws or facts
which may occur after the date hereof.
The opinions set forth herein are expressed solely for your benefit and for
the benefit of any other parties which may subsequently become Banks, assignees
or participants as permitted under Section 10.12 of the Agreement.
Very truly yours,
/s/ DECHERT PRICE & RHOADS
<PAGE>
[LETTERHEAD OF SAFEGUARD SCIENTIFICS, INC.APPEARS HERE]
Exhibit 6.1.19
--------------
April 15, 1999
Mr. Gregory M. Cote
PNC Bank, National Association, as Agent
1000 Westlakes Drive, Suite 200
Berwyn, Pennsylvania 19312
Dear Mr. Cote:
Mr. John N. Nickolas, Managing Director of Internet Capital Group, Inc, (the
"Company"), has asked me to write a letter explaining our intentions regarding
the Company's next round of financing.
The Company is currently commencing the process of raising funding through an
initial public offering of its stock. Safeguard Scientifics, Inc. ("Safeguard")
has been and remains a strong supporter of the Company. We understand that a
group of lenders (the "Banks"), led by PNC Bank, National Association, as agent
of the bank group, is considering providing the Company with a bridge loan and a
syndicated credit facility, subject, among other things, to Safeguard's
furnishing to the Banks this letter with respect to Safeguard's intention to
take action as provided below.
This letter will inform you that Safeguard intends to take such action as is
necessary to promptly cure any Event of Default that occurs under the Banks'
loan documents with the Company, in order to enable the Company to remain in
compliance and meet its obligations to the Banks under the loan documents.
In reliance on this letter, Safeguard requests that the Banks assist the Company
by making the Bridge loan and syndicated credit facility available to the
Company.
Sincerely,
/s/ Michael W. Miles
Michael W. Miles
Senior Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT 7.3.3
-------------
TO CREDIT AGREEMENT
-------------------
INTERNET CAPITAL GROUP
QUARTERLY PERFORMANCE REPORT
----------------------------
CURRENT INCOME STATEMENT INFORMATION
------------------------------------
Revenue
Operating Exp
Pretax
Other Income/Exp
Taxes
Net
Depr/Amor
EBITDA
______________________________________
PLAN INCOME STATEMENT INFORMATION
---------------------------------
Revenue
Operating Exp
Pretax
Other Income/Exp
Taxes
Net
Depr/Amor
EBITDA
______________________________________
CURRENT BALANCE SHEET INFORMATION
---------------------------------
Cash & Cash Equivalents
Current Assets
Current Liabs
Quick Ratio
Shareholders Equity
Intangibles
Tangible Net Worth
______________________________________
ICG COST BASIS
OTHER LARGE SHAREHOLDERS
BANKERS (LENDING)
<PAGE>
EXHIBIT 7.3.5
FORM OF
QUARTERLY COMPLIANCE CERTIFICATE
________________, [1999/2000]
PNC BANK, NATIONAL ASSOCIATION
as Agent for the Banks Party
to the Credit Agreement Referred to Below
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Ladies and Gentlemen:
I refer to the Credit Agreement, dated as of April 30, 1999 (as amended,
supplemented, restated or modified from time to time, the "Credit Agreement"),
among INTERNET CAPITAL GROUP, INC., a Delaware corporation ("ICG"), INTERNET
CAPITAL GROUP OPERATIONS, INC., a Delaware corporation ("ICG Operations"; ICG
and ICG Operations being referred to herein individually as a "Borrower" and
collectively as the "Borrowers"), the Banks party thereto and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as agent for the Banks under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings and all references to section numbers are to the
Credit Agreement. All calculations herein are performed according to the
conditions set forth in Section 1.3 of the Credit Agreement.
I, ________________________, [PRESIDENT/CHIEF EXECUTIVE OFFICER/CHIEF
FINANCIAL OFFICER TREASURER/ASSISTANT TREASURER] of the Administrative Borrower,
do hereby certify on behalf of the Borrower as of the fiscal [QUARTER/YEAR]
ended _________________, [1999/2000] (the "Report Date"), as follows:
1. MINIMUM LIQUIDITY (Section 7.2.16).
As of the Report Date, (A) the Borrowers' Cash, Cash Equivalents,
Borrowing Base Availability and Committed Subscriptions are $__________,
which is not less than (B) the minimum permitted level of Cash, Cash
Equivalents, Borrowing Base Availability and Committed Subscriptions which
is $__________ , such amounts computed as follows:
(A) Cash as of the Report Date: $_____________
(B) Cash Equivalents as of the Report Date: $_____________
(C) Borrowing Base Availability as of the Report Date: $_____________
[See Item C(l) from Borrowing Base Certficate]
(D) Committed Subscriptions as of the Report Date: $_____________
<PAGE>
2. MAXIMUM LEVERAGE RATIO (Section 7.2.17).
The ratio of (A) consolidated total indebtedness on the Report Date to (B)
Consolidated Tangible Net Worth for the four quarters ending on the Report
Date is _____ to 1.0, calculated as set forth below, which does not exceed
.50 to 1.0.
(A) Consolidated Total Indebtedness for the Borrowers and their
-------------------------------
respective Subsidiaries as of the Report Date, without duplication,
is computed as follows:
(i) Loans under the Credit Agreement $____________
(ii) Borrowed money and amounts raised under or
liabilities in respect of any note purchase
or acceptance credit facility $____________
(iii) Reimbursement obligations under any letter
of credit, currency swap agreement, interest
rate swap, cap, collar or floor agreement or
other interest rate management device $____________
(iv) Any other transaction (including forward sale
or purchase agreements, capitalized leases
and conditional sales agreements) having the
commercial effect of a borrowing of money
entered into by such Person to finance its
operations or capital requirements $____________
(v) All other obligations, indebtedness or
liabilities (and guaranties of any of the
foregoing) defined as "Indebtedness" in the
Credit Agreement $____________
(vi) Sum of Items (i) through (v) equals
consolidated total ____________ indebtedness
of the Borrowers and their respective
Subsidiaries on the Report Date $____________
(B) Consolidated Tangible Net Worth for the Borrowers and
their respective Subsidiaries as of the Report Date is
computed as follows, in each case determined on a
consolidated basis in accordance with GAAP: $____________
(i) total stockholders' equity for the Borrowers
and their respective Subsidiaries $____________
(ii) minority interest in net assets of each of
the Borrower's Subsidiaries $____________
(iii) intangible assets for the Borrowers and
their respective Subsidiaries $____________
<PAGE>
(iv) Sum of (x) Items (3) and (ii) minus (y) Item
(iii) equals Consolidated Tangible Net Worth
as of the Report Date $____________
3. INVESTMENTS (Section 7.1.15).
At no time did any Loan Party make an Investment in any Person, whether as
further Investment in a Person in which an Investment has previously been
made or as a new Investment in a new Person, in excess of $25,000,000 per
annum.
4. EVENTS OF DEFAULT OR POTENTIAL DEFAULT.
The Loan Parties are in compliance with all of the covenants under the
Credit Agreement and no event exists and is continuing which constitutes
an Event of Default or Potential Default.
5. REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Article V of the Credit
Agreement are true, in all material respects, on and as of the date hereof
with the same effect as though such representations and warranties had
been made on and as of the date hereof (except representations and
warranties which expressly relate solely to an earlier date or time, which
representations and warranties shall have been true and correct on and as
of the specific dates or times referred to therein).
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
_____ day of ________________, [1999/2000].
INTERNET CAPITAL GROUP, INC.
By:____________________________________
Name:_______________________________
Title:______________________________
<PAGE>
EXHIBIT 10.27
BREAKAWAY SOLUTIONS, INC.
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Option" or "Agreement") is dated as of January
6, 1999 by and between Gordon Brooks ("Optionee") and Internet Capital Group,
L.L.C. ("ICG").
In consideration of the premises and the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option: Representations and Warranties.
------------------------------------------------
(a) ICG hereby irrevocably grants to Optionee the right and option to
purchase all or any part of an aggregate of 284,195 shares (the "Option
Shares") of Series A Convertible Preferred Stock ("Series A Preferred
Stock") of Breakaway Solutions, Inc. ("Breakaway") presently owned by ICG,
on the terms and conditions set forth in this Agreement.
(b) ICG hereby represents and warrants to Optionee: (i) and ICG is
the sole and rightful owner of the Option Shares, free and clear of any and
all liens, claims and encumbrances of any nature whatsoever, (ii) that ICG
has the full and unrestricted right to grant the option hereunder without
violation of any law or regulation or rights of any third party, including
those of Breakaway or any shareholder or affiliate of Breakaway; and (iii)
that, upon exercise of all or any part of the option granted hereunder, ICG
shall have the full and unrestricted right to transfer the Option Shares to
Optionee without violation of any law or regulation or rights of any third
party, including those of Breakaway or any shareholder or affiliate of
Breakaway.
2. Term and Time of Exercise of Option: Option Price.
--------------------------------------------------
(a) This Option shall have a term of seven years, commencing on
January 6, 1999 (the "Grant Date"), and ending at the close of business on
January 6, 2006 (the "Termination Date"), except to the extent such term
may be reduced in accordance with Section 4 hereof. Upon the Termination
Date, or upon such earlier date as may be applicable pursuant to Section 4,
the Option shall terminate and become null and void.
(b) Subject to Section 4, the Option Shares shall be exercisable in
full upon the Grant Date.
(c) This Option shall be exercisable at the purchase price of $1,4167
per share (the "Option Price").
<PAGE>
3. Exercise of Option.
------------------
(a) Subject to the terms and conditions of this Agreement, this
Option may be exercised in whole or in part by delivery of a written notice
to ICG at its principal office, now located at 435 Devon Park Drive, Wayne,
Pennsylvania 19087, to the attention of Mr. Walter W. Buckley. Such notice
shall state the election to exercise the Option and the number of Option
Shares with respect to which it is being exercised, and shall be signed by
the person or persons exercising the Option. If the person exercising the
Option is not the Optionee, he or she shall also deliver with the notice
appropriate proof of his or her right to exercise the Option. No fractional
shares may be purchased. Full payment of the applicable Option Price shall
accompany such notice. Payment of the Option Price shall be by check
payable to the order of ICG.
(b) Upon receipt of notice of exercise and any necessary
documentation and the payment of the Option Price, ICG shall take or cause
to be taken such action as may be necessary to effect the transfer to
Optionee of certificates representing the Option Shares with respect to
which the Option has been exercised, including any action required to be
taken by Breakaway or any other third party. All shares so issued shall be
fully paid and nonassessable. This Option will remain in full force and
effect to the extent it has not been exercised or otherwise terminated.
(c) Optionee shall not be deemed for any purpose to be the owner of
any shares of the Series A Preferred Stock unless and until (i) the Option
shall have been exercised pursuant to the terms hereof and (ii) the shares
of Series A Preferred Stock with respect to which the Option was exercised
shall have been issued and delivered to the Optionee. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with
respect to such shares of Series A Preferred Stock.
4. Early Termination of Option Upon Termination of Relationship with ICG.
---------------------------------------------------------------------
(a) If Optionee's relationship with ICG is terminated for any reason
prior to the Termination Date for a reason other than death, Optionee may,
at any time within a period of ninety (90) days after the date of such
termination, exercise the Option to the extent (and only to the extent) the
Option was exercisable on the date that the relationship was terminated.
Upon the expiration of such ninety (90) day period, the Option shall, to
the extent not previously exercised or terminated, terminate and become
null and void.
(b) If Optionee's relationship with ICG is terminated prior to the
Termination Date due solely to the death of Optionee, Optionee's legal
representative may, at any time within a period of six (6) months after the
date of Optionee's death, exercise the Option to the extent (and only to
the extent) the Option was exercisable on the date of Optionee's death.
Upon the expiration of the foregoing six-month period, the Option shall, to
the extent not theretofore exercised or terminated, terminate and become
null and void.
2
<PAGE>
(c) Notwithstanding anything contained in the foregoing sections, in
no event may the Option be exercised after the Termination Date.
5. Adjustments to Option Shares.
----------------------------
The number of Option Shares and the Option Price shall be adjusted in
the event of any change in the outstanding Series A Preferred Stock of Breakway
by reason of any stock dividend or split, recapitalization, reclassification,
merger, consolidation, combination, or exchange of shares or other similar
corporate change. In the event of any liquidation, dissolution, merger or
consolidation of Breakway the Option shall continue in effect in accordance with
the terms of this agreement and Optionee shall be entitled to receive for each
Option Shares upon the exercise of the Option the same number and kind of stock,
securities, cash, property or other consideration per share that each
shareholder was entitled to receive in such liquidation, dissolution, merger or
consolidation.
6. Miscellaneous.
-------------
(a) The captions and section headings used herein for convenience
only, shall not be deemed part of this Agreement, and shall not in any way
restrict or modify the context and substance of any section or paragraph
hereof.
(b) This Agreement shall be governed by and construed in accordance
with, the laws of the Commonwealth of Pennsylvania without regard to its
choice or conflict of law rules.
(c) This Option is not intended to qualify as an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.
(d) The Optionee understands that the Option Shares have not been
registered under the Securities Act of 1933 and must be held indefinitely
unless they are subsequently registered under such Act or an exemption from
such registration is available upon disposition. Breakway may, but shall
not be required to register all or any part of the Option Shares.
(e) This Agreement shall inure to the benefit of and be binding upon
ICG's successors and assigns. All obligations imposed upon Optionee and all
rights granted to Optionee under this Agreement shall be binding upon and
inure to the benefit of Optionee's heirs, executors, Administrators, and
successors.
(f) This Agreement may be modified, amended, suspended or terminated,
and any terms or conditions may be waived, but only by a written instrument
executed by the parties hereto.
3
<PAGE>
(g) Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Agreement shall not be affected by such
holding and shall continue in full force in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Option as of the
day and year first above written.
INTERNET CAPITAL GROUP, L.L.C.
By: /s/ WALTER W. BUCKLEY, III
___________________________
President
By: /s/ GORDON BROOKS
___________________________
Optionee
4
<PAGE>
EXHIBIT 10.28
BENCHMARKING PARTNERS, INC.
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Option" or "Agreement") is dated as of January 1,
1997 by and between Christopher Greendale ("Optionee") and Internet Capital
Group, L.L.C. ("ICG").
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option: Representations and Warranties.
-----------------------------------------------
(a) ICG hereby irrevocably grants to Optionee the right and option to
purchase all or any part of an aggregate of 58,500 shares (the "Option Shares")
of Series A Preferred Stock ("Series A Preferred Stock") of Benchmarking
Partners, Inc. ("Benchmarking") presently owned by ICG, on the terms and
conditions set forth in this Agreement.
(b) ICG hereby represents and warrants to Optionee: (i) that ICG is the
sole and rightful owner of the Option Shares, free and clear of any and all
liens, claims and encumbrances of any nature whatsoever; (ii) that ICG has the
full and unrestricted right to grant the option hereunder without violation of
any law or regulation or rights of any third party, including those of
Benchmarking or any shareholder or affiliate of Benchmarking; and (iii) that,
upon exercise of all or any part of the option granted hereunder, ICG shall have
the full and unrestricted right to transfer the Option Shares to Optionee
without violation of any law or regulation or rights of any third party,
including those of Benchmarking or any shareholder or affiliate of Benchmarking.
2. Term and Time of Exercise of Option: Option Price.
-------------------------------------------------
(a) This Option shall have a term of ten years, commencing on January 1,
1997 (the "Grant Date"), and ending at the close of business on January 1, 2007
(the "Termination Date"), except to the extent such term may be reduced in
accordance with Sections 5 and 6 hereof. Upon the Termination Date, or upon such
earlier date as may be applicable pursuant to Sections 5 and 6, the Option shall
terminate and become null and void.
(b) Subject to Sections 5 and 6, the Option Shares shall become
exercisable in four cumulative equal annual increments beginning on the first
anniversary of the Grant Date. Thus, one-fourth (14,625) of the Option Shares
shall become exercisable one (1) year from the Grant Date; an additional one-
fourth (14,625) of the Option Shares shall become exercisable two (2) years from
the Grant Date; an additional one-fourth (14,625) of the Option Shares shall
become exercisable three (3) years from the Grant Date; and the remaining one-
fourth (14,625) of the Option Shares shall become exercisable four (4) years
from the Grant Date.
(c) This Option shall be exercisable at the purchase price of $2.85 per
share (the "Option Price").
<PAGE>
3. Exercise of Option.
------------------
(a) Subject to the terms and conditions of this Agreement, this Option may
be exercised in whole or in part by delivery of a written notice to ICG at its
principal office, now located at 435 Devon Park Drive, Wayne, Pennsylvania
19087, to the attention of Mr. Walter W. Buckley. Such notice shall state the
election to exercise the Option and the number of Option Shares with respect to
which it is being exercised, and shall be signed by the person or persons
exercising the Option. If the person exercising the Option is not the Optionee,
he or she shall also deliver with the notice appropriate proof of his or her
right to exercise the Option. No fractional shares may be purchased. Full
payment of the applicable Option Price shall accompany such notice. Payment of
the Option Price shall be by check payable to the order of ICG.
(b) Upon receipt of notice of exercise and any necessary documentation and
the payment of the Option Price, ICG shall take or cause to be taken such action
as may be necessary to effect the transfer to Optionee of certificates
representing the Option Shares with respect to which the Option has been
exercised, including any actions required to be taken by Benchmarking or any
other third party. All shares so issued shall be fully paid and nonassessable.
This Option will remain in full force and effect to the extent it has not been
exercised or otherwise terminated.
(c) Optionee shall not be deemed for any purpose to the owner of any
shares of the Series A Preferred Stock unless and until (i) the Option shall
have been exercised pursuant to the terms hereof and (ii) the shares of Series A
Preferred Stock with respect to which the Option was exercised shall have been
issued and delivered to the Optionee. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Series A Preferred Stock.
4. Early Termination of Option Upon Termination of Consulting Services
-------------------------------------------------------------------
Agreement.
---------
(a) If Optionee's relationship with ICG is terminated for any reason prior
to the Termination Date for a reason other than death, Optionee may, at any time
within a period of ninety (90) days after the date of such termination, exercise
the Option to the extent (and only to the extent) the Option was exercisable on
the date that the relationship was terminated. Upon the expiration of such
ninety (90) day period, the Option shall, to the extent not previously exercised
or terminated, terminate and become null and void.
(b) If Optionee's relationship with ICG is terminated prior to the
Termination Date due solely to the death of Optionee, Optionee's legal
representative may, at any time within a period of six (6) months after the date
of Optionee's death, exercise the Option to the extent (and only to the extent)
the Option was exercisable on the date of Optinee's death. Upon the expiration
of the foregoing six-month period, the Option shall, to the extent not
theretofore exercised or terminated, terminate and become null and void.
2
<PAGE>
(c) Notwithstanding anything contained in the foregoing sections, in no
event may the Option be exercised after the Termination Date.
5. Effect of Change in Control.
---------------------------
Notwithstanding anything in this Agreement to the contrary, in the event of
a Change in Control (as defined below) of ICG or Benchmarking, the Option, to
the extent not previously exercised or terminated on the date of such change in
Control, shall become immediately and fully exercisable. A Change in Control
means the occurrence of any of the following events: (i) if more than 50% of
the then outstanding equity ownership of ICG or Benchmarking, as applicable,
sold or otherwise transferred to an entity which was not a equity holder of ICG
or Benchmarking, as applicable, as of the day immediately after the Grant Date;
(ii) the merger or consolidation of ICG or Benchmarking, as applicable, with or
into another corporation (other than a merger or consolidation in which ICG or
Benchmarking, as applicable, is the surviving corporation and which does not
result in any capital reorganization or reclassification or other changes to
ICG's or Benchmarking's capitalization, as applicable; (iii) a sale or
disposition of all or substantially all of ICG's or Benchmarking's assets, as
applicable; or (iv) a plan of liquidation or dissolution of ICG or Benchmarking,
as applicable.
6. Adjustment to Option Shares.
---------------------------
The number of Option Shares and the Option Price shall be adjusted in the
event of any change in the outstanding Series A Preferred Stock of Benchmarking
by reason of any stock dividend or split, recapitalization, reclassification,
merger, consolidation, combination, or exchange of shares or other similar
corporate change. Subject to Section 5, in the event of any liquidation,
dissolution, merger or consolidation of Benchmarking the Option shall continue
in effect in accordance with the terms of this agreement and Optionee shall be
entitled to receive for each Option Share upon the exercise of the Option the
same number and kind of stock, securities, cash, property or other consideration
per share that each shareholder was entitled to receive in such liquidation,
dissolution, merger or consolidation.
7. Miscellaneous.
-------------
(a) The captions and section headings used herein are for convenience
only, shall not be deemed part of this Agreement, and shall not in any way
restrict or modify the context and substance of any section or paragraph hereof.
(b) This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Pennsylvania without regard to its choice or
conflict of law rules.
(c) This Option is not intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
(d) The Optionee understands that the Option Shares have not been
registered under the Securities Act of 1933 and must be held indefinitely unless
they are subsequently registered
3
<PAGE>
under such Act or an exemption from such registration is available upon
disposition. Benchmarking may, but shall not be required to, register all or any
part of the Option Shares.
(e) This Agreement shall inure to the benefit of and be binding upon ICG's
successors and assigns. All obligations imposed upon Optionee and all rights
granted to Optionee under this Agreement shall be binding upon and inure to the
benefit of Optionee's heirs, executors, Administrators, and successors.
(f) This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
(g) Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Option as of the day and year
first above written.
INTERNET CAPITAL GROUP, L.L.C.
By: /s/ WALTER W. BUCKLEY, III
______________________________
President
By: /s/ CHRISTOPHER GREENDALE
______________________________
Optionee
4
<PAGE>
EXHIBIT 10.29
SYNCRA SOFTWARE, INC.
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Option" or "Agreement") is dated as of August 1,
1998 by and between Michael H. Forster ("Optionee") and Internet Capital Group,
L.L.C. ("ICG").
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option: Representations and Warranties.
-----------------------------------------------
(a) ICG hereby irrevocably grants to Optionee the right and option to
purchase all or any part of an aggregate of 86,207 shares (the "Option Shares")
of Series A Convertible Preferred Stock ("Series A Preferred Stock") of Syncra
Software, Inc. ("Syncra") presently owned by ICG, on the terms and conditions
set forth in this Agreement.
(b) ICG hereby represents and warrants to Optionee: (i) that ICG is the
sole and rightful owner of the Option Shares, free and clear of any and all
liens, claims and encumbrances of any nature whatsoever; (ii) that ICG has the
full and unrestricted right to grant the option hereunder without violation of
any law or regulation or rights of any third party, including those of Syncra or
any shareholder or affiliate of Syncra; and (iii) that, upon exercise of all or
any part of the option granted hereunder, ICG shall have the full and
unrestricted right to transfer the Option Shares to Optionee without violation
of any law or regulation or rights of any third party, including those of Syncra
or any shareholder or affiliate of Syncra.
2. Term and Time of Exercise of Option: Option Price.
-------------------------------------------------
(a) This Option shall have a term of ten years, commencing on August 1,
1998 (the "Grant Date"), and ending at the close of business on August 1, 2008
(the "Termination Date"), except to the extent such term may be reduced in
accordance with Sections 5 and 6 hereof. Upon the Termination Date, or upon such
earlier date as may be applicable pursuant to Sections 5 and 6, the Option shall
terminate and become null and void.
(b) Subject to Sections 5 and 6, the Option Shares shall become
exercisable in four cumulative approximately equal annual increments beginning
on the first anniversary of the Grant Date. Thus, 21,552 Option Shares shall
become exercisable one (1) year from the Grant Date; an additional 21,552 Option
Shares shall become exercisable two (2) years from the Grant Date; an additional
21,552 Option shares shall become exercisable three (3) years from the Grant
Date; and the remaining 21,551 Option Shares shall become exercisable four (4)
years from the Grant Date.
<PAGE>
(c) This Option shall be exercisable at the purchase price of $2.32 per
share (the "Option Price").
3. Exercise of Option.
------------------
(a) Subject to the terms and conditions of this Agreement, this Option may
be exercised in whole or in part by delivery of a written notice to ICG at its
principal office, now located at 435 Devon Park Drive, Wayne, Pennsylvania
19087, to the attention of Mr. Walter W. Buckley. Such notice shall state the
election to exercise the Option and the number of Option Shares with respect to
which it is being exercised, and shall be signed by the person or persons
exercising the Option. If the person exercising the Option is not the Optionee,
he or she shall also deliver with the notice appropriate proof of his or her
right to exercise the Option. No fractional shares may be purchased. Full
payment of the applicable Option Price shall accompany such notice. Payment of
the Option Price shall be by check payable to the order of ICG.
(b) Upon receipt of notice of exercise and any necessary documentation and
the payment of the Option Price, ICG shall take or cause to be taken such action
as may be necessary to effect the transfer to Optionee of certificates
representing the Option Shares with respect to which the Option has been
exercised, including any actions required to be taken by Syncra or any other
third party. All shares so issued shall be fully paid and nonassessable. This
Option will remain in full force and effect to the extent it has no been
exercised or otherwise terminated.
(c) Optionee shall not be deemed for any purpose to be the owner of any
shares of the Series A Preferred Stock unless and until (i) the Option shall
have been exercised pursuant to the terms hereof and (ii) the shares of Series A
Preferred Stock with respect to which the Option was exercised shall have been
issued and delivered to the Optionee. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Series A Preferred Stock.
4. Early Termination of Option Upon Termination of Consulting Services
-------------------------------------------------------------------
Agreement.
---------
(a) If Optionee's relationship with ICG is terminated for any reason prior
to the Termination Date for a reason other than death, Optionee may, at any time
within a period of ninety (90) days after the date of such termination, exercise
the Option to the extent (and only to the extent) the Option was exercisable on
the date that the relationship was terminated. Upon the expiration of such
ninety (90) day period, the Option shall, to the extent not previously exercised
or terminated, terminate and become null and void.
(b) If Optionee's relationship with ICG is terminated prior to the
Termination Date due solely to the death of Optionee, Optionee's legal
representative may, at any time within a period of six (6) months after the date
of Optionee's death, exercise the Option to the extent (and only to the extent)
the Option was exercisable on the date of Optionee's death. Upon the
2
<PAGE>
expiration of the foregoing six-month period, the Option shall, to the extent
not theretofore exercised or terminated, terminate and become null and void.
(c) Notwithstanding anything contained in the foregoing sections, in no
event may the Option be exercised after the Termination Date.
5. Effect of Change in Control.
---------------------------
Notwithstanding anything in this Agreement to the contrary, in the event of
a Change in Control (as defined below) of ICG or Syncra, the Option, to the
extent not previously exercised or terminated on the date of such Change in
Control, shall become immediately and fully exercisable. A Change in Control
means the occurrence of any of the following events: (i) if more than 50% of
the then outstanding equity ownership of ICG or Syncra, as applicable, sold or
otherwise transferred to an entity which was not an equity holder of ICG or
Syncra, as applicable, as of the day immediately after the Grant Date; (ii) the
merger or consolidation of ICG or Syncra, as applicable, with or into another
corporation (other than a merger or consolidation in which ICG or Syncra, as
applicable, is the surviving corporation and which does not result in any
capital reorganization or reclassification or other changes to ICG's or Syncra's
capitalization, as applicable; (iii) a sale or disposition of all or
substantially all of ICG's or Syncra's assets, as applicable; or (iv) a plan of
liquidation or dissolution of ICG or Syncra, as applicable.
6. Adjustment to Option Shares.
---------------------------
The number of Option Shares and the Option Price shall be adjusted in the
event of any change in the outstanding Series A Preferred Stock of Syncra by
reason of any stock dividend or split, recapitalization, reclassification,
merger, consolidation, combination, or exchange of shares or other similar
corporate change. Subject to Section 5, in the event of any liquidation,
dissolution, merger or consolidation of Syncra the Option shall continue in
effect in accordance with the terms of this agreement and Optionee shall be
entitled to receive for each Option Share upon the exercise of the Option the
same number and kind of stock, securities, cash, property or other consideration
per share that each shareholder was entitled to receive in such liquidation,
dissolution, merger or consolidation.
7. Miscellaneous.
-------------
(a) The captions and section headings used herein are for convenience
only, shall not be deemed part of this Agreement, and shall not in any way
restrict or modify the context and substance of any section or paragraph hereof.
(b) This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Pennsylvania without regard to its choice or
conflict of law rules.
3
<PAGE>
(c) This Option is not intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
(d) The Optionee understands that the Option Shares have not been
registered under the Securities Act of 1933 and must be held indefinitely unless
they are subsequently registered under such Act or an exemption from such
registration is available upon disposition. Syncra may, but shall not be
required to, register all or any part of the Option Shares.
(e) This Agreement shall inure to the benefit of and be binding upon ICG's
successors and assigns. All obligations imposed upon Optionee and all rights
granted to Optionee under this Agreement shall be binding upon and inure to the
benefit of Optionee's heirs, executors, Administrators, and successors.
(f) This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
(g) Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Option as of the day and year
first above written.
INTERNET CAPITAL GROUP, L.L.C.
By: /s/ WALTER W. BUCKLEY, III
___________________________
President
By: /s/ MICHAEL H. FORSTER
___________________________
Optionee
4
<PAGE>
Exhibit 21.1
Subsidiaries of Internet Capital Group, Inc.
--------------------------------------------
Name Jurisdiction of Incorporation
- ---- -----------------------------
Internet Capital Group Operations, Inc. Delaware
Arbinet
Benchmarking Partners, Inc.
BidCom
Blackboard, Inc.
Breakaway Solutions, Inc.
Clear Commerce Corporation
Collabria, Inc.
CommerX Inc.
ComputerJobs.com, Inc.
Context Integration, Inc.
Deja.com, Inc.
e-Chemicals, Inc.
Entegrity Solutions
Internet Commerce Systems, Inc.
The Linkshare Corporation
MessageQuest, Inc.
ONVIA.com, Inc.
PrivaSeek, Inc.
Plansponsor Exchange
RapidAutoNet Corporation
SageMaker, Inc.
ServiceSoft Technologies, Inc.
Sky Alland Marketing, Inc.
SMART Technologies, Inc.
Syncra Software, Inc.
Universal Access, Inc.
US Interactive, Inc.
VerticalNet, Inc. Pennsylvania
Vivant! Corporation
Unless otherwise provided, each of the subsidiaries named above do
business under the same name.
<PAGE>
Exhibit 23.1
The Board of Directors
Internet Capital Group, Inc.
We consent to the use of our report included herein and to the references to our
firm under the headings "Selected Consolidated Financial Data" and "Experts" in
the prospectus.
KPMG LLP
Philadelphia, Pennsylvania
May 7, 1999
<PAGE>
Exhibit 23.3
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 11, 1999, except Note 1 as to which the date is
April 1, 1999, with respect to the financial statements of ComputerJobs.com,
Inc. included in the Registration Statement (Form S-1) and related Prospectus of
Internet Capital Group, Inc. for the registration of shares of its common stock.
Ernst & Young LLP
Atlanta, Georgia
May 7, 1999
<PAGE>
Exhibit 23.4
Consent of Independent Accountants
We hereby consent to the use in the Registration Statement on Form S-1 of
Internet Capital Group, Inc. of our report dated April 29, 1999, relating to the
financial statements of Syncra Software, Inc., which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 10, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 26,840,904
<SECURITIES> 0
<RECEIVABLES> 1,903,174
<ALLOWANCES> 61,037
<INVENTORY> 0
<CURRENT-ASSETS> 29,802,103
<PP&E> 1,922,557
<DEPRECIATION> 771,289
<TOTAL-ASSETS> 96,785,975
<CURRENT-LIABILITIES> 9,349,665
<BONDS> 351,924
0
0
<COMMON> 66,044
<OTHER-SE> 80,658,334
<TOTAL-LIABILITY-AND-EQUITY> 96,785,975
<SALES> 0
<TOTAL-REVENUES> 3,134,769
<CGS> 0
<TOTAL-COSTS> 4,642,528
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (924,588)
<INCOME-PRETAX> 16,455,149
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,898,928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,898,928
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
If you have any questions regarding the Directed Share Subscription Program,
please contact Safeguard's automated investor relations line at (888) SFE-1200.
Please do not call Internet Capital Group with any questions regarding this
program. Only Safeguard's automated investor relations line or representatives
of Safeguard will be able to answer your questions.
[LOGO OF INTERNET CAPITAL GROUP APPEARS HERE]
, 1999
Dear Safeguard Stockholder:
As you may know, we are undertaking an initial public offering of the
common stock of Internet Capital Group. We are permitting Safeguard Scientifics
to use its Directed Share Subscription Program to offer you the opportunity to
buy our common stock at our initial public offering price. We are offering a
total of shares of our common stock to Safeguard stockholders
under the program.
Safeguard has previously sent you materials describing in general terms how
the program works. Set forth below is a detailed description of how the program
will work in connection with our offering. Please review this description and
the attached prospectus carefully in deciding whether or not you wish to invest.
Who can subscribe
Only holders of Safeguard common stock as of , 1999
are eligible to participate in the program.
You may not transfer your right to subscribe
Your right to participate may not be transferred except by involuntary
operation of law such as death or certain dissolutions. There will be no trading
market for your right to subscribe.
Number of shares for which you may subscribe
To determine how many shares of our common stock you are eligible to
purchase, divide the number of shares of Safeguard common stock that you owned
as of , 1999 by ten and round up to the nearest whole number.
For example, if you held between 491 and 500 shares of Safeguard common stock as
of this date, you may subscribe for up to 50 shares of our common stock. You
would have to have had at least 501 shares of Safeguard common stock to be
eligible to subscribe for 51 shares of our common stock. You may not subscribe
for a fractional share of our common stock.
Minimum Subscription Size
The minimum subscription that we will accept for any account is for
shares of our common stock. Therefore, holders of fewer than
shares of Safeguard common stock as of , 1999 will not be able
to purchase our shares under the program. This limit applies to each of your
accounts, not the aggregate of all of your accounts. If as of ,
1999 you held shares of Safeguard common stock in one account and
another shares in a different account, we will not consider you to be
the owner of shares of Safeguard common stock. Since none of your
accounts contained at least shares of Safeguard common stock, you would
not be eligible to subscribe.
<PAGE>
You are under no obligation to subscribe, but if you subscribe for any
shares it must be for at least shares in each account. For example, if
you held shares of Safeguard common stock in a single account as of
, 1999 and you choose to purchase our shares under the program, you may purchase
between and shares.
Subscription Price
The price per share under the program will be the same price that all
investors will pay in our initial public offering. The price per share in the
initial public offering will be determined by negotiations between us and the
underwriters of our offering. The factors that we expect to consider in these
negotiations are described in the attached prospectus under the heading
"Underwriting." We currently anticipate that the offering price will be between
$ and $ per share. We will inform you of the initial public offering
price as described below under "How to Subscribe."
Stock Purchase Agreement with Safeguard Scientifics
We intend to enter into a Stock Purchase Agreement with Safeguard. This
agreement will provide that if all of our shares offered under
the program are not purchased by Safeguard stockholders, then Safeguard will
purchase the remaining shares at our initial public offering price. Safeguard
will be able to transfer all or part of its obligation to purchase these
remaining shares to third parties.
How to Subscribe
Enclosed with this letter and the attached copy of our preliminary
prospectus is a subscription form. The subscription form specifies the number of
our shares of common stock you may purchase in the program after we determine
the initial offering price. We expect to determine the initial public offering
price in late July to early August 1999, but various factors could hasten or
delay us. We will close the initial public offering and stop accepting
subscription forms four business days after we determine the initial public
offering price.
IN ORDER TO PURCHASE SHARES UNDER THE PROGRAM, YOU MUST ADHERE TO THE
FOLLOWING PROCEDURES:
. Subscription forms and payments will not be accepted until after we have
determined our initial public offering price. Any subscription forms or
payments received before then will be returned to you.
. Time will not permit us to notify you directly of our initial public offering
price and closing date. Instead, Safeguard will take the following actions:
. publicize the offering price and the closing date on Safeguard's Web site
(www.safeguard.com) and through a press release and other news media;
. make every effort to notify each broker, dealer, bank, trust company or
other nominee that holds shares on behalf of Safeguard stockholders of the
offering price and closing date;
. make available an automated investor relations line (888-SFE-1200) on a 24
hour basis; and
. through the Safeguard Web site, provide you with an opportunity to request
e-mail notification (either directly to you or your designated
representative).
You will have to monitor these media to know when to place your order and
deliver payment. Also, if you do not hold your Safeguard shares directly,
you will need to keep in close contact with your broker, bank or other
nominee that holds your Safeguard shares on your behalf since they will need
to process the subscription form for our shares and payment on your behalf.
. We will stop accepting orders under the program at 5:00 p.m. New York City
time on the fourth business day after we determine the initial public
offering price. Subscription forms and payments
2
<PAGE>
that have not been received by ChaseMellon Shareholder Services, L.L.C. by
this deadline will not be honored. For example, if we determine the initial
public offering price on a Thursday, ChaseMellon must receive all orders and
payments by 5:00 p.m. New York City time on the following Wednesday. This
deadline would be extended to the following Thursday if there were any
intervening holidays on which the Nasdaq National Market was closed.
. To place an order for our shares under this program, you will have to take
the following actions:
. If you hold your Safeguard shares in your own name, you must complete
and sign the subscription form and return it with full payment to
ChaseMellon. Your subscription form and payment must be received by
ChaseMellon before 5:00 p.m. New York City time on the fourth business
day after we determine the initial public offering price. We will not
honor any subscription form received by ChaseMellon after that date.
We suggest, for your protection, that you deliver your subscription form
and payment to ChaseMellon by overnight or express mail courier (or by
facsimile transmission if you intend to wire funds) as follows:
By Hand Delivery:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
120 Broadway - 13th Floor
New York, NY 10271
By Overnight or Express Mail Courier:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
85 Challenger Road
Mail Drop Reorg
Ridgefield Park, NJ 07660
By Facsimile Transmission and Wire Transfer:
ChaseMellon Shareholder Services, L.L.C.
Facsimile Transmission: (201) 329-_______
To confirm fax, call: (201) 296-_______
Wire instructions: Wire to: Mellon Bank, N.A.
ABA #________________
Credit: Internet Capital Group, Inc. Escrow Account
A/C #_________________
Attention: ______________________
Reference: [account number that appears on your
subscription form]
. If you hold your Safeguard shares through a broker, bank, trust company
or other nominee, then after we determine the initial public offering
price, you will have to contact the nominee that holds your Safeguard
shares if you wish to place an order and arrange for payment. WE CAUTION
YOU THAT BROKERS AND OTHER NOMINEES WILL REQUIRE SOME TIME TO PROCESS
SUBSCRIPTION FORMS FROM SAFEGUARD STOCKHOLDERS. THEREFORE, THEY MOST
LIKELY WILL STOP ACCEPTING SUBSCRIPTION FORMS EARLIER THAN THE FOURTH
BUSINESS DAY AFTER WE DETERMINE THE INITIAL PUBLIC OFFERING PRICE.
3
<PAGE>
. You must pay the subscription price by cash, check or money order in
U.S. dollars payable to "ChaseMellon Shareholder Services, L.L.C."
or by wire transmission. Until this offering has closed, your
payment will be held in escrow by ChaseMellon Shareholder Services,
L.L.C.
. We will provide to each broker, dealer, bank, trust company, clearing
corporation and other nominee who holds Safeguard shares for the account
of others copies of the preliminary and final prospectus to provide to
the beneficial owners. Each of those entities will be responsible for
providing you with a copy of the preliminary and final prospectus.
ChaseMellon Shareholder Services will mail the final prospectus to all
record holders of Safeguard common stock as of , 1999.
. Safeguard will decide all questions as to the validity, form and
eligibility of subscriptions (including times of receipt, beneficial
ownership and compliance with minimum exercise provisions). The
acceptance of subscription forms and the subscription price also will be
determined by Safeguard. Alternative, conditional or contingent
subscriptions will not be accepted. Safeguard reserves the absolute
right to reject any subscriptions not properly submitted. In addition,
Safeguard may reject any subscription if the acceptance of the
subscription would be unlawful. Safeguard also may waive any
irregularities or conditions in the subscription for our shares, and
Safeguard's interpretation of the terms and conditions of the program
will be final and binding.
. We are not obligated to give you notification of defects in your
subscription. We will not consider a subscription to be made until all
defects have been cured or waived. If your subscription is rejected,
your payment of the exercise price will be promptly returned by
ChaseMellon.
Cancellation of Initial Public Offering
We may cancel our initial public offering at any time up until the closing.
If the initial public offering is canceled, Safeguard will publicize the
cancellation on its Web site and through a press release and other news media.
The program gives you no rights to purchase shares of our common stock if we
cancel our initial public offering and any funds previously submitted by you
will be returned promptly.
Federal Tax Consequences
We believe that you will not be considered to have received a taxable
distribution of property as a result of your having the opportunity to
participate in this offering. Furthermore, we believe that, if the opportunity
were considered to be a property right, its value would be minimal, because your
opportunity is nontransferable, is of short duration and gives you only the
ability to purchase our common stock under the program at the same price as
other purchasers in our initial public offering. However, the Internal Revenue
Service is not bound by this position, and you are encouraged to consult with
your tax advisors about the federal, state and other tax consequences of the
program.
Stabilization
The underwriters of our initial public offering may engage in certain
transactions that stabilize the price of our common stock. We make no
representation as to the direction or magnitude of any effect that such
transactions may have on the price of our common stock.
Risk Factors
Investing in our common stock involves certain risks which are disclosed on
page of the attached preliminary prospectus.
Certain Restrictions
In managing the program, we and Safeguard will take reasonable steps to
comply with the laws of the different countries in which Safeguard stockholders
live. If compliance is too burdensome in one or more countries,
4
<PAGE>
Safeguard stockholders residing in such countries will not be offered the
opportunity to purchase our shares under the program.
* * *
If you have any questions regarding the Directed Share Subscription Program,
please contact Safeguard's automated investor relations line at (888) SFE-1200.
Please do not call Internet Capital Group with any questions regarding this
program. Only Safeguard's automated investor relations line or representatives
of Safeguard will be able to answer your questions.
Sincerely,
Walter W. Buckley
President and
Chief Executive Officer
5
<PAGE>
Exhibit 99.2
[Broker Dealer letter to accompany ICG letter delivered
in connection with Directed Share Subscription Program]
[Merrill Lynch & Co. letterhead]
, 1999
Dear Safeguard Stockholder:
In connection with the Safeguard Scientifics Directed Share Subscription
Program relating to the Internet Capital Group public offering, you are
receiving:
. a letter from Internet Capital Group explaining the Directed Share
Subscription Program, and
. a copy of Internet Capital Group's prospectus relating to its public
offering and the Directed Share Subscription Program.
Please direct any questions regarding the Directed Share Subscription
Program to Safeguard Scientifics' automated investor relations line at
(888) SFE-1200. Please do not call Internet Capital Group with any questions
regarding this program. Only Safeguard's automated investor relations line or
representatives of Safeguard will be able to answer your questions.
Very truly yours,
Merrill Lynch & Co.
<PAGE>
Exhibit 99.3
[LOGO OF INTERNET CAPITAL GROUP APPEARS HERE]
Dear Broker:
As you may know, we are undertaking an initial public offering of our shares of
common stock. We are permitting Safeguard Scientifics, Inc. to use its Directed
Share Subscription Program to offer Safeguard stockholders the opportunity to
buy shares of our common stock at the initial public offering price. The price
per share under this program will be the same price that all investors will pay
in our initial public offering.
The right to participate in this program may not be transferred. There will be
no trading market for this subscription right, and there will be no
oversubscription privilege.
If you have any questions regarding the Directed Share Subscription Program,
please call Safeguard's investor relations line at (888) SFE-1200. Please do
---------
not call Internet Capital Group regarding this program. Only Safeguard's
- -------------------------------------------------------
automated investor relations line or representatives of Safeguard will be able
to provide you with information regarding this program or answer any questions
you may have.
Under this program, each Safeguard stockholder will be eligible to purchase one
share of our common stock for every ten Safeguard shares owned of record on
_________, 1999. If the number of Safeguard shares owned by a stockholder is
not evenly divisible by ten, the number of shares a Safeguard stockholder is
entitled to purchase will be rounded up to the nearest whole number. You will
have until ________, 1999 to advise ChaseMellon Shareholder Services, L.L.C.,
the agent for this program, of your requirements for rounding purposes.
The minimum subscription we will accept is for ________ shares of our common
stock. Therefore, holders of fewer than _______ Safeguard shares as of
_________, 1999 will be unable to purchase our shares under this program. This
limit applies to each account, not the aggregate of all accounts, held by a
Safeguard stockholder. For example, if as of ______, 1999, a stockholder held
______ Safeguard shares in one account and another ______ Safeguard shares in a
different account, the stockholder will not be considered to be the owner of the
minimum number of Safeguard shares required to participate in this program and
will, therefore, not be eligible to subscribe.
<PAGE>
Preliminary prospectuses for distribution to Safeguard stockholders are being
distributed through Corporate Investor Communications, Attention: Processing
Department, 111 Commerce Road, Carlstadt, NJ 07072-2586, telephone number (201)
896-1900. You should provide a copy of the preliminary prospectus to each
Safeguard stockholder on whose behalf you hold shares.
Subscription forms and payment cannot be accepted until after we have determined
our initial public offering price.
Once our initial public offering price has been determined, Safeguard
Scientifics will take the actions outlined in the preliminary prospectus to
publicize the Subscription Price and the date by which you must respond to the
offer that is being made to Safeguard stockholders under this program.
Depository Trust Company has advised Safeguard Scientifics that they will notify
their participants electronically of the initial public offering price and the
expiration date for this program. Corporate Investor Communications will
provide you with final prospectuses for distribution to the Safeguard
stockholders who received a preliminary prospectus.
All subscription forms and payments must be received by ChaseMellon Shareholder
Services, L.L.C. by 5:00 p.m. New York City time on the fourth business day
after we have determined our initial public offering price. In order for your
customers to purchase shares under the program you will have to act promptly and
advise your customers to act promptly.
When you exercise this subscription privilege on behalf of beneficial owners of
common stock through Depository Trust Company's Automated Subscription Offer
Program, you will be required to certify that each beneficial owner for whom you
are subscribing meets the eligibility requirements of this program.
If you have any questions regarding the Directed Share Subscription Program,
please call Safeguard's investor relations line at (888) SFE-1200.
Sincerely,
Walter W. Buckley
President and
Chief Executive Officer
<PAGE>
Exhibit 99.4
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Account # Directed Share Subscription Program #
- ---------------------------------------------------
Maximum # of Shares of Internet Capital Group, Inc.
Available for Purchase
- ---------------------------------------------------
Record Date Shares of Safeguard Scientifics, Inc.
SAFEGUARD SCIENTIFICS, INC.
DIRECTED SHARE SUBSCRIPTION PROGRAM
- --------------------------------------------------------------------------------
INTERNET CAPITAL GROUP, INC.
SUBSCRIPTION FORM
The shareholder named below has the right to purchase, pursuant to the terms and
conditions of the Safeguard Scientifics, Inc. Directed Share Subscription
Program, the number of fully paid and non-assessable shares of common stock,
$.001 par value, of Internet Capital Group, Inc. indicated above at a
Subscription Price that will be determined as outlined below. THE DIRECTED
SHARE SUBSCRIPTION PROGRAM WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME ON THE
FOURTH BUSINESS DAY AFTER THE INITIAL PUBLIC OFFERING PRICE IS DETERMINED. As
described in the preliminary prospectus accompanying this Subscription Form,
each shareholder may subscribe for one share of Internet Capital Group common
stock for every ten shares of Safeguard Scientifics common stock held as of
, 1999 in any account, rounded upwards. The minimum subscription that we will
accept is for __ shares of Internet Capital Group per any individual account.
Therefore, holders will not be able to subscribe with respect to accounts
containing fewer than ___ shares of Safeguard common stock as of ,
1999. The right to participate in this program and purchase shares of Internet
Capital Group is nontransferable except involuntarily by operation of law (e.g.
death or certain dissolutions). Should an involuntary transfer occur by
operation of law, please contact ChaseMellon Shareholder Services, L.L.C., the
agent for the program, by telephone at 800-______________ for appropriate
instructions.
The Subscription Price per share under the program will be the same price that
all investors will pay in Internet Capital Group's initial public offering. The
price per share will be determined by negotiations between Internet Capital
Group and the underwriters of the offering. The factors to be considered in
these negotiations are described in the preliminary prospectus accompanying this
Subscription Form. Internet Capital Group currently anticipates that its
initial public offering price will be determined in late July to early August
1999 but various factors could hasten or delay this determination. Time will
not permit Internet Capital Group to notify you directly of the Subscription
Price and the expiration date for this offering, but Safeguard Scientifics will
take the actions described in the accompanying preliminary prospectus to
publicize this information.
No offer to buy securities can be accepted, and no part of the subscription
price can be received, until the initial public offering price has been
determined and the registration statement, of which the preliminary prospectus
accompanying this Subscription Form is a part, has been declared effective. Any
Subscription Forms or payments received before then will be returned to you.
All persons electing to subscribe for shares of Internet Capital Group, Inc.
must complete the Election to Purchase on the reverse side of this Subscription
Form and return the Subscription Form, together with full payment of the
Subscription Price, to ChaseMellon at the addresses on the back of this
Subscription Form. If you do not properly complete and sign this Subscription
Form, it may be rejected. The Subscription Form and full payment of the
Subscription Price must be received by ChaseMellon no later than 5:00 p.m. New
York City time on the fourth business day after the initial public offering
price is determined. ChaseMellon will not honor any subscriptions received
after that time and date. If you do not wish to subscribe for shares, you do
not need to return this Subscription Form. Before completing and returning this
Subscription Form, you are urged to read carefully the preliminary prospectus
mailed to you with this Subscription Form for a more complete explanation of the
offering and for information about Internet Capital Group. If Internet Capital
Group cancels the initial public offering, you will have no rights to purchase
shares of Internet Capital Group and any funds previously submitted by you will
be returned.
<PAGE>
You should not return this Subscription Form or deliver any payment until after
Internet Capital Group has determined its initial public offering price. Any
subscription forms or payment received before then will be returned to you.
Once the initial public offering price has been determined, Safeguard
Scientifics will take the actions described in the preliminary prospectus to
publicize the subscription price and the date by which you must respond to the
offer that has been made to you under this program.
If you wish to subscribe for shares at that time, you should complete this
Subscription Form and deliver payment of the subscription price to ChaseMellon.
ChaseMellon must receive the properly completed and signed Subscription Form and
full payment of the Subscription Price by 5:00 p.m. New York City Time, on the
fourth business day after Internet Capital Group determines its initial public
offering price. ChaseMellon will stop accepting Subscription Forms after that
time and date.
We suggest, for your protection, that you deliver the completed Subscription
Form and payment of the subscription price to ChaseMellon Shareholder Services,
L.L.C. by overnight or express mail courier. The addresses for ChaseMellon are
as follows:
By Hand Delivery: By Overnight Delivery/Express Mail Courier
- ----------------- ------------------------------------------
ChaseMellon Shareholder Services, ChaseMellon Shareholder Services,
L.L.C. L.L.C.
Attn: Reorganization Dept. Attn: Reorganization Dept.
120 Broadway, 13th Floor 85 Challenger Road, Mail Drop--Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
If you wish to pay the subscription price by wire transfer, please see the
Facsimile Transmission and Wire Transfer Instructions on page 3 of the letter
accompanying the preliminary prospectus.
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SUBSCRIPTION FORM--ELECTION TO PURCHASE
Subject to the terms and conditions of the Directed Share Subscription Program
described in the preliminary prospectus, receipt of which is hereby
acknowledged, the undersigned hereby elects to purchase shares of common stock
of Internet Capital Group, Inc. as indicated below.
<TABLE>
<CAPTION>
<S> <C>
Number of shares purchased/1/ ____________________(NOTE: __ share minimum required
in each account)/2/
Per Share Subscription Price $___________________
Payment enclosed/3/ $___________________
</TABLE>
/1/ If the amount enclosed is not sufficient to pay the Subscription Price for
all shares that are stated to be purchased, or if the number of shares
being purchased is not specified, the number of shares purchased will be
assumed to be the maximum number that could be purchased upon payment of
such amount. Any amount remaining after such division shall be returned to
the purchaser.
/3/ Any order for less than the minimum purchase requirement will be rejected.
/3/ The Subscription Price must be paid by cash, check or money order in U.S.
dollars representing "good funds" payable to ChaseMellon Shareholder
Services, L.L.C. The payment enclosed should equal the total shares
purchased multiplied by the per share subscription price.
Shares of common stock of Internet Capital Group, Inc. will be issued promptly
following the closing of the offering. Such shares will be registered in the
same manner set forth on the face of this Subscription Form. If your shares are
held in joint ownership, all joint owners must sign. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such. If signing for a corporation, an authorized officer must sign and provide
title. If signing for a partnership, an authorized partner must sign and
indicate title.
Please provide a telephone number at which you can be reached in the event that
we have questions regarding the information that you have supplied.
Daytime Telephone Number ( ) ____________________________________
Evening Telephone Number ( ) ____________________________________
(IF JOINTLY OWNED, BOTH MUST SIGN)
SIGNATURE(S): ________________________________________
Dated:___________________________, 1999
________________________________________
NOTE: The above signature(s) must correspond with the
name(s) as written upon the face of this
Subscription Form in every particular without
alteration.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-9
DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE--
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
Failure to complete this form may subject you to 31%
federal income tax withholding.
Part 1: PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER IN THE SPACE
PROVIDED AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
TIN__________________________________________________
Social Security or Employer Identification Number
Part 2: Check the box if you are awaiting a TIN [_]
Part 3: CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) the
number shown on this form is my correct taxpayer identification number (or a TIN
has not issued to me but I have mailed or delivered an application to receive a
TIN or intend to do so in the near future), (2) I am not subject to backup
withholding either because I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends or the IRS has notified me that I am
no longer subject to backup withholding, and (3) all other information provided
on this form is true, correct and complete.
Dated:___________________, 1999 SIGNATURE:___________________________________
You must cross out item (2) above if you have been notified by the IRS that you
are currently subject to backup withholding because of underreporting interest
or dividends on your tax return. However, if after being notified by the IRS
that you were subject to backup withholding, you received another notification
from the IRS that you are no longer subject to backup withholding, do not cross
out item (2).
