10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2001 Commission File No. 000-26363

Internet Pictures Corporation
(Exact name of registrant as specified in its charter)

Delaware	52-2213841
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3160 Crow Canyon Road
San Ramon, California 94583
(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: (925) 242-4002

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

6,699,201 shares of $0.001 par value common stock outstanding as of October 15, 2001

Page 1 of 26
Exhibit Index on Page 26

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
	Item 1. Consolidated Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis Of Financial Condition and Results Of Operations
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes In Securities And Use Of Proceeds
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission Of Matters To A Vote Of Security Holders
	Item 5. Other Information
	Item 6. Exhibits And Reports On Form 8-K
SIGNATURES
INDEX TO EXHIBITS FOR FORM 10-Q
VISUAL CONTENT SERVICES AGREEMENT
PURCHASE AGREEMENT - LEASEBACK
MASTER LEASE AGREEMENT

INTERNET PICTURES CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
INDEX

PART I—FINANCIAL INFORMATION			3
	Item 1.	Consolidated Financial Statements	3
	Item 2.	Management's Discussion and Analysis Of Financial Condition and Results Of Operations	14
PART II — OTHER INFORMATION			22
	Item 1.	Legal Proceedings	22
	Item 2.	Changes In Securities And Use Of Proceeds	22
	Item 3.	Defaults Upon Senior Securities	23
	Item 4.	Submission Of Matters To A Vote Of Security Holders	23
	Item 5.	Other Information	23
	Item 6.	Exhibits And Reports On Form 8-K	24
Signatures			25
Exhibit Index			26

2

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

INTERNET PICTURES CORPORATION
CONSOLIDATED BALANCE SHEETS

		December 31,			September 30,
		2000			2001
(In thousands, except share and per share amounts)		(1)			(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	5,322		$	15,320
Securities available-for-sale			5,713			—
Accounts receivable, net of allowance for doubtful accounts of $4,617 at December 31, 2000 and $2,888 at September 30, 2001(unaudited)			13,732			3,017
Inventory, net of reserve for obsolescence of $203 at December 31, 2000 and $479 at September 30, 2001(unaudited)			1,061			290
Prepaid expenses and other current assets			6,790			2,248
	Total current assets		32,618			20,875
Property and equipment, net			20,965			6,645
Other assets			1,555			—
Goodwill and other intangible assets			5,476			3,651
	Total assets	$	60,614		$	31,171
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	4,077		$	4,224
Accrued liabilities			16,682			11,584
Deferred revenue			9,077			1,765
Current portion of promissory note and obligations under capital leases			1,608			1,134
	Total current liabilities		31,444			18,707
Promissory note and obligations under capital leases, net of current portion			957			1,279
Commitments and contingencies (Note 9)			—			—
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value:			—			1
	Authorized: 5,001,100 at December 31, 2000 and September 30, 2001(unaudited)
	Issued and outstanding: 0 at December 31, 2000 and 1,115,080 at September 30, 2001(unaudited)
Class B common stock, $0.0001 par value:			—			—
	Authorized: 7,421,536 at December 31, 2000 and September 30, 2001(unaudited)
	Issued and outstanding: 404,173 at December 31, 2000 and 117,656 at September 30, 2001(unaudited)
Common stock, $0.001 par value:			6			7
	Authorized: 150,000,000 at December 31, 2000 and September 30, 2001(unaudited)
	Issued and outstanding: 5,946,402 at December 31, 2000 and 6,581,545 at September 30, 2001 (unaudited)
Additional paid-in capital			484,151			513,842
Notes receivable from stockholders			(2,349	)		(227	)
Unearned stock-based compensation			(3,361	)		(237	)
Accumulated deficit			(450,296	)		(501,565	)
Accumulated other comprehensive income (loss)			62			(636	)
	Total stockholders’ equity		28,213			11,185
	Total liabilities and stockholders’ equity	$	60,614		$	31,171

(1) The December 31, 2000 balances were derived from the audited financial statements.

See accompanying notes to the unaudited condensed consolidated financial statements.

3

INTERNET PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

		Three months ended						Nine months ended
		September 30,						September 30,
		2000			2001			2000			2001
In thousands, except per share data		(unaudited)						(unaudited)
Revenues:
Products		$	15,515		$	1,904		$	37,280		$	13,729
Services			1,703			4,672			3,710			10,333
			17,218			6,576			40,990			24,062
Cost of revenues:
Products			7,330			1,114			19,450			6,616
Services			810			1,286			1,474			3,951
			8,140			2,400			20,924			10,567
	Gross profit		9,078			4,176			20,066			13,495
Operating expenses:
Sales and marketing			22,279			2,834			60,778			17,760
Research and development			3,649			1,733			10,086			5,720
General and administrative			4,012			1,896			15,071			8,280
Stock-based compensation			(1,811	)		409			5,769			4,446
Goodwill amortization			19,330			609			38,040			1,825
Restructuring and impairment			—			1,462			—			11,655
Bad debt expense			197			300			431			3,513
Loss (gain) on disposal of assets			—			(114	)		—			1,655
Merger expenses			—			—			15,175			—
Total operating expenses			47,656			9,129			145,350			54,854
Other income(expense):
Interest expense, net			(9	)		(9,637	)		(216	)		(10,642	)
Other			875			44			2,964			(169	)
Loss before extraordinary items			(37,712	)		(14,546	)		(122,536	)		(52,170	)
Extraordinary gain			—			—			—			901
Net loss		$	(37,712	)	$	(14,546	)	$	(122,536	)	$	(51,269	)
Basic and diluted loss per common share:
Loss before extraordinary items		$	(6.24	)	$	(2.19	)	$	(22.38	)	$	(8.11	)
Extraordinary gain			—			—			—		$	0.14
Net loss (Note 3)		$	(6.24	)	$	(2.19	)	$	(22.38	)	$	(7.97	)

See accompanying notes to the unaudited condensed consolidated financial statements.

4

INTERNET PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Nine months ended
		September 30,
		2000			2001
In thousands		(unaudited)
Cash flows from operating activities:
Net loss		$	(122,536	)	$	(51,269	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			41,210			4,082
Provision for doubtful accounts receivable			1,158			(1,729	)
Loss on disposal of assets			—			1,655
Non-cash interest expense related to amortization of discount attributable to beneficial conversion feature of debt and warrants			—			10,000
Non-cash compensation expense and restructuring charges			5,769			6,639
Impairment loss			—			1,122
Extraordinary gain			—			(901	)
Changes in operating assets and liabilities:
	Accounts receivable		(12,677	)		5,600
	Inventory		365			771
	Prepaid expenses and other current assets		(308	)		1,830
	Other assets		504			1,199
	Accounts payable		(3,278	)		27
	Accrued expenses		6,891			(2,520	)
	Deferred revenue		2,012			331
	Net cash used in operating activities		(80,890	)		(23,163	)
Cash flows from investing activities:
Purchases of furniture and equipment			(11,389	)		(631	)
Proceeds from sale of assets			—			11,165
Purchases of securities available-for-sale			(44,522	)		—
Maturities of securities available-for-sale			69,058			6,000
Acquisitions, net of cash acquired			(8,290	)		—
	Net cash provided by investing activities		4,857			16,534
Cash flow from financing activities:
Repayments of capital lease obligation and notes payable			(10,364	)		(2,552	)
Proceeds from issuance of common stock			69,590			—
Net proceeds from preferred stock, convertible promissory note and warrants			—			20,974
Proceeds from exercise of stock options			1,759			25
Distribution to stockholders			—			(839	)
Notes payable to stockholders			(1,986	)		—
	Net cash provided by financing activities		58,999			17,608
Effect of exchange rate changes on cash			75			(981	)
Net increase (decrease) in cash and cash equivalents			(16,959	)		9,998
Cash and cash equivalents, beginning of period			18,627			5,322
Cash and cash equivalents, end of period		$	1,668		$	15,320

No income tax payments were made in either period presented. Interest paid for the nine months ending September 30, 2000 and 2001 was $206 and $229, respectively.

5

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements include the accounts of Internet Pictures Corporation and its wholly-owned subsidiaries, Interactive Pictures Corporation, Interactive Pictures UK Limited, Internet Pictures (Canada), Inc. and PW Technology, Inc. The consolidation of these entities will collectively be referred to as the Company or iPIX. All significant intercompany balances and transactions have been eliminated. We have prepared these financial statements, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our audited financial statements as of and for the period ended December 31, 2000. The information furnished reflects all adjustments which management believes are necessary for a fair presentation of our financial position as of September 30, 2001 and the results of our operations and our cash flows for the nine month periods ended September 30, 2000 and 2001. All such adjustments are of a normal recurring nature.

2. RESULTS OF OPERATIONS

The results of operations for the three month periods and the nine month periods ended September 30, 2000 and 2001 are not necessarily indicative of the results to be expected for the respective full years.

3. LOSS PER SHARE

LOSS PER SHARE BEFORE EXTRAORDINARY ITEM. We compute net loss per share in accordance with SFAS No.128, Earnings Per Share. Under the provisions of SFAS No. 128, basic and diluted net loss per share is computed by dividing the net loss applicable to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share excludes potential common shares if the effect is antidilutive. Potential common shares are composed of incremental shares of common stock issuable upon the conversion or exercise of potentially dilutive convertible preferred stock, stock options and warrants.

6

The following table sets forth the computation of basic and dilutive net loss per share for the periods indicated:

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2000			2001			2000			2001
In thousands, except per share data	(unaudited)						(unaudited)
NUMERATOR:
Loss before extraordinary item applicable to common stock	$	(37,712	)	$	(14,546	)	$	(122,536	)	$	(52,170	)
DENOMINATOR:
Weighted average shares outstanding		6,040			6,641			5,475			6,430
LOSS PER SHARE BEFORE EXTRAORDINARY ITEM:
Basic and diluted	$	(6.24	)	$	(2.19	)	$	(22.38	)	$	(8.11	)

The following table sets forth potential common stock excluded from the calculation of earnings per share as of September 30, 2001:

	Shares		Range of Exercise/Conversion Prices
	(in thousands)
Stock options		3,260	$1.42-$338.13
Convertible preferred stock		8,921	$2.50
Warrants		2,169	$2.50-$203.80

4. REVERSE STOCK SPLIT

On August 22, 2001 our shareholders approved a one-for-ten reverse stock split of all of our outstanding $0.001 par value common stock and our $0.0001 par value Class B common stock. The reduction of shares was subject to an increase to eliminate fractional interests resulting from the reverse stock split. No fractional shares of common stock were issued in connection with the reverse stock split, and cash was issued in lieu of any fractional shares. The reverse stock split was effective as of the close of market on August 22, 2001, and our common stock began trading on a reverse split basis on August 23, 2001. All share and per share data is presented to give effect to the retroactive application of the reverse stock split.

5. RESTRUCTURING AND IMPAIRMENT

During the first quarter of 2001, we recorded a restructuring charge of $1,878,000 consisting of expenses associated with a reduction in our workforce, lease obligations for vacated offices and a write down of abandoned office equipment of $1,122,000 to its net realizable value.

During the second quarter of 2001, we recorded a restructuring charge of $7,193,000 as a result of continued efforts to align our business strategy toward higher margin business.

7

The costs primarily consist of severance payments, termination benefits associated with a reduction in our work force, facility closure costs and other contractual obligations.

Included in the second quarter restructuring is $1,300,000 related to a severance liability for our former chief executive officer, James M. Phillips. At September 30, 2001 the unpaid liability is $900,000, which is to be paid in installments ending in September of 2003. As further consideration for Mr. Phillips’ separation agreement, we forgave a note receivable from Mr. Phillips and the related interest aggregating $2,193,000.

Included in the third quarter restructuring is $1,462,000 related to the write off of the unamortized portion of our directors’ and officers’ insurance policy. We were required to obtain a new policy due to the change in control of the company related to the closing of Tranche B of our announced capital raising transaction.

6. DISPOSAL OF ASSETS

A subsidiary of Homestore.com purchased certain assets from us pursuant to the terms of an acquisition agreement dated January 12, 2001. Under the terms of the acquisition agreement, the subsidiary of Homestore.com purchased certain computers, furniture, fixtures and equipment and certain sales contracts with residential real estate brokers and agents. We used these assets in our operations providing virtual tours of residential real estate properties. As part of the acquisition, Homestore.com’s subsidiary hired certain sales force and customer service personnel. The purchase price for these assets was $12,000,000 in cash, of which $155,000 was paid directly to a lessor for certain capital lease obligations, $7,454,000 was deposited into control accounts for deferred revenue obligations and the remainder, $4,391,000, was paid to us. We also granted Homestore.com’s subsidiary an exclusive domestic license of certain of our virtual tour technology for the residential real estate market.

In accordance with the January 12, 2001 purchase transaction, we agreed to negotiate one remaining residential real estate contract with RETT f/k/a National Reality Trust. Homestore.com’s subsidiary, RETT and we settled on March 3, 2001 the remaining obligation of the contract for which we received $1,935,500.

We recorded an extraordinary gain of $901,000 from the cash received from the January 12, 2001 agreement, resulting in the disposal of assets used to provide tours of residential real estate properties that were related to the pooling of Interactive Pictures Corporation and bamboo.com.

The remaining residential real estate related assets that were unrelated to the pooling of Interactive Pictures Corporation and bamboo.com were recorded as a loss on the disposal of assets of $1,655,000.

8

7. STOCK-BASED COMPENSATION

Stock-based compensation expense consists of the amortization of deferred compensation related to stock options granted to employees and others prior to our initial public offering with an exercise price below the deemed fair market value of our common stock on the date of grant, to the amortization of the fair value of warrants and options issued to non-employees and to the amortization of the fair value of restricted stock granted to employees. The related compensation is amortized over the vesting period of the options or stock grants. Expenses related to the warrants are amortized over the term of the agreements to which they relate. The following presents, for the periods indicated, the charges that have been excluded from the following captions:

	Three months ended						Nine months ended
	September 30,						September 30,
	2000			2001			2000		2001
In thousands	(unaudited)						(unaudited)
Cost of revenues	$	5		$	(9	)	$	90	$	95
Sales and marketing		(1,920	)		194			4,317		1,552
Research and development		59			110			964		650
General and administrative		45			114			398		2,149
	$	(1,811	)	$	409		$	5,769	$	4,446

8. DISTRIBUTION TO STOCKHOLDERS

On May 10, 2001, we issued one hundred ninety thousand (190,000) shares of common stock to six of our stockholders (the “Stockholders”) in exchange for the termination of certain obligations arising under (i) the merger agreement between the Company and TBI Imaging, Inc. and (ii) the merger agreement between the Company and Opticom Corporation, each dated March 16, 2000. Concurrent with the above transaction, we distributed all of the outstanding shares of Imaging Services Corporation, a wholly-owned subsidiary, and certain related assets to the Stockholders. As a result of the transaction, we recorded a distribution to stockholders of $2,979,000, which resulted in a reduction of additional paid in capital.

9. COMMITMENTS AND CONTINGENCIES

Please reference Legal Proceedings in our Annual Report on Form 10K for the fiscal year ended December 31, 2000 and our Quarterly Report on Form 10Q for the quarter ended June 30, 2001 for additional disclosures.

We are subject to claims in the ordinary course of business. Management believes the ultimate resolution of these matters will have no material impact our financial condition, results of operations or cash flows.

9

If the plaintiffs in any of these cases were to prevail in their action, our financial condition, results of operations and cash flows could be materially adversely affected

10. SEGMENTS

We have two reportable segments: 1) products and 2) services. The accounting policies of the segments are the same as those of the Company. We evaluate the performance of our segments and allocate resources to them based solely on evaluation of gross profit. There are no inter-segment revenues. We do not make allocations of corporate costs to the individual segments and do not identify separate assets of the segments in making decisions regarding performance or allocation of resources to them.

Information about reported segments is as follows:

		Three months ended				Nine months ended
		September 30,				September 30,
		2000		2001		2000		2001
In thousands		(unaudited)				(unaudited)
Revenues:
Products		$	15,515	$	1,904	$	37,280	$	13,729
Services			1,703		4,672		3,710		10,333
	Total	$	17,218	$	6,576	$	40,990	$	24,062
Cost of revenues:
Products		$	7,330	$	1,114	$	19,450	$	6,616
Services			810		1,286		1,474		3,951
	Total	$	8,140	$	2,400	$	20,924	$	10,567

Long-lived asset information by geographic area is as follows:

	December 31,		September 30,
	2000		2001
In thousands	(unaudited)
LONG-LIVED ASSETS:
Foreign	$	3,285	$	53
United States		17,680		6,592
	$	20,965	$	6,645

10

11. EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued Statement No. 141 (FAS 141), Business Combinations, and Statement No. 142 (FAS 142), Goodwill and Other Intangible Assets. FAS 141 supercedes APB 16, Business Combinations and primarily addresses the accounting for the cost of an acquired business (i.e., the purchase price allocation), including any subsequent adjustments to its cost.

The most significant changes made by FAS 141 involve the requirement to use the purchase method of accounting for all business combinations, thereby eliminating use of the pooling-of-interests method along with the establishment of new criteria for determining whether intangible assets acquired in a business combinations should be recognized separately from goodwill. FAS 141 is effective for all business combinations (as defined in the statement) initiated after September 30, 2001 and for all business combinations accounted for by the purchase method that are completed after September 30, 2001 (that is, the date of the acquisition is July 1, 2001 or later). We do not expect adoption of FAS 141 to have a material impact on our reported results of operations, financial position or cash flows.

FAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). FAS 142 supercedes APB 17, Intangible Assets. Under FAS 142, goodwill and indefinite lived intangible assets will no longer be amortized and will be tested for impairment at least annually at a reporting unit level. Additionally, the amortization period of intangible assets with finite lives is no longer limited to forty years. FAS 142 is effective for fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized in an entity’s statement of financial position at that date, regardless of when those assets were initially recognized. Early application is permitted for entities with fiscal years beginning after March 15, 2001 provided that the first interim period financial statements have not been issued previously. We do not expect adoption of FAS 142 to have a material impact on our financial position or cash flows. However, since the goodwill will no longer be amortized, it may have a material impact on our reported results of operations.

12. CONVERTIBLE PROMISSORY NOTE AND WARRANTS

On May 14, 2001, we executed definitive agreements with Image Investor Portfolio, a separate series of Memphis Angels, LLC for an investment by it into the Company. The agreement (the “Purchase Agreement”) called for the investment to occur in two tranches. Tranche A consisted of a $10.0 million convertible promissory note (the “Note”) that we issued to Image Investor Portfolio.

We also issued three warrants (Warrant 1, Warrant 2 and Warrant 3) to Image Investor Portfolio. Warrant 1 entitles the holder to subscribe for and purchase 150,000 shares of Series B Preferred Stock at $20 per share and is exercisable at any time before the expiration date of May 14, 2006. Warrant 2 entitles the holder to subscribe for and

11

purchase 100,000 shares of Series B Preferred Stock at $40 per share and is exercisable at any time before the expiration date of May 14, 2006. Warrant 3 entitles the holder to subscribe for and purchase 1,000,000 shares of Series B Preferred Stock at $20 per share and is exercisable at any time before the expiration date of August 29, 2002.

On September 26, 2001, we completed the transactions contemplated under Tranche B of the investment. At the close of the transaction, we issued 1,115,080 shares of our Series B Preferred Stock represented by the conversion of the $10.0 million Note, the conversion of $0.3 million of interest on the Note and $12.025 million in cash through the exercise of Warrant 3. The remainder of Warrant 3 expired. Proceeds of the investment will be used for sales and marketing efforts, research and development and general working capital purposes.

The $22.30 million of Series B Preferred Stock is convertible into our common stock at a price of $2.50 per share. The conversion price may be adjusted at the sixth month anniversary of the closing of Tranche B based on the preceding twenty-day average trading price of our common stock, but not below a price of $2.00 per share or above a price of $2.50 per share.

In accordance with APB 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants and EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features, the entire proceeds from the second quarter 2001 convertible promissory note, $10,000,000, were allocated to the warrants and the beneficial conversion feature of the Note based on a calculation using the Black-Scholes model. During the third quarter of 2001, we recorded $9,195,000 as interest expense related to the accretion of the Note to its face value as a result of the close of Tranche B and the subsequent conversion of the Note to our Series B Preferred Stock. Of the $9,195,000 of interest expense recorded in the third quarter, $7,192,000 was recorded upon conversion of the Note to Series B Preferred Stock.

On September 26, 2001, we filed an Amended Certificate of Designation of Series B Preferred Stock, which amended certain provisions that required mezzanine presentation of our Series B Preferred Stock, the beneficial conversion feature of the Note and the warrants. As a result, Warrant 1, Warrant 2, the beneficial conversion feature of the Note and the outstanding Series B Preferred Stock are reflected in the shareholders’ equity section of the accompanying financial statements.

13. CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with high quality financial institutions. Our accounts receivable are derived from revenue earned from clients located in the U.S. and abroad. We perform ongoing credit evaluations of our clients’ financial condition and we do not require collateral from our clients.

12

The following table summarizes the revenue from customers in excess of 10% of total revenues:

	Three months ended			Nine months ended
	September 30, 2001			September 30, 2001
Customer A		46	%		29	%
Customer B		27	%		17	%

At September 30, 2001 Customer B represents 15% of accounts receivable and holds 100,000 shares of our Series B Preferred Stock and a warrant for 60,000 shares. All amounts due from Customer B as of September 30, 2001, were collected in full during October 2001.

14. PURCHASE AGREEMENT-LEASEBACK

On September 26, 2001, we sold certain assets totaling $2,474,000 to a stockholder and agreed to leaseback those assets over a three-year period from that stockholder. The net book value and the fair value of the assets equaled the sale price, resulting in no gain or loss on the sale of the assets. The monthly lease payments are approximately $97,000 in years one and two and approximately $21,000 in year three. The lease is accounted for as a capital lease in accordance with SFAS No. 13, Accounting for Leases. In order to sell the assets to the stockholder, we paid off the remaining payments under an existing capital lease of the assets from a third party during the third quarter.

13

Item 2. Management’s Discussion and Analysis Of Financial Condition and Results Of Operations

OVERVIEW

Internet Pictures Corporation (iPIX) provides mission critical imaging software and services solutions to facilitate commerce, communication and entertainment. The Company’s solutions include the capture, processing, management and distribution of images and related data. iPIX solutions create and manage a rich variety of media including still images, 360° by 360° immersive images, video, animation, text and audio. The Company’s clients are those who rely heavily on images to support their business and/or are generating revenue with images. iPIX clients span a broad array of industries including real estate, auctions and classifieds, travel, government, security and observation, automotive, sports and entertainment. These clients include market leaders such as eBay, CNN, Discovery and Homestore.com.

The Company’s solutions are centered on its two technologies: iPIX Immersive Imaging; and iPIX Rimfire Imaging.

iPIX Immersive Imaging

iPIX provides the leading immersive 360-degree images for real estate, e-commerce, security and observation, travel and hospitality, and entertainment. iPIX immersive images offer viewers the opportunity to navigate a spherical scene (still or video) on their own terms, looking in any direction, and zooming in and out as they choose. This interactive imaging experience offers the most complete field of view to communicate the most information, increases buyer confidence and adds a new dimension to imaging.

iPIX Rimfire Imaging

Rimfire is an open imaging platform that allows business-to-business and business-to-consumer sites to quickly and easily capture, manage and distribute media from site viewers to live Web pages. With Rimfire, end-users can easily publish still photos and other rich media to the Web with simple drag-and-drop image submission. Rimfire also offers enhanced features for automatic generation of slide shows from multiple photos, NetCards using submitted images and built-in size, crop and rotate tools. For example, with Rimfire, eBay is able to allow their users to instantly add photos directly to their listings from the “Sell Your Item” form online. The photos are automatically sized, formatted and delivered to the eBay Web site to the standards pre-set by eBay.

Utilizing our Rimfire infrastructure products and services, we provide end-to-end solutions to customers who request digital media content to be hosted and distributed to the Internet. Revenues associated with the hosting services are recognized ratably over the hosting and distribution term. We also generate revenues from our sale of digital media content as well as iPIX keys and iPIX kits. Sales of immersive images, iPIX kits and iPIX keys are recognized upon delivery to the customer. We calculate a provision for returns based on historical experience and make appropriate reserves at the time revenues are recognized. To date, returns have been insignificant.

14

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the percent relationship to total revenues of select items in our statements of operations.

	Three months ended						Nine months ended
	September 30,						September 30,
	2000			2001			2000			2001
	(unaudited)						(unaudited)
Revenues		100	%		100	%		100	%		100	%
Cost of revenues		47	%		36	%		51	%		44	%
Gross profit		53	%		64	%		49	%		56	%
Operating expenses:
Sales and marketing		130	%		43	%		148	%		74	%
Research and development		21	%		26	%		25	%		24	%
General and administrative		25	%		29	%		38	%		34	%
Stock-based compensation		(11	)%		6	%		14	%		18	%
Goodwill amortization		112	%		9	%		93	%		8	%
Restructuring and impairment		0	%		22	%		0	%		48	%
Bad debt expense		0	%		5	%		0	%		15	%
Loss on disposal of assets		0	%		(1	)%		0	%		7	%
Merger expenses		0	%		0	%		37	%		0	%
Total operating expenses		277	%		139	%		355	%		228	%
Loss from operations		(224	)%		(75	)%		(306	)%		(172	)%
Other income (expense), net		5	%		(146	)%		7	%		(45	)%
Loss before extraordinary items		(219	)%		(221	)%		(299	)%		(217	)%
Extraordinary gain		0	%		0	%		0	%		4	%
Net loss		(219	)%		(221	)%		(299	)%		(213	)%

15

Quarter Ended September 30, 2001 Compared to the Quarter Ended September 30, 2000

Revenues. Total revenues decreased to $6.6 million in the third quarter of 2001, compared to $17.2 million in the third quarter of 2000, a decrease of $10.6 million or 62%. This decrease was due primarily to a decrease of $11.4 million in sales of full service virtual tours off-set by an increase of $0.8 million in non-real estate related revenues. As part of the sale of assets to Homestore.com during the first quarter of 2001, we no longer directly sell full service virtual tours or iPIX keys to customers in the residential real estate market. Instead, we have an agreement with Homestore.com whereby we provide certain processing, hosting and distribution services for Homestore.com and receive transaction fees and royalties. The third quarter 2001 revenues of $6.6 million included $6.1 million from the sale of our technology products and services and $0.5 million related to full service virtual real estate tours. We do not expect to generate significant future revenues from the sale of virtual real estate tours in the US residential markets.

Cost of Revenues. Cost of revenues consists of our direct expenses associated with the processing, hosting and distribution of digital content and the costs of the digital camera and related components included in an iPIX kit. Cost of revenues decreased to $2.4 million in the third quarter of 2001, compared to $8.1 million in the third quarter of 2000, a decrease of $5.7 million or 71%. Cost of revenues as a percentage of total revenues decreased to 36% in the third quarter of 2001 from 47% in the third quarter of 2000. This decrease was the result of a lower volume of virtual tour deliveries and the increase in higher margin Rimfire based revenue.

Sales and Marketing. Sales and marketing expenses consist primarily of salaries for marketing, sales, and business development personnel. Sales and marketing expenses also include commissions and related benefits for sales personnel and consultants, traditional advertising and promotional expenses. Sales and marketing expenses decreased to $2.8 million in the third quarter of 2001, compared to $22.3 million in the third quarter of 2000, a decrease of $19.5 million or 87%. This decrease is due primarily to our decision to sell more of our products and services through various third parties, such as equipment manufacturers, and become less reliant upon a worldwide direct sales force. As a result, we had a significant reduction in our sales force and eliminated our field operations personnel. In addition, we eliminated costs relating to technology access and sponsorship fees and decreased advertising and branding expenses.

Research and Development. Research and development expenses consist primarily of personnel costs. Research and development expenses decreased to $1.7 million in the third quarter of 2001, compared to $3.6 million in the third quarter of 2000, a decrease of $1.9 million or 53%. This decrease was due primarily to decreased personnel and related costs as a result of our reduction in work force and our exit from the full service real estate business.

General and Administrative. General and administrative expenses consist primarily of salaries and related benefits for administrative and executive staff and fees for

16

professional services. General and administrative expenses decreased to $1.9 million in the third quarter of 2001, compared to $4.0 million in the third quarter of 2000, a decrease of $2.1 million or 53%. This decrease was due primarily to a decrease in personnel and related costs and fees related to professional services.

Stock-based Compensation. Stock-based compensation expense consists of the amortization of deferred compensation related to stock options granted to employees and others prior to our initial public offering with an exercise price below the deemed fair market value of our common stock on the date of grant. In addition, it also includes the amortization of the fair value of warrants and options issued to non-employees and restricted stock granted to employees. The related compensation is amortized over the vesting period of the options or stock grants. Expenses related to the warrants are amortized over the term of the agreements to which they relate. Stock-based compensation expense increased to $0.4 million in the third quarter of 2001, compared to $(1.8) million in the third quarter of 2000, an increase of $2.2 million or 123%. The credit in the third quarter of 2000 was primarily related to the reduction in our stock price during that quarter.

Goodwill Amortization. The amortization consists of goodwill associated with the acquisitions during the second quarter of 2000. Amortization of goodwill was $0.6 million in the third quarter 2001, compared to $19.3 million in the third quarter of 2000, a decrease of $18.7 million or 97%. The decrease is related to the impairment charge taken in the fourth quarter of 2000 of $176.8 million.

Restructuring and Impairment Charges. Included in the third quarter restructuring is $1,462,000 related to the write off of the unamortized portion of our directors’ and officers’ insurance policy. We were required to obtain a new policy due to the change in control related to the closing of Tranche B.

Bad Debt Expense. Bad debt expense was $0.3 million in the third quarter of 2001, compared to $0.2 million in the third quarter of 2000, an increase of $0.1 million.

Other Income (Expense). Other income (expense) consists primarily of interest earned on cash and investments, interest paid on capital leases, interest accrued for the convertible promissory note and the accretion of the promissory note towards its face value. Other income (expense) decreased to $(9.6) million in the third quarter of 2001, compared to $(0.0) million in the third quarter of 2000. This decrease was due primarily to interest expense related to the accretion of the promissory note and decreased earnings on our cash investments related to a lower cash balance. In the third quarter of 2001, we recorded non-cash interest expense of $9.2 million related to the accretion of the promissory note to its face value.

17

Nine months Ended September 30, 2001 Compared to the Nine months Ended September 30, 2000

Revenues. Total revenues decreased to $24.1 million in the nine months ended September 30, 2001, compared to $41.0 million in the nine months ended September 30, 2000, a decrease of $16.9 million or 41%. This decrease was due primarily to a decrease of $18.7 million in sales of full service virtual tours off-set by an increase of $1.8 million in non-real estate related revenues. For the nine months ended September 30, 2001, revenues of $24.1 million included $16.5 million from the sale of our technology products and services and $7.6 million related to full service virtual real estate tours. We do not expect to generate significant future revenues from the sale of virtual real estate tours in the US residential markets. Instead, we have an agreement with Homestore.com whereby we provide certain processing, hosting and distribution services for Homestore.com and receive transaction fees and royalties.

Cost of Revenues. Cost of revenues decreased to $10.6 million in the nine months ended September 30, 2001, compared to $20.9 million in the nine months ended September 30, 2000, a decrease of $10.3 million or 49%. Cost of revenues as a percentage of total revenues decreased to 44% in the first nine months of 2001 from 51% in the first nine months of 2000. This decrease was the result of a lower volume of virtual tour deliveries and the increase in higher margin Rimfire based revenues.

Sales and Marketing. Sales and marketing expenses decreased to $17.8 million in the nine months ended September 30, 2001, compared to $60.8 million in the nine months ended September 30, 2000, a decrease of $43.0 million or 71%. This decrease is due primarily to our decision to sell more of our products and services through various third parties, such as equipment manufacturers, and become less reliant upon a worldwide direct sales force. As a result, we had a significant reduction in our sales force and eliminated field operations personnel. In addition, we eliminated costs relating to technology access and sponsorship fees and decreased advertising and branding expenses.

Research and Development. Research and development expenses decreased to $5.7 million in the nine months ended September 30, 2001, compared to $10.1 million in the nine months ended September 30, 2000, a decrease of $4.4 million or 43%. This decrease was due primarily to decreased personnel and related costs as a result of our reduction in work force and our exit from the full service real estate business.

General and Administrative Expenses. General and administrative expenses decreased to $8.3 million in the nine months ended September 30, 2001, compared to $15.1 million in the nine months ended September 30, 2000, a decrease of $6.8 million or 45%. This decrease was due primarily to a decrease in personnel and related costs and fees for professional services.

Stock-based Compensation. Stock-based compensation expense decreased from $4.4 million in the nine months ended September 30, 2001, compared to $5.8 million in the

18

nine months ended September 30, 2000, a decrease of $1.3 million or 23%. The decrease was due primarily to the decrease in our stock price.

Goodwill Amortization. Amortization of intangible assets was $1.8 million in the nine months ended September 30, 2001, compared to $38.0 million in the nine months ended September 30, 2000, a decrease of $36.2 million or 95%. The decrease is related to the impairment charge taken in the fourth quarter of 2000 of $176.8 million.

Merger Expenses. Merger expenses consist of costs incurred as a result of the merger of Interactive Pictures and bamboo.com that occurred on January 19, 2000. Merger expenses in the nine months ended September 30, 2000 were $15.2 million.

Extraordinary Gain. The extraordinary gain during the first nine months of 2001 of $0.9 million results from the sale of assets used to provide residential real estate virtual tours that were related to the pooling of Interactive Pictures Corporation and bamboo.com. The sale transaction took place within a year of the 2000 pooling transaction and accordingly, the gain from the sale is considered to be extraordinary.

Loss on Disposal of Assets. The $1.7 million loss during the first nine months of 2001 on the disposal of assets is the result of the sale of assets used to provide residential real estate virtual tours that consisted of the remaining residential real estate assets that were unrelated to the 2000 pooling of Interactive Pictures Corporation and bamboo.com.

Restructuring and Impairment Charges. During the nine months ended September 30, 2001, we recorded a restructuring charge of $11.7 million consisting of expenses associated with a reduction in our workforce, lease obligations for vacated office and other contractual obligations. In addition to the restructuring, we wrote down abandoned office equipment and other assets of $1.1 million to their net realizable value.

Included in the restructuring is $1.3 million related to a severance liability with our former chief executive officer, James M. Phillips. At September 30, 2001 the unpaid liability is $0.9 million, which is to be paid in installments ending in September of 2003. As further consideration for Mr. Phillips’ separation agreement, we forgave a note receivable from Mr. Phillips and the related interest aggregating $2.2 million.

Bad Debt Expense. Bad debt expense was $3.5 million in the nine months ended September 30, 2001, compared to $0.4 million in the first half of 2000. The increase in bad debt expense was the result of non-payment by customers, now in financial difficulty, and our belief that certain former customers will not pay all of their obligations.

Other Income (Expense). Other income (expense) decreased to $(10.8) million in the nine months ended September 30, 2001, compared to $2.7 million in the nine months ended September 30, 2000, a decrease of $13.6 million. This decrease was due primarily to interest expense related to the accretion of the promissory note and decreased earnings on our cash investments related to a lower cash balance. In the nine months ended

19

September 30, 2001, we recorded non-cash interest expense of $10.0 million related to the accretion of the promissory note to its face value.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations through our registered public offerings, the private placements of capital stock, a convertible debenture, a convertible promissory note and warrant and options exercises. At September 30, 2001, we had $15.3 million of cash and cash equivalents.

On May 14, 2001, we executed definitive agreements with Paradigm Capital Partners and Memphis Angels, LLC for an investment by the parties into the Company. The agreement called for the investment to occur in two tranches. Tranche A consisted of $10.0 million in convertible notes and warrants. On September 26, 2001, we completed the Tranche B transactions of the investment. At the close of the Tranche B transaction, we issued 1,115,080 shares of our Series B Preferred Stock represented by the conversion of the $10.0 million Note, the conversion of $276,615 of interest on the Note and $12.025 million in cash through the exercise of Tranche B warrants.

Net cash used in operating activities was $23.2 million for the nine months ended September 30, 2001 and $80.9 million for the nine months ended September 30, 2000. Net cash used for operating activities in each of these periods is primarily a result of net losses offset by changes in net operating assets. Our net loss for the nine month periods ended September 30, 2001 and 2000 included $4.1 million and $41.2 million, respectively, for non-cash depreciation and amortization.

Net cash provided by investment activities was $16.5 million for the nine months ended September 30, 2001 and $4.9 million for the nine months ended September 30, 2000. Net cash provided by investing activities was related to the net purchases and maturities of short-term investments, the acquisition of computer software and hardware and other equipment and the proceeds from the sale of assets.

Net cash provided by financing activities was $17.6 million for the nine months ended September 30, 2001 and $59.0 million for the nine months ended September 30, 2000. The net cash provided by financing activities for these periods was due primarily to the sale of shares of our common and preferred stock, the exercise of stock options and the issuance of a convertible promissory note, off-set by the repayment of capital lease obligations and other notes payable.

Although we have no material commitments for capital expenditures, we anticipate that the rate of capital expenditures and other expenses consistent with our operations, personnel and marketing activities will be a material use of our cash resources for the foreseeable future. We may also use our cash resources to acquire or license technology, products or businesses related to our current business. We believe that the issuance of our third quarter 2001 preferred stock, our second quarter 2001 convertible promissory note and warrants, together with existing cash and cash equivalents, will be sufficient to

20

meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the FAB issued Statement No. 141 (FAS 141), Business Combinations, and Statement No. 142 (FAS142), Goodwill and Other Intangible Assets. FAS 141 supercedes APB 16, Business Combinations and primarily addresses the accounting for the cost of an acquired business (i.e., the purchase price allocation), including any subsequent adjustments to its cost.

The most significant changes made by FAS 141 involve the requirement to use the purchase method of accounting for all business combinations, thereby eliminating use of the pooling-of-interests method along with the establishment of new criteria for determining whether intangible assets acquired in a business combinations should be recognized separately from goodwill. FAS 141 is effective for all business combinations (as defined in the statement) initiated after September 30, 2001 and for all business combinations accounted for by the purchase method that are completed after September 30, 2001 (that is, the date of the acquisition is July 1, 2001 or later). We do not expect adoption of FAS 141 to have a material impact on our reported results of operations, financial position or cash flows.

FAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). FAS 142 supercedes APB 17, Intangible Assets. Under FAS 142, goodwill and indefinite lived intangible assets will no longer be amortized and will be tested for impairment at least annually at a reporting unit level. Additionally, the amortization period of intangible assets with finite lives is no longer limited to forty years. FAS 142 is effective for fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized in an entity’s statement of financial position at that date, regardless of when those assets were initially recognized. Early application is permitted for entities with fiscal years beginning after March 15, 2001 provided that the first interim period financial statements have not been issued previously. We do not expect adoption of FAS 142 to have a material impact on our financial position or cash flows. However, since the goodwill will no longer be amortized, it may have a material impact on our reported results of operations.

INFLATION

Inflation has not had a significant impact on our operations to date.

FORWARD-LOOKING STATEMENTS

This quarterly report contains statements about future events and expectations which are characterized as forward-looking statements. Forward-looking statements are based on our management’s beliefs, assumptions and expectations of our future economic

21

performance, taking into account the information currently available to them. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Factors that could contribute to these differences include those discussed in “Risk Factors” of our registration statement on Form S-3 filed with the SEC on October 16, 2001.

The words “believe”, “may”, “will”, “should”, “anticipate”, “estimate”, “expect”, “intends”, “objective” or similar words or the negatives of these words are intended to identify forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Please reference Legal Proceedings in our Annual Report on Form 10K for the fiscal year ended December 31, 2000 and our Quarterly Report on Form 10Q for the quarter ended June 30, 2001 for additional disclosures.

We are subject to claims in the ordinary course of business. Management believes the ultimate resolution of these matters will have no material impact our financial condition, results of operations or cash flows.

If the plaintiffs in any of these cases were to prevail in their action, our financial condition, results of operations and cash flows could be materially adversely affected.

Item 2. Changes In Securities And Use Of Proceeds

On May 14, 2001, we executed definitive agreements with Image Investor Portfolio, a separate series of Memphis Angels, LLC for an investment by it into the Company. The agreement called for the investment to occur in two tranches (the “Purchase Agreement”). Tranche A consisted of a $10.0 million convertible promissory note (the “Note”) that we issued to Image Investor Portfolio.

On September 26, 2001, we completed the Tranche B transactions of the investment. At the close of the transaction, we issued 1,115,080 shares of our Series B Preferred Stock represented by the conversion of the $10.0 million Note, the conversion of $0.3 million of interest on the Note and $12.025 million in cash through the exercise of Tranche B warrants. The remainder of the Tranche B warrants expired. The Series B Preferred Stock was issued to Image Investor Portfolio and certain other accredited investors. Proceeds of the investment will be used for sales and marketing efforts, research and development and general working capital purposes.

22

The $22.3 million of Series B Preferred Stock is convertible into our common stock at a price of $2.50 per share. The conversion price may be adjusted at the sixth month anniversary of the closing of Tranche B based on the preceding twenty-day average trading price of the Company’s common stock, but not below a price of $2.00 per share or above a price of $2.50 per share.

Pursuant to the terms of an Amended Certificate of Designation of Series B Preferred Stock, filed with the Secretary of State of the State of Delaware on September 26, 2001, the 2001 Series B Preferred Stock bears dividends at an annual rate of 8% of the original issue price payable quarterly in cash or as an increase to the Series B Preferred Stock liquidation preference. In addition to significant matters requiring a class vote, Series B Preferred Stock is entitled to vote on matters submitted to holders of common stock on an as-converted basis and, so long as at least 25% of the shares of the Series B Preferred Stock issued in connection with the Tranche A and Tranche B closings is outstanding, is entitled to elect four (4) members of the Board of Directors of the Company. These modifications to the Series B Preferred Stock made pursuant to the Amended Certificate of Designation limit the rights of the current holders of our common stock. For example, the common stock holders will be entitled to elect only three (3) directors, and the Company is required to obtain the separate approval of Series B Preferred holders in order to consummate certain transactions.

The Company relied on the exemption from registration provided in Section 4(2) and Rule 506 of the Securities Act when effecting the private placement of the Note and the Series B Preferred Stock. All of the securities were purchased by ten (10) accredited investors, and no general advertising or solicitation was used.

Item 3. Defaults Upon Senior Securities

         None.

Item 4. Submission Of Matters To A Vote Of Security Holders

On August 22, 2001 we held the annual meeting of our stockholders to vote upon the following proposals. First, the stockholders voted to elect three directors to serve until the 2004 annual meeting of stockholders. Donald W. Strickland was elected to the Board of Directors by a vote of 43,582,347 for, 0 against, and 5,751,128 abstentions and broker nonvotes. William J. Razzouk was elected to the Board of Directors by a vote of 43,613,690 for, 0 against and 5,719,785 abstentions and broker nonvotes. Laban P. Jackson, Jr. was elected to the Board of Directors by a vote of 45,161,107 for, 0 against and 4,172,368 abstentions and broker nonvotes. Thomas M. Garrott and Michael Easterly continue serving as directors until the annual meeting of stockholders in the year 2002 (Class III directors). Frank A. McGrew, IV and Andrew P. Seamons continue serving as directors until the annual meeting of stockholders in the year 2003 (Class I directors). Frank A. McGrew resigned from the Board of Directors on September 26, 2001 and was replaced by David M. Wilds. Andrew Seamons resigned from the Board of Directors on October 17, 2001 and was replaced by Gregory S. Dailey.

23

Second, the stockholders approved and adopted the amendment to the restated certificate of incorporation to effect a ten-for-one stock combination, or reverse stock split, with respect to all of our outstanding common stock by a vote of 46,676,356 for, 2,505,588 against and 151,531 abstentions and broker nonvotes.

Third, the stockholders ratified the Securities Purchase Agreement between the Company and Image Investor Portfolio and the transactions contemplated thereunder by a vote of 25,067,224 for, 3,654,592 against and 388,197 abstentions and broker nonvotes.

Finally, the stockholders voted to ratify the selection of PricewaterhouseCoopers LLP as our independent auditors by a vote of 48,835,569 for, 289,481 against and 208,424 abstentions and broker nonvotes.

Item 5. Other Information

         None.

Item 6. Exhibits And Reports On Form 8-K

         a.     Exhibits

Exhibit 10.1	Visual Content Services Agreement between the Company and eBay Inc., dated April 19, 2000, as amended
Exhibit 10.2	Purchase Agreement between the Company and eBay Inc. dated September 26, 2001
Exhibit 10.3	Master Lease Agreement between the Company and eBay Inc. dated September 26, 2001

         b.     Reports on Form 8-K

     (1) October 3, 2001; Item 5

24

INTERNET PICTURES CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATE: October 31, 2001	INTERNET PICTURES CORPORATION (Registrant)
	/s/ Paul Farmer Paul Farmer Authorized Officer Chief Financial Officer and Chief Accounting Officer

25

INTERNET PICTURES CORPORATION

INDEX TO EXHIBITS FOR FORM 10-Q

FOR QUARTER ENDED SEPTEMBER 30, 2001

EXHIBIT NO.	EXHIBIT DESCRIPTION
Exhibit 10.1	Visual Content Services Agreement between the Company and eBay Inc., dated April 19, 2000, as amended
Exhibit 10.2	Purchase Agreement between the Company and eBay Inc. dated September 26, 2001
Exhibit 10.3	Master Lease Agreement between the Company and eBay Inc. dated September 26, 2001

26 EX-10.1 3 g72381ex10-1.txt VISUAL CONTENT SERVICES AGREEMENT Exhibit 10.1 * Indicates material has been omitted pursuant to a request for confidential information VISUAL CONTENT SERVICES AGREEMENT THIS VISUAL CONTENT SERVICES AGREEMENT (the "Agreement") is entered into as of April 19, 2000 (the "Effective Date"), between Internet Pictures Corporation, a Delaware corporation with an office located at 124 University Avenue #201, Palo Alto, CA 94301 ("IPIX"), and eBay Inc., a Delaware corporation with an office located at 2145 Hamilton Avenue, San Jose, CA 95125 ("eBay"). WHEREAS, IPIX provides visual content and other digital media solutions to operators of Internet websites; WHEREAS, eBay operates an Internet online listing and trading site that brings together sellers and buyers of goods and services; WHEREAS, eBay desires to offer enhanced visual content services to users of its website; WHEREAS, IPIX desires to be the exclusive provider of the Services (defined below) for the Sites (defined below); and WHEREAS, eBay desires to engage IPIX as its exclusive provider of the Services for the Sites as set forth below; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: DEFINITIONS 1.1 "Base Level Bandwidth" means the level of bandwidth consumed in delivering the jointly developed Basic Service to Customers, as further described in Exhibit A. 1.2 "Basic Service" means the service that IPIX will offer each Customer free of charge, as further described in Exhibit B. 1.3 "Confidential Information" means any confidential or proprietary information of a party (the "Disclosing Party") which is disclosed to the other party (the "Receiving Party") in a writing marked confidential or, if disclosed orally, is identified as confidential at the time of disclosure and is subsequently reduced to a writing marked confidential and delivered to the other party within 10 days of disclosure. The terms of this Agreement will constitute Confidential Information. 1.4 "Customer" means any person who accesses any page on a Site. 1.5 "Deal Quarter" means a three-calendar-month period during the Term. 1.6 "eBay Marks" means the eBay trademarks, service marks and/or trade names designated by eBay for use in the performance of this Agreement. 1.7 "eBay Site" means the website owned and operated by eBay accessible at www.ebay.com (or any successor URL) that provides online listing and trading services to Customers, but shall not include eBay Great Collections(TM) or the Automotive areas and any content or data related thereto. 1.8 "eBay Templates" means the underlying data and structure for pages of the eBay Site and applicable Additional Sites (as defined in Section 4.3(b)) provided by eBay to IPIX pursuant to this Agreement, and any interfaces supplied by eBay during the Term to facilitate integration and operation of the Image Management Solution. 1.9 "eBay Bulk Upload Tools" means bulk upload and listing tools owned or controlled by eBay and provided by eBay to IPIX during the Term. 1.10 "Enhanced Services" means enhanced Image products and services produced by IPIX that IPIX and/or eBay will offer Customers for a fee, as further provided in Exhibit B. 1.11 "First Level Support" means the customer support for the Services eBay provides directly to Customers and the Help Tools, as further provided in Section 3.3(a) and Exhibit H. 1 Confidential 1.12 "Image" means any digital photographic image to be included in Listings. 1.13 "IPIX Image" means any Image produced by or on behalf of IPIX for a Customer. 1.14 "IPIX Marks" means the IPIX trademarks, service marks and/or trade names designated by IPIX for use in the performance of this Agreement. 1.15 "IPIX Technology" means the proprietary software and hardware developed by or licensed to IPIX and used to develop and/or implement the Services and/or provide the Services to Customers (including but not limited to the Image Management Solution and Plug-Ins). 1.16 "Listing" means any listing submitted by a Customer on any Site. 1.17 "Penetration Rate" means the total number of Listings utilizing the Enhanced Services during a Deal Quarter divided by the total number of Listings on the Sites during such Deal Quarter. 1.18 "Performance Standards" means the parameters described in Exhibit A. 1.19 "Plug-In" means a plug-in module, Active X-based control or other tool or application designed for integration and use with a web browser to enable a Customer to use the Services. 1.20 "Second Level Support" means IPIX support to eBay customer support personnel, as further provided in Section 3.3(b) and Exhibit H. 1.21 "Service Provider Network" means the managed network of trained videographers/photographers with whom IPIX has entered into agreements to capture images at designated sites. 1.22 "Services" means collectively the Basic Service, Enhanced Services and Virtual Tour Services. 1.23 "Sites" means the eBay Site and the Additional Sites. 1.24 "Standard Images" mean still Images up to 400 pixels by 300 pixels. 1.25 "Term" means the term of this Agreement as set forth in Section 6. 1.26 "Third Level Support" means IPIX customer support directly to Customers solely in the event that both First Level Support and Second Level Support are inadequate, as further provided in Section 3.3(b) and Exhibit H. 1.27 "Transferred Information" means any information passed from eBay to IPIX regarding eBay users and their trading activities. 1.28 "Virtual Tour Images" means Images used for display in a fully interactive 360 degree virtual tour format targeted at automobiles, boats, antique furniture, real estate, resort properties and other objects suitable for panoramic imaging. 1.29 "Virtual Tour Services" means the capture, processing, hosting and distribution services for Virtual Tour Images offered by IPIX where the Images are captured by the Customer or through the Service Provider Network, as further described in Exhibit B. 2. SERVICES AND IMPLEMENTATION 2.1 Services. As further provided below, IPIX will provide a complete, turn-key Image management solution for use by Customers (the "Image Management Solution"), which will include: (i) an easy-to-use integrated Image submission and hosting interface supporting the drag and drop of Customer-provided Images (where applicable), and browser-based submission of such Images (where drag and drop is infeasible) by Customers into the "Sell Your Item" pages of the Sites or other similar pages on the Sites that Customers use to list items for trading; and (ii) the uploading and hosting of such Images on IPIX servers and the display and distribution of such Images on the Sites. (a) Basic Service. IPIX shall offer each Customer the Basic Service in accordance with the schedule and criteria set forth in Exhibits A and B. (b) Enhanced Services. IPIX shall offer Customers the Enhanced Services in accordance with the roll-out schedule and criteria set forth in Exhibits A and B. (c) Virtual Tour Services. IPIX shall also offer Virtual Tour Services to Customers on a mutually agreeable off-site (i.e., not on the Sites), co-branded website hosted by IPIX, the presentation 2 Confidential of which shall be approved by eBay in writing before such services are made commercially available (with such approval not to be unreasonably withheld or delayed). Such website will be subject to Section 12 ("Customer Information") regarding treatment of Referrals (as defined in Section 5.4) and use of Customer Information. IPIX will make available the Virtual Tour Services to Customers and at such prices as IPIX may determine in its discretion (subject to the requirements of Section 2.1(d) below). (d) Services Pricing. During the Term, if IPIX furnishes a palette of Image services substantially similar to the Services for online listing and trading to any third party on pricing terms more favorable than the pricing terms offered to eBay herein, eBay may elect to incorporate such pricing terms into this Agreement in its sole discretion (provided that Virtual Tour Services are excluded from such obligation). Moreover, if IPIX's then-current effective national pricing for Virtual Tour Services is more favorable than the pricing offered to eBay Customers, the parties shall immediately modify the Agreement to reflect such favorable pricing. The parties will mutually agree on pricing for all Services other than Virtual Tour Services, and will periodically review the then-current pricing for the Services. (e) Current Version. Subject to Section 3.2, during the Term, IPIX will offer to eBay the most current version of the Services offered by IPIX, provided that eBay will not be obligated to introduce or accept such version until eBay is ready to introduce or accept such version and has approved such version pursuant to the approval process set forth in Section 2.2 (c). IPIX will have no obligation to offer individual features of a version separate from the version as a whole. (f) Access to Sites. Subject to the terms and conditions of this Agreement, eBay will offer the Services on the Sites and will permit IPIX to provide the Services on the Sites by means of the Image Management Solution; provided that, other than with respect to patches and error corrections necessary for compliance with the requirements of Exhibit A, IPIX shall not alter, delete or modify the Image Management Solution or the Services (including without limitation modifying the Plug-Ins or requiring any different or additional Plug-Ins) or any parts thereof or the user experience associated with the Image Management Solution or the Services without first receiving eBay's prior written approval pursuant to Section 2.2(c) below. (g) Management Reviews. Executive representatives of each party will meet every two months during the Term to discuss project performance, concepts for the development and rollout of additional Enhanced Service consistent with Exhibit B and other appropriate issues. 2.2 Implementation. IPIX Obligations. IPIX will use commercially reasonable efforts to develop the Image Management Solution and develop and host the Services under an eBay private label including a prominent "Powered by IPIX" designation (as described in Exhibit B, section 1(g)), and IPIX will reasonably cooperate with eBay to integrate the Image Management Solution and Services into the "Sell Your Item" and "View Item" pages of the eBay Site. IPIX will use commercially reasonable efforts to develop and implement the Services pursuant to the development schedule and specifications set forth in Exhibit B, and, commencing on the date of the Initial Launch (as defined below), maintain the Services as specified in Exhibit A and in compliance with eBay's general promotional guidelines (or, if eBay develops unique guidelines for eBay-owned services, such unique guidelines) set forth on the Sites. IPIX will also provide integration and functionality such that the Services will be reasonably enabled to work in conjunction with bulk upload and similar listing tools reasonably designated by eBay, and will be enabled to work with Mr. Lister and Auction Assistant, and any additional eBay Bulk Upload Tools mutually agreed by the parties, provided that it shall be eBay's responsibility to implement any modifications of the eBay Bulk Upload Tools required for integration of the Services. IPIX will, free of charge to eBay, operate and maintain the IPIX Technology for the purpose of providing the Services to Customers, and will cooperate with eBay to develop the interfaces between the eBay listing and bidding processes and the Services. IPIX will use commercially reasonable efforts to develop, support and maintain any Plug-Ins required for eBay users to use the Services, and the parties will cooperate to implement the mechanism for such Plug-Ins to be downloaded by Customers at no charge. (b) eBay Obligations. eBay will use commercially reasonable efforts to facilitate the integration of the Image Management Solution into the Sites and the eBay Bulk Upload Tools, subject to this Section 2. Moreover, eBay will use commercially reasonable efforts to cooperate with IPIX in 3 Confidential fulfilling IPIX's obligations hereunder, including without limitation: providing the eBay Templates and eBay Bulk Upload Tools to IPIX; modifying the eBay Bulk Upload Tools as required for integration with the Services; working with IPIX to implement the Image Management Solution on the Sell Your Item and other relevant pages on the Sites; providing IPIX with technical information necessary to enable IPIX to serve Images on the "View Item" pages on the Sites; and making the appropriate introductions to the development teams of Mister Lister(TM) and Auction Assistant(TM) to facilitate the integration of bulk upload and similar listing tools. As further provided in Exhibit B, IPIX may implement an IPIX logo watermark on all still Images submitted through the Services. eBay may, in its reasonable discretion based on eBay user feedback, determine at any time that the watermark should not be displayed on the Images linked or posted after that time, and IPIX will cease inserting the watermark on the Images within 14 days of notification of such determination from eBay; provided, however, that, in such event, the parties shall mutually establish some other IPIX branding mechanism of like frequency (and which complies with eBay's advertising guidelines) to substitute for the IPIX logo watermark. (c) Approval. When IPIX has developed and is prepared to implement the Services as provided in Section 2.2(a), a new version of the Services as contemplated in Section 2.1(e), an Additional Site as provided in Section 4.3(b), an Additional Service or IPIX Proposed Service as provided in Section 4.3(c), or any other alteration, modification or addition to the Services as contemplated in Section 2.1(f) (collectively, the "Offerings"), IPIX shall make the Offerings available to eBay for review in a format mutually agreed by the parties for review and acceptance by eBay. The parties will cooperate to develop written specifications (such as an engineering requirements document (ERD)) for the Offerings, which shall include specific acceptance test criteria and procedures, and which both parties shall approve in writing prior to any obligation of IPIX to commence or continue development or implementation. eBay shall have 30 days, or such other period as may be stated in the specifications, following the delivery of an Offering to determine in its reasonable judgment whether the Offering conforms to the applicable specifications (the "Initial Acceptance Period"). eBay agrees to inform IPIX during the Initial Acceptance Period of any non-conformance describing the nature of the non-conformance. If no notice of non-conformance is received by IPIX before the end of the Initial Acceptance Period, the Offering shall be deemed to be accepted by eBay. If eBay reasonably rejects an Offering as non-conforming, IPIX shall promptly correct the non-conformance and deliver a modified Offering to eBay within the period mutually agreed by the parties. If no period is specified, the period will be 30 days. eBay shall then determine in its reasonable judgment whether the modified Offering conforms to the applicable specifications in accordance with the procedures in this Section 2.2(c). If eBay then reasonably rejects the modified Offering, eBay, in its sole discretion, based on the applicable specifications and in accordance with the procedures set forth in this Section 2.2(c), (i) may allow IPIX to continue resubmitting modified Offerings until they meet the acceptance criteria; (ii) waive the unsatisfied acceptance criteria; (iii) if the Offering is an Additional Service as defined in Section 4.3(c) and it has not been launched in accordance with the schedule set forth in Section 4.3(c), eBay may terminate any obligation by eBay with respect to such Offering in accordance with Section 4.3(c); or (iv) if the Offerings are those to be included in the Initial Launch and Final Launch, eBay may terminate this Agreement with no liability. (d) Changes to eBay Templates. eBay may modify the eBay Templates provided from time to time in its sole discretion, and IPIX will provide eBay with guidance regarding implementation of such modified templates throughout the Services promptly after receiving such templates. eBay will provide IPIX with reasonable advance notice of such modifications, and IPIX's implementation of any necessary changes in the Image Management Solution as a result of the new templates will be subject to the approval process specified in Section 2.2(c). (e) Delay. The parties acknowledge that each is dependent on the cooperation of the other to meet the development schedule set forth in Exhibit B, and each party shall devote appropriate product management and technical support adequate to meet such schedule. Unless otherwise mutually agreed by the parties in writing, if the Final Launch (as defined in Exhibit B) has not 4 Confidential occurred by December 31, 2000, except to the extent such failure is due to eBay's failure to perform tasks which are identified as its responsibility in this Section 2.2 and which are a prerequisite for IPIX's timely performance), then eBay may thereafter terminate this Agreement upon written notice to IPIX at any time. 3. PERFORMANCE STANDARDS; CUSTOMER SUPPORT 3.1 Performance Standards. IPIX will ensure that the provision of the Services meets the criteria described in Exhibits A and B. * IPIX will provide to eBay * dedicated product management and technical support available on a 24-hours, 7 days-a-week remote basis to support the integration of the Services into the Sites and on an ongoing basis and will provide reasonable on-site presence at eBay's Silicon Valley facilities during the launch and integration phases to ensure smooth integration. Additionally, IPIX will ensure that, during the term of the integration and, as further requested by eBay, for a reasonable time thereafter, the dedicated integration team will include the following members of the IPIX engineering team, so long as each remains an employee of IPIX: Andy Mutz, Adam Sah, Joseph Molnar, Diana Stanley and Lisa Wood. IPIX will treat eBay, with respect to service commitments, feature sets and user experience, at least as favorably as it does its most strategic partners to which IPIX provides analogous services. 3.2 Current Technology. IPIX agrees to use commercially reasonable efforts to keep the IPIX Technology current and at a level at least as high as the level comparable to the level of technology generally used in the professional photo-hosting industry for similar services; provided, however, that, in the event, pursuant to Section 2.1(e), eBay declines to introduce or accept the most current version of the Services offered by IPIX reasonably promptly following IPIX's offer to eBay of such version, IPIX shall have no further obligation with respect to that version pursuant to this Section 3.2. 3.3 Customer Support; Training. (a) First Level Support. eBay will provide First Level Support to Customers using the Services. IPIX will provide English-language FAQs, tutorials, and similar aids ("Help Tools") to help eBay users in the use of the Services, including automated, Web-based customer support for the Services consisting of an HTML page with a menu of support topics. eBay will host and maintain the Help Tools on an eBay server. Second and Third Level Support. IPIX will provide Second Level Support to eBay customer support personnel to enable such personnel to respond to Customer inquiries about the Services. If eBay customer support personnel have contacted IPIX to obtain Second Level Support and eBay reasonably determines after following eBay's internal escalation process that IPIX's Second Level Support is insufficient to enable eBay personnel to address a Customer inquiry, eBay personnel may redirect such inquiry directly to IPIX for Third Level Support. Training. IPIX will provide free, live training regarding Services support to eBay's customer support organization. During the initial rollout of any new Services or Services to any new Site and for 2 weeks after such rollout, IPIX will provide a full-time employee in eBay's Salt Lake City location free of charge to help address customer support issues. An IPIX representative will also be available free of charge from time to time to participate in live, real-time chat board discussions at eBay's request. If functional or design errors in the Services result in an increased Customer support burden, IPIX will remedy such errors promptly to the extent such remedy is not delayed as a result of eBay's act or failure to act. (d) Response Times and Reports. IPIX will provide the customer support specified in this Section 3 in accordance with the criteria set forth in Exhibit H. 4. MARKETING; EXCLUSIVITY 4.1 Marketing Plan. Each party will use reasonable commercial efforts to market and promote the Services to increase the usage thereof through a variety of promotional mechanisms, in a mutually-agreeable manner, in accordance with the marketing plan set forth in Exhibit C, as such plan may be modified from time to time in writing by mutual agreement of the parties. 4.2 Promotional Impressions. * 5 Confidential 4.3 Exclusivity. * (c) Additional Services. (i) * (ii) IPIX Requests. To the extent IPIX desires to add an additional Image submission or hosting service to the palette of Enhanced Services (an "IPIX Proposed Service"), the parties shall discuss such IPIX Proposed Service in good faith, subject to Exhibit B. In the event the parties mutually agree that IPIX should provide such IPIX Proposed Service on a Site, the parties will mutually agree upon a launch date and such IPIX Proposed Service shall become an "Enhanced Service" upon the launch of such IPIX Proposed Service on the Site. Such IPIX Proposed Service will be subject to the approval process in Section 2.2(c). (d) Digitization Services. None of the restrictions set forth in this Section 4.3 will limit eBay's ability to enter into any agreements or relationships with any party, nor restrict promotional activities, with respect to the digitization portion of any Image services (other than the capture and digitization of Virtual Tour Images), but will only apply to the submission and hosting portions of the process; provided, that eBay will discuss in good faith with IPIX opportunities whereby IPIX would provide digitization services to Customers. (e) * 5. FINANCIAL 5.1 * 5.2 * 5.3 * 5.4 * 5.5 * 5.6 Payment Terms; Taxes. Overdue payments shall accrue interest, at the lesser of 1-1/2% per month or the maximum allowable interest under applicable law, from due date until paid, and each party shall pay the other party's costs of collection on such overdue payments, if any (including reasonable attorneys' fees). Each party shall pay any sales, use or similar tax related to such party's performance of its obligations or exercise of its rights under this Agreement, exclusive of taxes based on the other party's net income. 5.7 IPIX Reports. IPIX shall provide eBay weekly technical performance reports (including, but not limited to bandwidth and availability) and shall provide eBay with written notice each time the delivery of the Basic Service consumes bandwidth at a level equal to 80%, 90% or 100% of the Base Level Bandwidth ("Bandwidth Notice"). Such written notice shall be provided within two business days of the occurrence of such event. If eBay unilaterally requests IPIX to modify the Basic Service in a manner that requires materially greater bandwidth consumption than the Base Level Bandwidth and IPIX has not provided eBay with the required Bandwidth Notice, eBay shall not be required to pay the Additional Bandwidth Costs. 5.8 Inspection of Records. During the Term, and for 12 months thereafter, each party will have the right, at its own expense and not more than twice in any 12 month period, to authorize an independent auditor reasonably acceptable to both parties to inspect those accounting records of the other party necessary to verify the accuracy of funds paid to the auditing party pursuant to this Section 5, provided that such independent auditor has executed a confidentiality agreement with respect to such records that is reasonably acceptable to the audited party. Such inspections will take place during the audited party's normal business hours, upon not less than 10 days prior written notice to the audited party. 5.9 Warrant. Within 15 days following the Effective Date, IPIX will grant eBay a warrant to purchase 600,000 shares of common stock of IPIX at an exercise price per share equal to the closing price of the common stock of IPIX on the Nasdaq National Market on the Effective Date (the "Warrant"). The Warrant shall expire 12 months after the termination Confidential 6 or expiration of the Agreement. One-ninth (1/9) of the shares subject to the Warrant will vest and become exercisable at the end of each Deal Quarter during the term of the Agreement; provided, however, that no further vesting of shares subject to the Warrant shall occur following any expiration or termination of the Agreement, notwithstanding Section 6.5 or anything to the contrary herein. The Warrant will be exercisable on a net-exercise or cashless exercise basis and shall be substantially in the form attached hereto as Exhibit F. 6. TERM AND TERMINATION 6.1 Term. The term of the Agreement will commence on the Effective Date and shall continue for 14 successive "Deal Quarters," with the first Deal Quarter commencing on April 1, 2000. 7 6.2 Right of First Discussion. eBay will extend to IPIX, at least 180 days prior to the expiration of the Agreement, a right of first discussion under which IPIX would be afforded the initial discussions with eBay regarding extension of the Agreement. Such discussion period would continue for at least 30 days, but in the event that no agreement is reached during such period, eBay shall be free to engage in discussions with other parties, without an obligation to re-initiate discussions with IPIX. In no event will this right of discussion preclude eBay from responding to solicitations from third parties during the Agreement, provided that eBay may not engage in material discussions with such third parties regarding providing Image submission and hosting services until the IPIX 30-day discussion period has lapsed, or unless IPIX is in breach of the Agreement (including without limitation the Performance Standards in Exhibit A and the Customer Support standards in Exhibit I). 6.3 Termination for Breach. (a) Unless otherwise agreed in writing between the parties, and except as set forth in this Section 6.3 and Exhibit A, a party may terminate this Agreement in the event the other party breaches a material term, condition or representation of this Agreement, and fails to remedy such default within 30 days after being notified by the non-breaching party of such breach or failure. (i) The failure by IPIX to meet any of the Performance Standards in Exhibit A, other than a Client Application Failure (as defined in Exhibit A) and other than a failure resulting from eBay's act or failure to act, shall constitute a material breach of this Agreement. If IPIX does not cure a Server Application Error (as defined in Exhibit A) within 30 days after IPIX discovers or is notified of such Server Application Error, eBay may then terminate this Agreement by written notice without any further cure period. If IPIX does not cure failures with respect to the General Latency and Uptime Performance Standards within the 15-day cure period set forth in Exhibit A, eBay may terminate the Agreement as set forth in Exhibit A. eBay may also terminate the Agreement in the event IPIX repeatedly fails to meet the Performance Standards set forth in Section 1 of Exhibit A in accordance with the provisions set forth in Exhibit A. (ii) A substantial and ongoing failure by IPIX to conform to the customer support requirements in Exhibit H, other than a failure resulting from eBay's act or failure to act, shall constitute a material breach of this Agreement. 6.4 Effects of Termination. Except as provided below, upon expiration or termination of this Agreement: (a) IPIX will immediately cease all use of the eBay Marks; (b) IPIX will continue to provide Services in a manner commensurate with the quality of Services provided prior to such expiration or termination and to support Customers who purchased such Services (or in the case of the Basic Service, elected to use the Basic Service) during the Term for a minimum of 75 days after the Listing corresponding to such Services is concluded, and the licenses granted below under Section 7.2 and 7.3(b)(ii) will survive during such period; (c) eBay will cease all use of the IPIX Marks, IPIX Images and the IPIX Technology and shall purge all IPIX Technology and IPIX Images from its servers 75 days after the conclusion of every Listing for which Customers purchased Services (or in the case of the Basic Service, elected to use the Basic Service) during the Term. 8 (d) Each party will promptly destroy or return any Confidential Information of the other party in its possession. Notwithstanding the foregoing, in the event of any termination of the Agreement (but excluding the expiration of the Agreement, to which Section 6.2 applies, termination by eBay pursuant to Section 2.2(e), and termination by IPIX pursuant to Section 6.3) IPIX will continue, if requested by eBay, to provide the Services and associated customer and technical support on a non-exclusive basis for a period of 4 months after such termination (the "Transition Period"), in a manner consistent with the manner in which the Services were provided during the previous portion of the Term, in order to facilitate an orderly migration of the Services. Each party shall continue to pay the other party amounts due under the Agreement through the end of the Transition Period, and any licenses required for such performance shall continue in effect during the Transition Period. 6.5 Survival of Certain Terms. The provisions of Sections 5.6, 5.8, 5.9, 6.4, 6.5, 7.1(a), 7.1(b) (solely with respect to the license to derivative works of the Help Tools), 7.1(b)(ii-iv), 7.2(a), 7.2(b)(iii-iv), 7.3(a)(i), 7.3(b)(i), 7.4, 8, 9, 10, 11, 12 and 13 will survive the expiration or termination of this Agreement for any reason. Except as otherwise expressly provided herein, all other rights and obligations of the parties will cease upon expiration or termination of this Agreement. 7. PROPRIETARY RIGHTS 7.1 IPIX Technology; Help Tools; IPIX Images (a) All IPIX Technology, Help Tools and all IPIX Images are, and at all times will remain, the exclusive property of IPIX, and no provision of this Agreement implies any transfer to eBay of any ownership interest in the IPIX Technology, Help Tools or the IPIX Images. The licenses set forth in Sections 7.1(b) confer neither title to, nor ownership in, the IPIX Technology, Help Tools or the IPIX Images and are not a sale of any rights therein. eBay hereby irrevocably assigns to IPIX all right, title and interest worldwide in and to any modifications or derivative works of the IPIX Technology, Help Tools and IPIX Images made by eBay, including without limitation any copyrights, trade secrets, patent rights, moral rights, contract rights and licensing rights. (b) IPIX hereby grants to eBay a nonexclusive, fully-paid, royalty-free, worldwide license to use, reproduce, display, digitally perform and/or modify the IPIX Technology, Help Tools and IPIX Images solely as necessary to provide the Services in accordance with the Agreement. eBay may sublicense or distribute the IPIX Technology or any portion thereof (such as Plug-Ins), Help Tools and IPIX Images to Customers, solely as necessary to make the Services available to Customers on the Sites. In addition, IPIX hereby grants to eBay a perpetual, irrevocable, nonexclusive, fully-paid, royalty-free, worldwide foregoing license to use, reproduce, digitally perform, display, modify and distribute for any purpose any derivative works of Help Tools which eBay creates in the process for localizing such Help Tools for use on international Sites. (i) As reasonably requested by IPIX from time to time, eBay agrees to include such ownership restrictions and other licensing provisions regarding the IPIX Technology, IPIX Images and Help Tools in relevant legends, disclaimers and license agreements presented to Customers on the Sites in connection with the Services. eBay shall reproduce all copyright notices in the original IPIX Technology, Help Tools and IPIX Images and on all copies or modifications thereof where the omission of such notices would jeopardize or impair IPIX's intellectual property rights therein. 9 (ii) Any transfer, copying, distribution or other use of the IPIX Technology, Help Tools and IPIX Images by eBay other than as expressly provided herein constitutes a material breach of this Agreement. (iii) eBay will not disassemble or decompile the IPIX Technology including single Java class files under any circumstances. The disassembly or decryption by eBay of the foregoing constitutes a material breach of this Agreement. (iv) eBay will not export or re-export the IPIX Technology or any copy or adaptation in violation of any applicable laws or regulations. 7.2 eBay Templates; eBay Bulk Upload Tools 10 (a) All eBay Templates and eBay Bulk Upload Tools are, and at all times will remain, the exclusive property of eBay, and no provision of this Agreement implies any transfer to IPIX of any ownership interest therein. The license set forth in Section 7.2(b) confers neither title to, nor ownership in, and is not a sale of, the eBay Templates, the eBay Bulk Upload Tools or any other eBay proprietary technology. IPIX hereby irrevocably assigns to eBay all right, title and interest worldwide in and to any modifications of the eBay Templates made by IPIX, including without limitation any copyrights, trade secrets, patent rights, moral rights, contract rights and licensing rights. (b) (i) eBay hereby grants to IPIX a nonexclusive, worldwide, fully-paid, royalty-free license to use the eBay Templates during the Term solely as necessary to develop and provide the Services on the Sites in accordance with this Agreement. "Use" means reproducing, modifying storing, loading, installing, digitally performing, and/or displaying the eBay Templates. IPIX must reproduce all copyright notices in the original eBay Templates and eBay Bulk Upload Tools and on all copies or modifications thereof. (ii) eBay hereby grants to IPIX a nonexclusive, fully-paid, royalty-free license to internally use the eBay Bulk Upload Tools during the Term solely to facilitate the integration of bulk upload and similar listing tools into the Image Management Solution. "Use" means reproducing, modifying storing, loading, installing, digitally performing, and/or displaying the eBay Bulk Upload Tools. The Bulk Upload Tools shall be deemed eBay Confidential Information and may not be distributed or sublicensed in any form for any purpose. (iii) IPIX will not disassemble or decompile the eBay Templates or eBay Bulk Upload Tools, including single Java class files under any circumstances. The disassembly or decryption by IPIX of any Java class file constitutes a material breach of this Agreement. (iv) IPIX will not export or re-export the eBay Templates or eBay Bulk Upload Tools or any copy or adaptation in violation of any applicable laws or regulations. 7.3 Trademarks. (a) IPIX Marks. (i) IPIX owns and at all times will continue to own the IPIX Marks. eBay will not take any actions inconsistent with IPIX's ownership rights. (ii) Subject to the restrictions set forth herein, IPIX hereby grants eBay a nonexclusive, worldwide, royalty-free, fully paid, nontransferable right to use the IPIX Marks during the Term, subject to the prior approval of IPIX, which IPIX shall not withhold or delay unreasonably, solely in connection with the offering, promotion and marketing of the Services as provided in Section 4. eBay's use of the IPIX Marks will not create in eBay any right, title or interest therein or thereto. All use by eBay of the IPIX Marks will inure to the exclusive benefit of IPIX. At IPIX's reasonable request, eBay will assist IPIX with the protection and maintenance of the IPIX Marks. eBay may only use the IPIX Marks as expressly permitted herein. eBay agrees to use the IPIX Marks in a manner commensurate with the style, appearance and quality of IPIX's services and/or products bearing such marks. (b) eBay Marks. (i) eBay owns and at all times will continue to own the eBay Marks. IPIX will not take any actions inconsistent with eBay's ownership rights. 11 (ii) Subject to the restrictions set forth herein, eBay hereby grants IPIX a nonexclusive, worldwide, royalty-free, fully paid, nontransferable right to use the eBay Marks during the Term, subject to the prior approval of eBay, which eBay shall not withhold or delay unreasonably, solely in connection with the offering, promotion and marketing of the Services as provided in Section 4. IPIX's use of the eBay Marks will not create in IPIX any right, title or interest therein or thereto. All use by IPIX of the eBay Marks will inure to the exclusive benefit of eBay. At eBay's reasonable request, IPIX will assist eBay with the protection and maintenance of the eBay Marks. IPIX may only use the eBay Marks as expressly permitted herein. IPIX agrees to use the eBay Marks in a manner commensurate with the style, appearance and quality of eBay's services and/or products bearing such marks. (c) Guidelines. Each party's use of the other party's Mark will comply with the standard written guidelines provided by such other party; modifications or additions to such policies will be promptly provided to the other party. If at any time any party determines that another party's use of the Marks does not follow its guidelines, it will notify the other party and that party will promptly revise its use of the Marks to so conform with the written guidelines within 30 days. If a party has been notified of non-conforming use of the other's Marks and fails to conform such use within 30 days, the other party may, in its sole discretion, revoke the trademark license provided in this Section 7.3. (d) Changes, Additions or Substitutions of Marks. Each party reserves the right to change its Marks, add new Marks or substitute new Marks for existing Marks. The party making such changes shall provide the other parties with written notice and with examples of the new Marks. The party receiving such notice shall make reasonable commercial efforts to promptly change its use of the Marks to comply with such change, addition or substitution. 7.4 Limitation on Grant of Rights. Except as expressly provided herein, neither party receives any other right or license to the technology or intellectual property of the other party. 7.5 Joint Development. Ownership of the intellectual property rights in any materials jointly developed by the parties in connection with this Agreement shall be specified in the applicable ERD, statement of work or other specifications for such materials. 12 8. CONFIDENTIALITY 8.1 General. Subject to Section 13.3, each party agrees that (a) it shall not disclose to any third party or use any Confidential Information disclosed to it by the other except as expressly permitted in this Agreement, and (b) it shall treat the other party's Confidential Information with the same degree of care it uses to protect its own information of a similar nature, but in no instance shall it use less than reasonable care. Notwithstanding anything to the contrary in this Agreement, in the event either party is required to publicly disclose the Agreement (or any element of the Agreement) pursuant to any regulatory or other governmental disclosure requirement, such party agrees to notify the other of such requirement and agrees to work with the other party and take all necessary steps to obtain confidential treatment of the Agreement and all the terms and conditions therein. 8.2 Exceptions. The foregoing restrictions will not apply to information that (i) is known to the Receiving Party at the time of disclosure by the Disclosing Party; (ii) is or becomes publicly known through no wrongful act of the Receiving Party; (iii) is rightfully received from a third party without restriction; (iv) is independently developed by the Receiving Party; (v) has been approved for release by written authorization of the Disclosing Party; (vi) is not marked or similarly designated as confidential, and is provided for a purpose or in a manner that reasonably contemplates, or would naturally be understood to contemplate, disclosure or use by others; and (vii) is disclosed pursuant to a valid order of any governmental authority provided that the party intending to make disclosure in such circumstances has given the other party prompt notice prior to making such disclosure so that such party may seek a protective order or other appropriate remedy prior to such disclosure. 9. REPRESENTATIONS AND WARRANTIES 9.1 Warranty. IPIX hereby represents and warrants to eBay that any content provided by IPIX to eBay (including but not limited to content contained in the Promotional Impressions and the Help Tools) will not contain any libelous, defamatory, obscene or slanderous material, and is not materially false, misleading or inaccurate, and will not contain any viruses, worms, time bombs, cancelbots or other programming routines intended to damage, detrimentally interfere with, surreptitiously intercept or expropriate any system, data, or personal information. 9.2 Disclaimer. THE WARRANTIES PROVIDED HEREIN ARE THE ONLY WARRANTIES PROVIDED WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT. SUCH WARRANTIES ARE IN LIEU OF, AND THE PARTIES HEREBY DISCLAIM, ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY IMPLIED WARRANTY OF TITLE, NONINFRINGEMENT OF THIRD PARTY RIGHTS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Each party acknowledges that it has not entered into this Agreement in reliance upon any warranty or representation except those specifically set forth herein. 10. INDEMNIFICATION 13 10.1 IPIX will indemnify, defend and hold harmless eBay and eBay affiliates operating any Additional Sites and their officers, directors, successors and permitted assigns from and against any and all losses, claims, suits, proceedings, liabilities, expenses (including reasonable attorneys' fees and expenses), causes of action, damages and costs (collectively "Claims") arising out, relating to or in connection with any claim by a third party regarding: (i) any Customer's use of the Services (other than Claims arising solely from the unavailability of the eBay Site or an Additional Site due to circumstances within eBay's or the applicable eBay affiliate's control and not general problems with the infrastructure of the Internet or any eBay or affiliate supplier); (ii) any infringement by the IPIX Technology, Help Tools, IPIX Marks or IPIX Images, or by the Services of any third party's worldwide patent, trademark, copyright, trade secret or other intellectual property right; and (iii) any content provided by IPIX to eBay (including but not limited to content contained in the Promotional Impressions and the Help Tools). Any Claim arising with respect to any Image created and submitted by a Customer or a third party on behalf of a Customer is expressly excluded from the foregoing indemnification. If the Services, IPIX Technology, Help Tools, IPIX Marks or IPIX Images are held to be infringing or their use is enjoined, or eBay believes such a holding is likely, IPIX shall, at its option and expense, either (a) procure for eBay the right to offer and use such Services, IPIX Technology, Help Tools, IPIX Marks or IPIX Images; or (b) replace or modify such Services, IPIX Technology, Help Tools, IPIX Marks or IPIX Images so that the substitute is non-infringing and otherwise complies with the requirements of this Agreement. 10.2 eBay will indemnify, defend and hold harmless IPIX and its officers, directors, successors and permitted assigns from and against any and all Claims arising out of, relating to or in connection with any claim by a third party that the eBay Templates, eBay Bulk Upload Tools or the eBay Marks infringe on the worldwide patent, trademark, copyright, trade secret or other intellectual property rights of such third party. Any Claim arising with respect to any Image created and submitted by a Customer or a third party on behalf of a Customer is expressly excluded from the foregoing indemnification. 10.3 The foregoing obligations are conditioned on (i) the indemnified party notifying the indemnifying party promptly in writing of such action, (ii) the indemnified party giving the indemnifying party the right to control the defense and settlement of any such claim with counsel reasonably satisfactory to the indemnified party (except that the indemnifying party shall not enter into any settlement that affects the indemnified party's rights or interest without the indemnified party's prior written approval), and (iii) the indemnified party cooperating and, at indemnifying party's request and expense, assisting in such defense. 11. LIMITATION OF LIABILITY EXCEPT WITH RESPECT TO EACH PARTY'S INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTION 10 OR A BREACH BY EITHER PARTY OF ITS OBLIGATIONS DESCRIBED IN SECTION 8, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR LOST PROFITS OR ANY FORM OF INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER FROM ANY CAUSES OF ACTION OF ANY KIND WITH RESPECT TO THIS AGREEMENT WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, AND WHETHER OR NOT THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. EXCEPT WITH RESPECT TO EACH PARTY'S INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTION 10 OR A BREACH BY EITHER PARTY OF ITS OBLIGATIONS DESCRIBED IN SECTION 8, NEITHER PARTY'S LIABILITY UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL EXCEED AN AMOUNT EQUAL TO THE TOTAL AMOUNT PAID BY IPIX TO EBAY DURING THE TWELVE (12) MONTHS PRECEDING THE CLAIM. THIS LIMITATION OF EACH PARTY'S LIABILITY IS CUMULATIVE, WITH ALL PAYMENTS FOR CLAIMS OR DAMAGES UNDER OR IN CONNECTION WITH THIS AGREEMENT BEING AGGREGATED TO DETERMINE SATISFACTION OF THE LIMIT. THE EXISTENCE OF ONE OR MORE CLAIMS WILL NOT ENLARGE THE LIMIT. 14 12. CUSTOMER INFORMATION 12.1 Collection Limitations. Any information that IPIX obtains from a Customer ("Customer-Provided Information", and together with Transferred Information, "Customer Information") will be limited to information reasonably related to the use of the Services under this Agreement or otherwise required to use the Services. 12.2 Use Limitations. IPIX may use Customer Information to provide and market the Services to Customers. IPIX will neither use itself nor permit any third party to use Customer Information for any purpose other than to provide or market the Services to Customers. Neither IPIX nor any third party will use Customer Information to market any other products or services to Customers where such product or service is then currently offered by eBay or a third party with whom eBay has a contractual relationship that could include such product or service. 12.3 Use Subject to Privacy Policy. IPIX further agrees to use such Customer Information only as authorized by eBay's privacy policy, the Customer and subject to IPIX's reasonable privacy policy, such privacy policy to be adequately displayed throughout the IPIX website. IPIX will neither use Customer Information to target communications to Customers (or facilitate the same on behalf of third parties) without the express written permission from eBay and opt-in agreement from the Customers, nor will IPIX solicit or facilitate such solicitation by any third party of Customers as a result of their status as an eBay user, and IPIX will explicitly not refer to Customers as "eBay users" or "eBay members" (or any similar reference) in any promotion, except with the prior written consent of eBay. 12.4 Certain Disclosures. IPIX agrees not to sell, rent, lease or otherwise disclose Customer Information without eBay's prior written consent (such consent to be in eBay's sole discretion). Notwithstanding the foregoing: IPIX will provide eBay reasonable access to IPIX's database of Customers (and related information) who have signed up with IPIX to use the Service through a Site or eBay advertising. 13. GENERAL PROVISIONS 13.1 Real Estate. In the event eBay elects to pursue Listings for the real estate market, IPIX will offer, at eBay's request, consulting, introductions to strategic partners, technical advice, and additional support, utilizing IPIX's extensive knowledge and relationships in the real estate industry. 13.2 Independent Contractors. The relationship of IPIX and eBay established by this Agreement is that of independent contractors, and nothing contained in this Agreement will be construed to (i) give either party the power to direct and control the day-to-day activities of the other, (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint undertaking, or (iii) allow either party to create or assume any obligation on behalf of the other for any purpose whatsoever. All financial and other obligations associated with a party's business are the sole responsibility of that party. 13.3 Press Plans. The parties will collaborate to release soon after the Effective Date one mutually agreeable joint press release regarding the relationship entered into hereunder. The parties shall agree to the content and timing of such joint press release. Upon eBay's written approval, in its sole and absolute discretion, the parties may also release a second mutually agreeable joint press release upon the launch of the Services. Any other press announcement by either party regarding the subject matter of this Agreement will be subject to the other party's prior written approval in its sole and absolute discretion. 15 13.4 Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the party to be charged. 13.5 Governing Law. This Agreement will be governed by and construed under the laws of the State of California as applied to contracts entered into and performed entirely within the State between residents thereof. 13.6 Notices. Any notice required or permitted by this Agreement will be deemed given if sent by prepaid overnight courier, addressed to the other party at the address set forth above or at such other address for which such party gives notice hereunder. Delivery will be deemed effective 1 day after deposit with such overnight courier. Notwithstanding the foregoing, any notice of failure or breach IPIX is required to give pursuant to Exhibit A or Exhibit H may be in the form of an email with confirmed receipt, and delivery will be deemed effective immediately. Any such email will be supplemented by a confirmation copy delivered by facsimile or overnight courier. 13.7 Force Majeure. Nonperformance of either party will be excused to the extent that performance is rendered impossible by storm, lockout or other labor trouble, riot, Internet infrastructure failure, hacker attack, war, rebellion, strike, fire, flood, accident or other act of God, governmental acts, orders or restrictions, or any other reason where failure to perform is beyond the control, and not caused by the gross negligence or willful misconduct of, the non-performing party. 13.8 Non-Assignability; Change of Control. Neither party may assign, transfer or delegate any right or obligation hereunder to a third party without the other party's written consent; provided, however, that either party may assign, transfer or delegate any right or obligation hereunder in the event such party experiences a Change of Control (as defined below). In the event IPIX experiences a Change of Control in connection with an eBay Competitor (as defined below), within ten (10) days following such Change of Control, IPIX shall provide written notice to eBay of such Change of Control. In the event of such Change of Control, eBay may, within ninety (90) days following such Change of Control, terminate this Agreement upon written notice to IPIX. "Change of Control" means any Ownership Change Event or a series of related Ownership Change Events (collectively, the "Transaction") wherein a party's shareholders immediately preceding the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of such party's voting stock or other voting interests immediately before the Transaction, direct or indirect beneficial ownership of more than 50% of the total combined voting power of the corporation or corporations to which substantially all of such party's assets or stock were transferred, as the case may be. An "Ownership Change Event" occurs if any of the following occur: (a) the direct or indirect sale or exchange in a single series of related transactions by such party's shareholders or other ownership interest holders of more than 50% of its voting stock or other voting interests; (b) a merger or consolidation in which such party is a party; (c) the sale, exchange or transfer of all or substantially all of such party's assets; or (d) a liquidation or dissolution of such party. However, an Ownership Change Event does not occur as a result of any transaction or series of transactions that are effected solely in connection with a (i) reincorporation, or (ii) a reorganization, recapitalization or similar financing not in connection with the sale of all or substantially all of such party's assets or stock or other ownership interests. During the Term, upon written notice to IPIX, eBay shall have the right to revise once during the first 30 days of each Deal Quarter the list of eBay Competitors listed in Exhibit G to add entities which eBay reasonably believes are or may become competitive with eBay (each an "eBay Competitor"). 13.9 Customer Data. eBay will have no obligation to provide to IPIX any Customer data under the Agreement. 16 13.10 Technology Escrow. Within 30 days following the Effective Date, IPIX shall deposit, and maintain during the Term, a copy of the current and complete source code for the software components of the IPIX Technology (other than those used to solely to provide the Virtual Tour Service) with a mutually acceptable escrow agent. Such escrow arrangement will be governed by a standard escrow agreement between such escrow agent and IPIX (the "Escrow Agreement"). IPIX shall name eBay in the Escrow Agreement as a contingent beneficiary of a restricted, non-transferable, non-exclusive, non-sublicenseable technology and source code license set forth in the Escrow Agreement, provided eBay executes such customary documentation applicable to contingent beneficiaries as the Escrow Agent shall specify from time to time. The foregoing license would only become effective if IPIX (a) no longer continues in the business of providing the Services, (b) experiences a Bankruptcy Event (as defined below) or (c) ceases to operate as a going business concern. The scope of such contingent license would be limited to a reasonable number of copies required for eBay's internal use for maintenance and operation purposes only, and eBay would be required as a condition of such license to maintain and secure such copies on a confidential basis in the same manner it treats its own similar information, but in no case with less than reasonable care. The escrow arrangement will not apply to any code or products IPIX licenses from third parties. If such third party code is necessary for the operation of the Image Management Solution and the Services, IPIX will use its best efforts to obtain, or assist eBay in obtaining, the necessary licenses to use such third party code to operate the Image Management Solution and the Services. A "Bankruptcy Event" means: (w) voluntary or involuntary proceedings by or against a party are instituted in bankruptcy under any insolvency law, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; (x) a receiver or custodian is appointed for such party; (y) proceedings are instituted by or against such party for corporate reorganization, dissolution, liquidation or winding-up of such party, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; or (z) substantially all of the assets of such party are seized or attached and not released within sixty (60) days thereafter. 13.11 Modification; Waiver. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the party to be charged, and the waiver of any breach or default will not constitute a waiver of any other right hereunder or any subsequent breach or default. 13.12 Headings. The headings to the sections and subsections of this Agreement are included merely for convenience of reference and will not affect the meaning of the language included therein. 13.13 Severability. In the event that it is determined by a court of competent jurisdiction as part of a final ruling, government action or binding arbitration, that any provision of this Agreement (or part thereof) is invalid, illegal, or otherwise unenforceable, such provision will be enforced as nearly as possible in accordance with the stated intention of the parties, while the remainder of this Agreement will remain in full force and effect and bind the parties according to its terms. To the extent any provision (or part thereof) cannot be enforced in accordance with the stated intentions of the parties, such provision (or part thereof) will be deemed not to be a part of this Agreement. 17 13.14 Counterparts; Facsimile Signatures. This Agreement may be executed by exchange of signature pages by facsimile and/or in any number of counterparts, each of which shall be an original as against any party whose signature appears thereon and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF the parties hereto have executed this Visual Content Services Agreement as of the day and year first above written. INTERNET PICTURES CORPORATION eBAY INC. By: /s/ Rudy Ruano By: /s/ Jeffrey Jordan ---------------------- -------------------------- Name: Rudy Ruano Name: Jeffrey Jordan Title: Senior Vice President Title: Vice President 18 * Indicates material has been omitted pursuant to a request for confidential information AMENDMENT NO. 1 TO THE VISUAL CONTENT SERVICES AGREEMENT THIS AMENDMENT NO. 1 (the "Amendment") to the VISUAL CONTENT SERVICES AGREEMENT (the "Agreement") is effective as of January 1, 2001 (the "Amendment Effective Date") by and between eBAY INC., a Delaware corporation with its principal place of business at 2145 Hamilton Avenue, San Jose, California 95125 ("eBay"), and INTERNET PICTURES CORPORATION, a Delaware corporation with its principal place of business at 1009 Commerce Park Drive, Oak Ridge, Tennessee 37830 ("IPIX"). Capitalized terms not herein defined shall have the meanings ascribed to them in the Agreement. BACKGROUND A. The parties entered into the Agreement, effective April 19, 2000. B. The parties desire to amend the Agreement to change the payment terms, promotional obligations, and technology escrow terms of the Agreement. C. All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Agreement unless defined otherwise in this Amendment. AMENDMENT 1. SERVICES AND IMPLEMENTATION. Section 2.1(d) ("Services Pricing") of the Agreement is amended to read as follows (insertions are indicated for convenience): 2.1(D) SERVICES PRICING. During the Term, if IPIX furnishes a palette of Image services substantially similar to the Services for online listing and trading to any third party on pricing terms more favorable than the pricing terms offered to eBay herein, eBay may elect to incorporate such pricing terms offered by IPIX to such third party into this Agreement in its sole discretion (provided that Virtual Tour Services are excluded from such obligation). Moreover, if IPIX's then-current effective national pricing for Virtual Tour Services is more favorable than the pricing offered to eBay Customers, the parties shall immediately modify the Agreement to reflect such favorable pricing. The parties will mutually agree on pricing for all Services other than Virtual Tour Services, and will periodically review the then-current pricing for the Services.* 2. PROMOTIONAL IMPRESSIONS. Section 4.2 ("Promotional Impressions") of the Agreement is hereby amended and restated in its entirety as follows: 19 4.2 PROMOTIONAL IMPRESSIONS. * 3. EXCLUSIVITY. A. Section 4.3(a)(iii) * of the Agreement is amended to read as follows (insertions are indicated for convenience): * B. Section 4.3(a)(ii) * of the Agreement is amended to read as follows (insertions are indicated for convenience): * C. SCOPE OF EXCLUSIVITY. Sections 4.3(a)(ii)(A) *, 4.3(a)(ii)(B) *, 4.3(a)(ii)(C) *, and 4.3(e) * of the Agreement are deleted in their entirety, and neither party will have any obligations or restrictions under such sections. 4. PROMOTIONAL IMPRESSIONS. Section 5.1 * is hereby amended and restated in its entirety as follows (insertions are indicated for convenience): * 5. TECHNOLOGY ACCESS FEES. A. CESSATION OF TECHNOLOGY ACCESS FEES. Section 5.2 * is hereby deleted in its entirety, and neither party will have any obligations or restrictions under such sections. B. EXHIBIT E. Exhibit E ("Payment Schedule") of the Agreement is hereby amended and restated in its entirety as follows. * 6. TECHNOLOGY ESCROW. Section 13.10 ("Technology Escrow") of the Agreement is amended to read as follows: 13.10 TECHNOLOGY ESCROW. (a) Within 30 days following the Effective Date, IPIX shall deposit, and maintain during the Term, a copy of the current and complete source code for the software components of the IPIX Technology (other than those used to solely to provide the Virtual Tour Service) (the "Source Code") with an escrow agent mutually agreeable to the parties. Such escrow arrangement will be governed by a standard escrow agreement between such escrow agent and IPIX (the "Escrow Agreement"). IPIX shall name eBay in the Escrow Agreement as a contingent beneficiary entitled to receive the Source Code if IPIX: (i) no longer continues in the business of providing the Services; provided, however that a Change of Control of IPIX (as defined in Section 13.8, but excluding a Change of Control Event occurring under Section 13.8(d)) shall not trigger a release of the Source Code from escrow, (ii) experiences a Bankruptcy Event (as defined below) or (iii) ceases to operate as a going business concern, 20 provided eBay executes such customary documentation applicable to contingent beneficiaries as the Escrow Agent may specify from time to time. The escrow arrangement will not apply to any code or products IPIX licenses from third parties. If such third party code is necessary for the operation of the Image Management Solution and the Services, IPIX will use its best efforts to obtain, or assist eBay in obtaining, the necessary licenses to use such third party code to operate the Image Management Solution and the Services. A "Bankruptcy Event" means: (w) voluntary or involuntary proceedings by or against a party are instituted in bankruptcy under any insolvency law, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; (x) a receiver or custodian is appointed for such party; (y) proceedings are instituted by or against such party for corporate reorganization, dissolution, liquidation or winding-up of such party, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; or (z) substantially all of the assets of such party are seized or attached and not released within sixty (60) days thereafter. (b) IPIX hereby grants to eBay a worldwide, fully-paid, perpetual, irrevocable license (with rights to sublicense such rights to third parties to enable such parties to support eBay) to use, reproduce, modify and otherwise exploit the Source Code, solely to support the uses contemplated under the Agreement, where such present license is exercisable upon the release of the Source Code under the Escrow Agreement. eBay will (and will require any third party to which it provides such Source Code to support the provision of the Services to eBay) to maintain and secure such copies on a confidential basis in the same manner it treats its own similar information, but in no case with less than reasonable care." 7. GENERAL. 7.1 GOVERNING LAW; VENUE. This Amendment shall be construed in accordance with and governed exclusively by the laws of the State of California applicable to agreements made among California residents and to be performed wholly within such jurisdiction, regardless of such parties' actual domiciles. Both parties submit to personal jurisdiction in California and further agree that any cause of action arising under this Amendment shall be brought exclusively in a court in Santa Clara County, CA. 7.2 FULL FORCE AND EFFECT. Except as may be specifically amended by this Amendment, the Agreement remains in full force and effect in accordance with its terms. 21 IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the Visual Content Services Agreement. eBAY INC. ("eBAY") INTERNET PICTURES CORPORATION ("IPIX") By: /s/ Jeff Jordan By: /s/ Howard Field ---------------------------------- -------------------------------- Name: Jeff Jordan Name: Howard Field Title: Senior Vice President, eBay U.S. Title: Senior Vice President 22 * Indicates material has been omitted pursuant to a request for confidential information AMENDMENT NO. 2 TO THE VISUAL CONTENT SERVICES AGREEMENT THIS AMENDMENT NO. 2 (the "Amendment") to the VISUAL CONTENT SERVICES AGREEMENT is effective as of September 26, 2001 (the "Amendment Effective Date") by and between eBAY INC., a Delaware corporation with its principal place of business at 2145 Hamilton Avenue, San Jose, California 95125 ("eBAY"), and INTERNET PICTURES CORPORATION, a Delaware corporation with its principal place of business at 1009 Commerce Park Drive, Oak Ridge, Tennessee 37830 ("IPIX"). BACKGROUND D. The parties entered into the Visual Content Services Agreement, effective April 19, 2000 (the "Agreement"). E. The parties entered into Amendment No. 1 to the Visual Content Services Agreement, effective January 1, 2001 (the "First Amendment") to adjust certain rights and obligations. F. The parties now desire to amend the Agreement to, among other things, modify the licenses, payment terms, promotional obligations, and technology escrow terms of the Agreement, as well as to make provisions for the purchase and sale-leaseback of certain IPIX hardware to eBay. G. All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Agreement unless defined otherwise in this Amendment. AMENDMENT 1. IPIX TECHNOLOGY. Section 1.15 "IPIX Technology" is hereby amended and restated in its entirety as follows: 1.15 "IPIX Technology" means any proprietary software, hardware, or other technology used or necessary in the development, implementation, or provision of Services to Customers (including but not limited to the Image Management Solution and Plug-Ins), any updates thereto, and all intellectual property rights (e.g., trademarks, trade secrets, copyrights, patents, and patent applications) associated therewith. 2. ENHANCED SERVICES PAYMENTS. Effective October 1, 2001, Section 5.3 * is hereby amended and restated in its entirety as follows: * 23 3. EXHIBIT I. Effective October 1, 2001, Exhibit I as follows shall be added to the Agreement: * 4. PROPRIETARY RIGHTS. Section 7.1 ("IPIX Technology; Help Tools; IPIX Images") is hereby amended and restated in its entirety as follows (changes are indicated for convenience): 7.1 IPIX Technology; Help Tools; IPIX Images. Except as modified by Sections 7.1(c) and 7.1(d) below: (a) All IPIX Technology, Help Tools and all IPIX Images are, and at all times will remain, the exclusive property of IPIX, and no provision of this Agreement implies any transfer to eBay of any ownership interest in the IPIX Technology, Help Tools or the IPIX Images. The licenses set forth in Sections 7.1(b) and 7.1(c) confer neither title to, nor ownership in, the IPIX Technology, Help Tools or the IPIX Images and are not a sale of any rights therein. eBay hereby irrevocably assigns to IPIX all right, title and interest worldwide in and to any modifications or derivative works of the IPIX Technology, Help Tools and IPIX Images made by eBay ("eBay Modifications"), including without limitation any copyrights, trade secrets, patent rights, moral rights, contract rights and licensing rights. (b) IPIX hereby grants to eBay a nonexclusive, fully-paid, royalty-free, worldwide license to use, reproduce, display, digitally perform and/or modify the IPIX Technology, Help Tools and IPIX Images (including any eBay Modifications) solely as necessary to provide the Services in accordance with the Agreement. eBay may sublicense or distribute the IPIX Technology or any portion thereof (such as Plug-Ins), Help Tools and IPIX Images to Customers, solely as necessary to make the Services available to Customers on the Sites. In addition, IPIX hereby grants to eBay a perpetual, irrevocable, nonexclusive, fully-paid, royalty-free, worldwide foregoing license to use, reproduce, digitally perform, display, modify and distribute for any purpose any derivative works of Help Tools which eBay creates in the process for localizing such Help Tools for use on international Sites. (i) As reasonably requested by IPIX from time to time, eBay agrees to include such ownership restrictions and other licensing provisions regarding the IPIX Technology, IPIX Images and Help Tools in relevant legends, disclaimers and license agreements presented to Customers on the Sites in connection with the Services. eBay shall reproduce all copyright notices in the original IPIX Technology, Help Tools and IPIX Images and on all copies or modifications thereof where the omission of such notices would jeopardize or impair IPIX's intellectual property rights therein. (ii) Any transfer, copying, distribution or other use of the IPIX Technology, Help Tools and IPIX Images by eBay other than as expressly provided herein constitutes a material breach of this Agreement. 24 (iii) eBay will not disassemble or decompile the IPIX Technology including single Java class files under any circumstances. The disassembly or decryption by eBay of the foregoing constitutes a material breach of this Agreement. (iv) eBay will not export or re-export the IPIX Technology or any copy or adaptation in violation of any applicable laws or regulations. (c) IPIX hereby grants eBay a perpetual, irrevocable, nonexclusive, fully-paid, royalty-free, worldwide license to use, reproduce, display, perform, modify, create derivative works of, distribute copies, make, have made, import, use, and in any way exploit the IPIX Technology to provide the Services (including, but not limited to, IPIX hosting technology, server-based software (source code, object code, and executable code), client-based software (source code, object code, and executable code), and Plug-Ins), with the right to sublicense such IPIX Technology to support the foregoing. The foregoing license is granted presently and shall become exercisable only upon occurrence of a Triggering Event (as defined below). Each of the following is a "Triggering Event", and parties acknowledge and agree that the Triggering Events are noncurable: * 5. EXHIBIT E. Effective October 1, 2001, Exhibit E shall be amended and restated as follows: * 6. 6.3 TERMINATION FOR BREACH. Section 6.3 ("Termination for Breach") is hereby amended by adding a new Section 6.3(b) as follows: (b) An occurrence of any Triggering Event other than Cash Failure (as specified in Section 13.10(b)(1)) shall constitute a material breach of the Agreement, and eBay may terminate the Agreement after the occurrence of any such Triggering Event upon written notice to IPIX. In addition, in the event of the occurrence of a Triggering Event caused by Cash Failure and the exercise by eBay of its rights under Section 7.1(c) and payment under Section 7.1(d), then this Agreement shall terminate. The obligations of each party to make any payments accrued and owing up to the date of termination shall survive any such termination. 7. REPRESENTATIONS AND WARRANTIES. Section 9.1 ("Warranty") of the Agreement is hereby amended and restated in its entirety as follows: 9.1 Warranty. IPIX hereby represents and warrants to eBay that: (i) any content provided by IPIX to eBay (including but not limited to content contained in the Help Tools) will not contain any libelous, defamatory, obscene or slanderous material, and is not materially false, misleading or inaccurate, and will not contain any viruses, worms, time bombs, cancelbots or other programming routines intended to damage, detrimentally interfere with, surreptitiously intercept or expropriate any system, data, or personal information; (ii) IPIX has the necessary right, power and authority to enter into this Agreement, First Amendment, and this Amendment and to grant the licenses contained herein; and (iii) IPIX's execution, delivery, and performance of its obligations under this Amendment 25 will not cause a breach or constitute an event of default under any agreement to which IPIX is a party or by which IPIX is bound. 8. TRANSITION ASSISTANCE. In the event that IPIX experiences a Triggering Event, IPIX will use commercially reasonable efforts to make available individuals familiar with the IPIX Technology (e.g., developers, operations, and quality assurance personnel), for hire by eBay to assist eBay in providing the Services. 9. TECHNOLOGY ESCROW. Section 13.10(a) ("Technology Escrow") of the Agreement is amended and restated to read as follows (changes are indicated for convenience): 13.10 TECHNOLOGY ESCROW. (a) Within 30 days following the Amendment Effective Date, IPIX shall amend the May 30, 2000 Two-Party Escrow Agreement; such amended escrow agreement shall be mutually agreeable to the parties and shall contain terms satisfactory to eBay (including reformation of Bankruptcy Events to conform to the Triggering Events and streamlined dispute resolution and release procedures as set forth in draft Amendment No. 1 to the Two-Party Escrow Agreement) (the "Escrow Agreement"). Under such Escrow Agreement, IPIX shall deposit, and maintain during the Term, a copy of the current and complete source code, object code, and executable code for the software components of the IPIX Technology as well as all associated documentation. IPIX shall name eBay in the Escrow Agreement as a contingent beneficiary entitled to receive the Code immediately upon the following events: (i) if IPIX no longer continues in the business of providing the Services; provided, however that a Change of Control of IPIX (as defined in Section 13.8, but excluding a Change of Control Event occurring under Section 13.8(d)) shall not trigger a release of the Code from escrow, (ii) upon the occurrence of a Triggering Event (as defined in Section 7.1(c) above) and eBay exercises its rights under Section 7.1(c); or (iii) if IPIX ceases to operate as a going business concern; provided eBay executes such customary documentation applicable to contingent beneficiaries as the Escrow Agent may specify from time to time. The escrow arrangement will not apply to any code or products IPIX licenses from third parties. If such third party code is necessary for the operation of Services, IPIX will assist eBay in obtaining, the necessary licenses to use such third party code to operate the Services. (b) An "Adverse Financial Event" means: (1) *; (2) IPIX (i) ceases to conduct its business in the ordinary course, or (ii) commences any insolvency proceeding with respect to itself, or (iii) takes any action to effectuate or authorize any of the foregoing; (3) voluntary or involuntary proceedings by or against IPIX are instituted in bankruptcy under any insolvency law, which proceedings, if 26 involuntary, shall not have been dismissed within thirty (30) days after the date of filing; (4) a receiver or custodian is appointed to effectuate or authorize any of the foregoing; (5) proceedings are instituted by or against such party for corporate reorganization, dissolution, liquidation or winding-up of such party, which proceedings, if involuntary, shall not have been dismissed within thirty (30) days after the date of filing; or (6) substantially all of the assets of such party are seized or attached and not released within thirty (30) days after the date of filing days thereafter. 10. 13.7 FORCE MAJEURE. Section 13.7 ("Force Majeure") of the Agreement is amended and restated to read as follows (changes are indicated for convenience): Force Majeure. Nonperformance of either party will be excused to the extent that performance is rendered impossible by storm, lockout or other labor trouble, riot, Internet infrastructure failure, hacker attack, war, rebellion, act of terrorism, strike, fire, flood, accident or other act of God, governmental acts, orders or restrictions, or any other reason where failure to perform is beyond the control of the non-performing party. 11. BANKRUPTCY CODE. The parties acknowledge and agree that the Agreement is a contract under which IPIX is a licensor of intellectual property as provided in Section 365(n) of Title 11, United States Code (the "Bankruptcy Code"). IPIX acknowledges that if IPIX, as a debtor in possession or trustee in bankruptcy in a case under the Bankruptcy Code, rejects this Agreement, eBay may elect to retain its rights under this Agreement as provided in Section 365(n) of the Bankruptcy Code. Upon written request of eBay to IPIX or the bankruptcy trustee, IPIX or such bankruptcy trustee will not interfere with the rights of eBay as provided in this Agreement. 12. NOTICE AND ADDITIONAL DOCUMENTS. * 27 13. GENERAL. 13.1 GOVERNING LAW; VENUE. This Amendment shall be construed in accordance with and governed exclusively by the laws of the State of California applicable to agreements made among California residents and to be performed wholly within such jurisdiction, regardless of such parties' actual domiciles. Both parties submit to personal jurisdiction in California and further agree that any cause of action arising under this Amendment shall be brought exclusively in a court in Santa Clara County, CA. 13.2 FULL FORCE AND EFFECT. Except as may be specifically amended by this Amendment, the Agreement remains in full force and effect in accordance with its terms. 13.3 CONFLICT. In the event of any conflict between the Visual Content Services Agreement, the First Amendment, and this Amendment, the terms set forth in this Amendment herein shall supersede any conflicting term(s) set forth in the Visual Content Services Agreement and the First Amendment. IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 to the Visual Content Services Agreement. eBAY INC. ("eBAY") INTERNET PICTURES CORPORATION ("IPIX") By:/s/ Jeff Jordan By: /s/ Donald Strickland ------------------------------ ------------------------------ Name: Jeff Jordan Name: Donald Strickland Title: Senior Vice President, eBay U.S. Title: Chief Executive Officer 28 EX-10.2 4 g72381ex10-2.txt PURCHASE AGREEMENT - LEASEBACK EXHIBIT 10.2 eBay Inc. 2145 HAMILTON AVENUE SAN JOSE, CA 95125 PURCHASE AGREEMENT - LEASEBACK THIS AGREEMENT dated as of September 26, 2001 by and between INTERNET PICTURES CORPORATION, a Delaware corporation, having its principal place of business at 1009 Commerce Park Drive, Oak Ridge, Tennessee 37830, hereinafter called SELLER and eBay Inc. a Delaware corporation, having its principal place of business at 2145 Hamilton Avenue, San Jose, California, 95125, hereinafter called BUYER. All capitalized terms used in this Agreement shall have the meanings ascribed to them in the Visual Content Services Agreement, effective as of September 7, 2001, Amendment No. 1 to the Visual Content Services Agreement, effective January 1, 2001, and Amendment No. 2 to the Visual Content Services Agreement, effective as of the date hereof, in each case by and between the SELLER and BUYER (collectively, the "VCSA Agreement"). WITNESSETH, that in consideration of the mutual undertaking herein contained, the parties agree as follows: 1. SALE. SELLER agrees to sell and BUYER agrees to purchase from SELLER the equipment listed on Schedule A-1 attached hereto and incorporated by reference herein together with all additions, attachments, parts or accessories incorporated or attached therein or associated therewith (referred to as the "Equipment") in accordance with the terms and conditions specified herein. All associated licenses to third party software resident on the Equipment (the "Third Party Licenses") are listed on Schedule A-2. 2. PURCHASE PRICE. BUYER shall purchase the Equipment for an amount equivalent to two million four hundred seventy four thousand four hundred forty five dollars and no cents ($2,474,445.00). SELLER shall provide BUYER with all of the purchase documentation associated with SELLER's purchase of the Equipment from the vendor(s) (the "Equipment Vendor(s)"), including but not limited to the purchase documentation, invoices, and bill of sale provided to SELLER. If SELLER has not yet paid the Equipment Vendor(s) from whom SELLER is purchasing the Equipment, BUYER shall pay said Purchase Price directly to the Equipment Vendor(s), unless otherwise agreed. 3. DELIVERY. SELLER shall deliver and BUYER shall accept delivery of the Equipment on the Closing Date at a location designated by BUYER prior to or on the Closing Date. Irrespective of any other provision hereof, SELLER shall bear all risk of damage from fire, the elements or otherwise until the full payment of the purchase price is paid. 4. CLOSING DATE. The Closing shall take place on September 26, 2001. 5. LEASEBACK. This Agreement is contingent upon SELLER leasing the Equipment from BUYER pursuant to Lease Schedule No. 1 to the Master Lease Agreement dated as of the date hereof between SELLER, as Lessee, and BUYER, as Lessor (collectively, the "Lease"). SELLER represents and warrants to BUYER that the Equipment has been installed, tested, inspected and accepted by SELLER from the Equipment Vendor(s) and that the Equipment is in good working order. 6. MAINTENANCE/WARRANTIES. (a) SELLER warrants that either (i) the Equipment is under "new" equipment warranty from the manufacturer or (ii) the Equipment has been continuously under a maintenance contract and will be eligible for the manufacturer's maintenance agreement as of the Closing Date and all Equipment is at current manufacturer release, revision and/or engineering change levels. (b) SELLER shall and hereby does assign to BUYER the benefit of all rights applicable to the Equipment in connection with warranties, servicing, training, patent and copyright indemnities and the like, including the right to use and possess licensed products associated with the Equipment provided by the manufacturer or Equipment Vendor(s). 7. SELLER REPRESENTATIONS. (a) SELLER is a corporation duly existing and in good standing under the laws of the state of its incorporation and qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or its ownership of property requires that it be so qualified. (b) SELLER is duly authorized to execute, deliver and perform its obligations under this Agreement and all corporate actions required on its part for the due execution, delivery and performance of the transaction contemplated herein have been duly and effectively taken. (c) SELLER's execution, delivery, and performance of its obligations under this Agreement are not in conflict with nor constitute a breach of any provision contained in 2 SELLER's Certificate of Incorporation or Bylaws, nor will they constitute an event of default under any agreement to which SELLER is a party or by which SELLER is bound. (d) The Equipment, together with the Third Party Licenses, constitutes all of the materials required to operate the IPIX Technology and to provide the Services. Each item of Equipment is owned by SELLER free and clear of any liens and encumbrances of any kind or description. Upon purchase of the Equipment hereunder, BUYER will acquire good and marketable title in and to the Equipment. Each item of Equipment (i) is currently located in the State of California and (ii) has at all times been located in the State of California during SELLER's ownership of the Equipment. The SELLER has paid in full the Equipment Vendor(s) from whom SELLER purchased the Equipment. At the time of SELLER's purchase of the Equipment, SELLER paid in full all sales taxes associated with the Equipment. (e) Each item of Equipment is in good condition and repair (ordinary wear and tear excepted) and is adequate and appropriate for the uses to which it is currently being put by SELLER. All representations and warranties herein shall survive the execution of this Agreement and the purchase of the Equipment. 8. TITLE. Title shall pass from SELLER to BUYER on the date BUYER tenders payment of the purchase price. SELLER shall provide BUYER with a Bill of Sale in the form of Schedule B attached hereto and incorporated by reference herein upon payment of the full Purchase Price to evidence passage of title to the Equipment from SELLER to BUYER free and clear of all claims, liens and encumbrances. 9. TAXES AND TAX BENEFITS. SELLER hereby indemnifies and holds BUYER harmless for any sales or other tax arising from the transaction between the Equipment Vendor and SELLER. BUYER hereby agrees that with respect to Equipment, SELLER shall be entitled to all the tax benefits that are afforded to an owner of equipment under the Internal Revenue Code of 1986 (the "Code"). 10. NOTICES. Any notice provided for herein shall be in writing and sent by registered or certified mail, postage prepaid, addressed to the party for which it is intended at the address set forth in the first paragraph of this Agreement or to such other address as either party shall from time to time indicate in writing, and said notice shall be effective upon receipt or three days from the date of mailing, whichever occurs first. 11. COVENANTS. 3 (a) Upon request by BUYER, SELLER shall assist BUYER in obtaining all licenses necessary or useful to operate the Services (including but not limited to executing any consents and/or assignments to transfer and/or effectuate such license(s) to BUYER for no additional incremental fees. (b) BUYER covenants that it shall pay any applicable California sales taxes arising from the sale of the Equipment to BUYER pursuant to this Agreement. 12. MISCELLANEOUS. (a) This constitutes the entire Agreement between SELLER and BUYER solely with respect to the purchase and sale of the Equipment and no representation or statement not contained herein shall be binding upon SELLER or BUYER as a warranty or otherwise, unless in writing and executed by the party to be bound thereby. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. (c) This Agreement shall be governed by and construed in accordance with the laws of the State of California, including all matters of construction, validity, performance and enforcement. Any disputes arising under this Agreement may be brought in the state courts and the federal courts located in San Jose, California, and the parties hereby consent to the personal jurisdiction and venue of these courts. (d) This Agreement is subject to acceptance by BUYER at its offices in San Jose, California, and shall only become effective on the date thereof. (e) This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and of equal force and effect. (f) SELLER agrees to and shall indemnify and hold BUYER harmless from and against all claims, liens, costs, loss, expenses or damages arising out of the breach by SELLER of its obligations or out of any misrepresentation by SELLER, hereunder. (g) THE PARTIES HERETO EACH HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT. [Remainder of page intentionally left blank.] 4 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and do each hereby warrant and represent that its respective signatory whose signature appears below has been and is on the date of this Agreement duly authorized by all necessary and appropriate corporate action to execute this Agreement. INTERNET PICTURES CORPORATION eBay Inc., AS SELLER AS BUYER By:/s/ Donald Strickland By:/s/ Michael R. Jacobson -------------------------- -------------------------- Title: President and CEO Title: Vice President, Legal Affairs Date: September 26, 2001 Date: September 26, 2001 EX-10.3 5 g72381ex10-3.txt MASTER LEASE AGREEMENT EXHIBIT 10.3 MASTER LEASE AGREEMENT EBAY INC. (INTERNET PICTURES CORPORATION) This MASTER LEASE AGREEMENT (this "MASTER LEASE") is made as of September 26, 2001, between eBay Inc., a Delaware corporation ("LESSOR"), with a place of business at 2145 Hamilton Avenue, San Jose, California, 95125, and Internet Pictures Corporation, a Delaware corporation ("LESSEE") with a primary place of business at 1009 Commerce Park Drive, Oak Ridge Tennessee 37830. All capitalized terms used in this Agreement shall have the meanings ascribed to them in the Visual Content Services Agreement, effective as of April 19, 2000, Amendment No. 1 to the Visual Content Services Agreement, effective January 1, 2001, and Amendment No. 2 to the Visual Content Services Agreement, effective as of the date hereof, in each case by and between the SELLER and BUYER (collectively, the "VCSA Agreement"). 1. DEFINITIONS. As used in this agreement: (a) "ASSIGNEE" means an assignee or secured party of Lessor under any Lease. (b) "COMMENCEMENT DATE" means the date on which the term of any Lease shall commence with respect to Equipment listed on the applicable Lease Schedule, which date shall be the date specified on such Lease Schedule as the Commencement Date. (c) "DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. (d) "EVENT OF DEFAULT" shall have the meaning set forth in SECTION 14. (e) "EVENT OF LOSS" means any theft, damage to or destruction to any item of Equipment, including, but not limited to, any condemnation, seizure, or requisition of title or use thereof. (f) "EQUIPMENT" means, individually or collectively, any hardware or other equipment listed on the applicable Lease Schedule, and all replacements thereof, and repairs, additions, and accessories thereto. (g) "LEASE" means a Lease Schedule incorporating the terms of this Master Lease. If more than one Lease Schedule which reference this Master Lease have been executed, then each Lease Schedule, together with the referenced Master Lease Agreement, shall constitute a separate and independent Lease; the original of such Lease shall consist of the original, manually signed Lease Schedule and a true copy of this Master Lease. (h) "LEASE SCHEDULE" means any lease schedule signed by Lessor and Lessee incorporating by reference the terms and provisions of this Master Lease. (i) "LESSOR" means, collectively, eBay Inc., a Delaware corporation, and any applicable Assignee. (j) "PURCHASE DATE" means the first day after the last day of the applicable Term, in the event that any Equipment is purchased hereunder. (k) "RENTAL PAYMENT" means all rental payments due or that become due hereunder, including any advance payments, specified on each Lease Schedule. (l) "RENT" means the aggregate of all Rental Payments. (m) "SUPPLIER" means any supplier of the Equipment subject to this Master Lease. (n) "TERM" means three (3) years from the date of each such applicable Lease Schedule. 2. SCOPE OF LEASE. Lessor hereby agrees to lease to Lessee and Lessee hereby agrees to lease from Lessor the Equipment solely (a) for Lessee's business purposes and not for personal or consumer use, and (b) under the terms and conditions of this Master Lease and the terms and conditions set forth in the applicable Lease Schedule. Any term or condition of any Lease Schedule that conflicts with a term or condition of this Master Lease shall prevail over such term or condition of this Master Lease. 3. PAYMENT OF RENT; TERM. Lessee shall pay Rental Payments to Lessor in the amount specified on each Lease Schedule, for the use of the applicable Equipment during the Term. If the Commencement Date does not fall on the first day of a month, the payment for the partial month at the commencement of the Lease shall be in amount as set forth on the Lease Schedule (the "INTERIM PAYMENT"). The Interim Payment is due on the Commencement Date, and the remaining Rental Payments shall be due and payable on the first day of the immediately following month and, without further demand, on the first day of each subsequent month during the Term thereafter, or as otherwise specified in the applicable Lease Schedule. All payments due hereunder shall be payable to Lessor at the address and in the manner specified in Lessor's invoice, or in the manner and at such address as Lessor may notify Lessee of in writing. Lessee agrees that, if it fails to make any Rental Payment or other payment when due hereunder, Lessee will pay to Lessor interest on the overdue amount at the rate of one and one-half percent (1.5%) per month, or the maximum legal interest rate, whichever is less. LESSEE AGREES AND ACKNOWLEDGES THAT (a) EACH LEASE IS A NET LEASE AND SHALL NOT BE CANCELED OR TERMINATED EXCEPT AS EXPRESSLY PROVIDED HEREIN OR ON THE APPLICABLE LEASE SCHEDULE, AND (b) LESSEE'S OBLIGATION TO MAKE ALL RENTAL PAYMENTS DUE OR THAT BECOME DUE HEREUNDER OR THEREUNDER SHALL BE ABSOLUTE, UNCONDITIONAL, NONCANCELLABLE AND NONREFUNDABLE, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT, REDUCTION, SETOFF, DEFENSE, INTERRUPTION, CLAIM, COUNTERCLAIM, ADJUSTMENT, OR DEFERMENT FOR ANY REASON WHATSOEVER. A handling and delivery charge to cover all transportation, packing, installation, and handling of the Equipment to and from Lessor's facilities shall be paid by Lessee. 4. INSTALLATION AND COMPLETION OF LEASE SCHEDULE. Lessee shall provide and maintain an installation environment that is in accordance with Supplier's Equipment specifications or user's manual. Except as otherwise specified in the applicable Lease Schedule, 2 Lessee shall furnish all labor and materials required to install the Equipment. Lessee agrees that it shall, with respect to the Equipment listed on Schedule 1 attached hereto, on the date hereof, and with respect to any subsequent Schedule, promptly, but in no event later than ten (10) days after its receipt of Equipment, (a) install such Equipment, and (b) complete and return to Lessor a signed Lease Schedule for such Equipment. 5. WARRANTY; LIMITATION OF LIABILITY. Lessee acknowledges that it has made the selection of each item of Equipment based upon its own judgment and expressly disclaims any reliance upon statements made by Lessor. Lessee shall be provided the benefit of any standard product warranties applicable to all Equipment that are normally furnished by Supplier to purchasers of identical Equipment, and the right to enforce any such warranty made by any Supplier is hereby assigned to Lessee for the term of the applicable Lease Schedule. LESSOR MAKES NO, AND DISCLAIMS ALL, WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL LESSOR BE LIABLE TO LESSEE OR ANY OTHER PERSON FOR EXEMPLARY, INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF THIS MASTER LEASE, ANY LEASE SCHEDULE OR THE USE OR POSSESSION OF EQUIPMENT, INCLUDING WITHOUT LIMITATION, THE COST OF COVER, LOSS OF PROFIT, USE, SAVINGS OR REVENUE, OR THE CLAIMS OF THIRD PARTIES, WHETHER OR NOT LESSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS. Lessee understands and agrees that neither the Supplier nor any salesperson of Supplier is an agent of Lessor. 6. TITLE. The Equipment shall always remain and be deemed personal property even though it may become attached or affixed to realty. Lessor shall retain title to the Equipment and no right, title, or interest in or to any Equipment shall pass to Lessee, except as expressly set forth in this Master Lease. If requested by Lessor, Lessee will affix plates or markings on the Equipment indicating the interests of Lessor and its Assigns therein, and Lessee will not allow any other indicia of ownership or other interest in the Equipment to be placed thereon. Lessee shall (a) not convey, sell, transfer, assign, sublet or otherwise dispose of, or permit any lien or encumbrance upon or against any interest in, this Master Lease, any Lease Schedule or any Equipment, (b) give immediate written notice to Lessor of any attempt to create such lien or encumbrance, and (c) at its sole expense, defend, indemnify and hold Lessor harmless from and against any claims, damages, costs, expenses, losses or the like relating to the protection and preservation of Lessor's title and interest in any Equipment. 7. TAXES. Lessee or Lessor, at Lessor's option, agrees to pay when due all sales, use, property or estimated property, excise and other taxes, fees or other charges of any nature whatsoever (except for any taxes based on Lessor's net income), however designated, together with any fines, penalties or interest thereon, now or hereafter imposed by any governmental entity or paid or accrued by Lessor, whether based upon any Lease, the Rental Payments or the purchase, license, delivery, ownership, leasing, use, possession or return of any Equipment. Lessee will pay all property or estimated property taxes on the Equipment directly to the appropriate taxing authority. Lessee will reimburse Lessor for any such payments made by Lessor promptly, but in no event later than thirty (30) days after Lessor's request. Any fees, 3 taxes or other charges paid by Lessor upon failure of Lessee to make such payments shall become immediately due from Lessee to Lessor. 8. LESSEE REPRESENTATIONS. Lessee hereby represents to Lessor that: (a) Lessee is a corporation duly existing and in good standing under the laws of the state of its incorporation and qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or its ownership of property requires that it be so qualified. (b) Lessee is duly authorized to execute, deliver and perform its obligations under this Master Lease and all corporate actions required on its part for the due execution, delivery and performance of the transaction contemplated herein have been duly and effectively taken. (c) Lessee's execution, delivery, and performance of its obligations under this Master Lease are not in conflict with nor constitute a breach of any provision contained in Lessee's Certificate of Incorporation or Bylaws, nor will they cause a breach or constitute an event of default under any agreement to which Lessee is a party or by which Lessee is bound. All representations and warranties herein shall survive the execution of this Agreement. 9. REPLACEMENT AND UPGRADE OF EQUIPMENT. At any time during the Term and so long as no Default or Event of Default shall have occurred and be continuing hereunder, Lessee shall have the sole right (after good faith consultation with Lessor) to replace or update the Equipment to the extent Lessee reasonably determines it necessary or desirable to provide the Services in accordance with the Performance Standards set forth in the VCSA Agreement. In any such instance, Lessee shall provide Lessor with the first right to enter into a transaction to purchase and/or enter into a sale/leaseback transaction (a "Purchase Transaction") with respect to all or any portion of such upgraded or replacement equipment to the Equipment (the "Replacement Equipment") by giving Lessor written notice, with sufficient detail, describing the Replacement Equipment desired to be purchased (a "Replacement Equipment Notice"). Without limiting the foregoing, if the fair market value of the Replacement Equipment contained in a Replacement Equipment Notice is an amount that meets or exceeds $100,000 in the aggregate, Lessor shall have fifteen (15) days after written receipt of such Replacement Equipment Notice to elect to enter into a Purchase Transaction. In the alternative, if the fair market value of the Replacement Equipment contained in the Replacement Equipment Notice is an amount that is less than $100,000 in the aggregate (a "De Minimis Replacement Notice"), Lessor's first right to enter into a Purchase Transaction for such Replacement Equipment shall continue to remain vested in Lessor indefinitely, unless Lessor waives in writing its right to enter into a Purchase Transaction for such Replacement Equipment. If Lessor decides to proceed with a Purchase Transaction, the Lessor shall decide whether to purchase any such Replacement Equipment either directly from the vendor for such Replacement Equipment or, in the event Lessee has purchased any Replacement Equipment set forth in a De Minimis Replacement Notice, from the Lessee. To the extent Lessor agrees to finance the purchase of any Replacement Equipment in accordance with this Section 9, the Lessee shall: (i) upon the request of Lessor, execute a Lease 4 Schedule evidencing a Lease for such Replacement Equipment; (ii) promptly pay to Lessor in cash the principal amount relating to the Equipment being replaced as determined in accordance with the applicable Lease Schedule, and the Lessee's rental payments under such Lease Schedule shall be appropriately reduced; and (iii) promptly pay any and all Rental Payments then due and owing to Lessor. 10. USE; MAINTENANCE; ALTERATIONS; INSPECTION; REMOVAL. Lessee agrees to comply with all laws and regulations applicable to this Master Lease and each Lease and the use and possession of any Equipment. Lessee, at its sole cost and expense, shall use each item of Equipment in accordance with Supplier's guidelines, meet any and all recertification requirements and keep in effect an Equipment maintenance agreement with Supplier or other party acceptable to Lessor. Lessee shall furnish all parts, materials and labor required to make all necessary repairs and keep the Equipment in good operating condition, and such parts and material shall become part of the applicable Equipment and the property of Lessor, subject to the applicable Lease. Lessee shall not make any alterations or attachments to any Equipment without the prior written consent of Lessor, and any permitted alteration or attachment that cannot be readily removed without damaging such Equipment's performance or merchantability shall become part of such Equipment and the property of Lessor. To the extent applicable, Lessor shall have the right during normal business hours to enter the premises where the Equipment is located to inspect the Equipment. Lessee shall not move the Equipment from the location where the Equipment is located, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT. 11. PURCHASE; RETURN OPTION. (a) If no Default or Event of Default shall have occurred and be continuing hereunder, and upon not less than ninety (90) days' or more than one hundred and eighty (180) days' written notice to Lessor before the end of any Term, Lessee shall have the option to (i) purchase or (ii) return the Equipment at the end of the applicable Term. (b) Provided that Lessee shall have given notice pursuant to SECTION 11(a) above, Lessee shall have the option to purchase on the Purchase Date, all (but not less than all) of the Equipment on the applicable Lease Schedule for an amount equal to the purchase option amount specified in the applicable Lease Schedule. Upon exercise of such option, Lessee shall pay to Lessor on the Purchase Date the aforementioned amount in cash, together with all sales and other applicable taxes and any other amounts due and owing hereunder, whereupon LESSOR SHALL CAUSE SUCH EQUIPMENT TO BE TRANSFERRED TO LESSEE WITHOUT RECOURSE OR WARRANTY, ON AN "AS-IS," "WHERE-IS" BASIS. (c) If Lessee does not elect to purchase the Equipment, Lessee shall return such Equipment at the end of the applicable Term at its own expense and risk of loss, and Lessee agrees to (i) pay for any repairs to place the applicable Equipment in the same condition as when received by Lessee, reasonable wear and tear excepted, (ii) obtain certification of such Equipment for maintenance by Supplier or its designee, (iii) promptly cause the Equipment to be disassembled, de-installed, inspected and crated in accordance with Supplier's recommendations, and (iv) deliver such Equipment, freight prepaid, to a location specified by Lessor. If any Equipment is not received by Lessor within fifteen (15) days after the end of the applicable Term, or if Lessee fails to provide Lessor with written notification of Lessee's intention to 5 purchase or return the Equipment, the applicable Lease Schedule will be deemed to be renewed for subsequent ninety (90) day periods at the original Rental Payment amount, until such time as a ninety (90) day prior written notice of purchase or return is given by Lessee. (d) Notwithstanding the foregoing, so long as (i) no Default or Event of Default shall have occurred and be continuing hereunder, (ii) no Triggering Event shall have occurred under the VCSA Agreement and (iii) the VCSA Agreement has been terminated in accordance with its terms, Lessee shall, within ninety (90) days of the effective termination date of the VCSA Agreement, purchase from Lessor for cash all of the Equipment under each Lease in an amount equal to the principal amount relating to all of such Equipment as determined in accordance with each Lease Schedule. Upon Lessee's payment to Lessor in full of all such amount made in accordance with this Section 11(d), this Master Lease and all Lease Schedules shall terminate. 12. INSURANCE. Lessee shall obtain and maintain liability insurance and insurance against loss or damage to the Equipment including, without limitation, loss by fire (including extended coverage), theft and such other risks of loss as are customarily insured against on that type of Equipment. Such insurance shall be in such amounts, in such form and with such insurers as are acceptable to Lessor, and shall contain a requirement that no material modification of, cancellation of, or failure to renew coverage may occur unless thirty (30) days prior written notice thereof has been provided to Lessor. Lessee shall cause its insurer to name Lessor and any Assignees as loss payees and additional insureds, and upon Lessor's request, Lessee shall cause its insurer to provide to Lessor a certificate evidencing such coverage within fifteen (15) days thereafter. In addition, Lessee shall maintain insurance coverage on the Equipment that meets or exceeds the level and scope of insurance that Lessee maintained on the Equipment during the period that Lessee owned the Equipment. 13. LOSS OR DAMAGE TO EQUIPMENT. Until the Equipment is returned to and received by Lessor as provided in SECTION 11 above, Lessee shall bear the entire risk of any Event of Loss. No Event of Loss shall relieve Lessee from its obligation to pay Rent, except as provided in (c) below. If any Event of Loss occurs, Lessee shall immediately notify Lessor and, at the option of Lessor, shall (a) place the affected Equipment in good repair and working order, (b) replace such Equipment with like Equipment in good repair and working order, with clear title to the replacement Equipment vested in Lessor, or (c) promptly pay to Lessor an amount equal to the sum of (i) all accrued and unpaid rent, (ii) the present value discounted at five percent (5%) of all remaining Rental Payments, (iii) the Lessor's original booked residual value, if any, of the Equipment, discounted in accordance with GAAP at the discount rate of five percent (5%), and (iv) any taxes, late fees, indemnity payments or other amounts due under this Master Lease or the applicable Lease Schedule. If such Equipment is subject to a fixed purchase option, the amount payable under SECTION 13(c) above shall be the amount required to exercise such option. Upon payment of the amount required by SECTION 13(c), Lessor shall transfer to Lessee, WITHOUT RECOURSE OR WARRANTY (EXPRESS OR IMPLIED), ALL OF LESSOR'S INTEREST, IF ANY, IN AND TO SUCH EQUIPMENT ON AN "AS IS," "WHERE IS" BASIS. The proceeds of any insurance payable with respect to such Equipment shall be applied, at the option of Lessor, either toward (1) replacement or repair of such Equipment, or (2) payment of any of Lessee's obligations hereunder. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make claim for, receive payment of, and execute and endorse all documents, checks or drafts 6 issued with respect to, any Event of Loss under any insurance policy relating to the applicable Equipment. 14. EVENTS OF DEFAULT. Any of the following shall be an "EVENT OF DEFAULT": (a) Lessee fails to pay (1) any portion of a Rental Payment within thirty (30) days after its due date or (2) any portion of a payment due to eBay under any sublicensing/subleasing agreement for space and/or bandwidth (the "Sublicensing Agreement") within thirty (30) days after its due date; (b) Lessee fails to perform or observe any other covenant, term or condition in this Master Lease, any Lease Schedule or the Sublicensing Agreement, which failure is not remedied within thirty (30) days after Lessee receives written notice from Lessor; (c) any representation of Lessee in this Master Lease, any Lease Schedule, the Sublicensing Agreement, the Purchase Agreement for the Equipment or the Bill of Sale for the Equipment is found to be inaccurate, and such failure or inaccuracy continues unremedied for thirty (30) days after written notice by Lessor; (d) without Lessor's consent, Lessee shall or shall attempt to abandon, remove, sell, encumber, assign, or sublet any item of Equipment; (e) Lessee shall dissolve or discontinue its business, or become insolvent or make an assignment for the benefit of creditors, or a trustee or receiver shall be appointed for Lessee or for a substantial part of its assets, or bankruptcy, reorganization or insolvency proceedings shall be instituted by or against Lessee, which proceedings, if involuntary, shall not have been dismissed within thirty (30) days after the date of filing; or (f) any Triggering Event shall have occurred under the VCSA Agreement. THE PARTIES ACKNOWLEDGE THAT AN EVENT OF DEFAULT CAUSED BY THE OCCURRENCE OF ANY OF SECTIONS 14(d), (e) OR (f) ABOVE ARE NON-CURABLE BY LESSEE. 15. REMEDIES. Upon the occurrence of an Event of Default and at any time thereafter, Lessor may, in its sole discretion, to the extent permitted by and in conformity with applicable law, do any one or more of the following: (a) upon notice to Lessee, terminate this Master Lease and any or all Lease Schedules; (b) declare the total amount or any portion thereof of unpaid Rent and other amounts due and to become due hereunder or under any Lease Schedule immediately due and payable; (c) demand that the Equipment be returned in accordance with SECTION 11 hereof; (d) enter the premises where any Equipment is located and take immediate possession thereof and remove any such Equipment; (e) re-lease or sell any Equipment at a public or private sale on such notice and terms as Lessor shall deem reasonable, or (f) exercise any other right or remedy available to Lessor under applicable law or proceed by court action to enforce the terms of this Master Lease or any Lease or to recover damages or expenses resulting from the Event of Default. In addition, Lessee shall be liable for and shall pay to Lessor all attorneys' fees and other costs incurred by Lessor in exercising Lessor's remedies, including placing any Equipment in the condition required by SECTION 11 hereof. If this Master Lease or any Lease Schedule is deemed at any time to be intended as security, Lessee hereby grants to Lessor a security interest in the applicable Equipment to secure, in addition to the indebtedness herein, all other indebtedness at any time owing by Lessee to Lessor. This Master Lease shall constitute a security agreement under applicable law if the transactions contemplated herein are deemed not to constitute a lease. Lessee agrees to make any and all filings, and to take any actions necessary or, in the view of counsel, advisable, to perfect the grant of such security interest under the applicable Uniform Commercial Code or to maintain perfection thereof. No remedy referred to in this Master Lease is intended to be exclusive, but each shall be in addition to any other remedy referred to or otherwise available to Lessor at law or in equity. No express or implied waiver by Lessor of any Default or Event of Default shall constitute a waiver of any 7 other Default or Event of Default by Lessee or a waiver of any of Lessor's rights, and no delay by Lessor in enforcing any right or requiring performance of any provisions of this Master Lease or any Lease Schedule by Lessee shall be a waiver of such right or affect the right of Lessor to enforce such provision. 16. ASSIGNMENT. Without Lessor's prior written approval, Lessee shall not (a) assign, transfer, pledge, hypothecate, or otherwise dispose of this Master Lease, any Lease Schedule, any Equipment or any interest therein, or (b) sublet or lend any Equipment or permit it to be used by anyone other than Lessee or Lessee's employees. Lessee agrees that any such assignment shall not materially change Lessee's duties or obligations under this Master Lease or any Lease Schedule. Each Assignee shall have all the rights but none of the obligations of Lessor under this Master Lease or any such Lease Schedule unless Lessee is otherwise notified by Lessor. Lessee shall recognize such assignments and/or security agreements and agrees that upon notice of such assignment it shall pay directly to the Assignee (unless otherwise directed by such Assignee) without abatement, deduction or setoff all amounts which become due hereunder and further agrees that it will not assert against such Assignee any defense, claim, counterclaim, or setoff for any reason whatsoever in any action for Rent or possession brought by the Assignee. 17. GENERAL INDEMNITY. Lessee agrees to indemnify and to defend and hold Lessor and any of its successors and Assignees harmless from and against all claims, costs, expenses (including, but not limited to, attorneys' fees), damages, losses, and liabilities of any nature whatsoever that may be imposed on, incurred by or asserted against any such indemnified party in any way relating to or arising out of this Master Lease, any Lease Schedule, or any item of Equipment or its purchase, acceptance, delivery, ownership, leasing, possession, maintenance, use, operation, or transportation, whether or not other parties are involved. The provisions of this SECTION 17 shall survive the termination of this Master Lease and all Lease Schedules. 18. GENERAL. (a) FURTHER ASSURANCES. Lessee shall promptly execute and deliver to Lessor such further documents and take such further action as Lessor may request to more effectively carry out the intent and purpose of this Master Lease and the Lease Schedules. Lessee hereby appoints Lessor as its attorney-in-fact for the purposes of executing, delivering, filing, registering and/or recording, as applicable, all documents, instruments and agreements that Lessor deems necessary or reasonably desirable to perfect and maintain a first priority perfected security interest in the Equipment. (b) NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing (including facsimile communication), unless expressly indicated to the contrary herein, and mailed, faxed or delivered to each party at the address first set forth above or at such other address as each party may designate in a written notice to the other parties, complying as to delivery with the terms of this SECTION 18(b). All such notices, requests, demands and other communications shall be effective when received (whether through the mails or by facsimile or delivery). (c) GOVERNING LAW. This Master Lease and all Lease Schedules shall be governed by and construed in accordance with the internal laws of the State of California, excluding its 8 choice of law rules. Any disputes arising under this Master Lease and all Lease Schedules may be brought in the state courts and the federal courts located in San Jose, California, and the parties hereby consent to the personal jurisdiction and venue of these courts. The parties hereby waive any right to a trial by jury in any action to enforce or defend any matter arising from or related to this Master Lease or any Lease Schedule. (d) UNENFORCEABLE PROVISIONS. If any term of this Master Lease or any Lease Schedule is found to be illegal or unenforceable, the remaining portions of this Master Lease or such Lease Schedule shall remain in effect, provided that the parties agree to negotiate in good faith substitute enforceable terms reflecting the parties' original intent in entering into this Master Lease or such Lease Schedule. (e) COMPLETE AGREEMENT; MODIFICATIONS. This Master Lease and all Lease Schedules constitute the entire understanding and agreement between Lessor and Lessee and there is no other understanding or agreement between the parties, oral or written, which is not set forth herein. This Master Lease and any Lease Schedule may not be amended except by a writing signed by Lessor and Lessee and shall be binding upon and inure to the benefit of the parties hereto, Assigns and their permitted successors. LESSOR: EBAY INC., LESSEE: INTERNET PICTURES CORPORATION a Delaware corporation a Delaware corporation By: /s/ Michael R. Jacobson By: /s/ Donald Strickland ------------------------------ ------------------------------ Name: Michael R. Jacobson Name: Donald Strickland Title: Vice President, Legal Affairs Title: President and CEO Date: September 26, 2001 Date: September 26, 2001 9 GRAPHIC 6 g72381checkbox.gif GRAPHIC begin 644 g72381checkbox.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA7`/]%8T:PH,%_ M&0`H7,@0X;^'$/^ILY;!842)&QQ5K'A1CQ6''"%:H_`.)#UF#\$I:/5P8SX+ CH_X=V0)QXS]K*$;-H%?3XA8`P2+:E!A4*,(,2),F%1`0`#L_ ` end GRAPHIC 7 g72381box.gif GRAPHIC begin 644 g72381box.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end

EX-10.1

                                                                    Exhibit 10.1

* Indicates material has been omitted pursuant to a request for confidential
  information


                      VISUAL CONTENT SERVICES AGREEMENT

      THIS VISUAL CONTENT SERVICES AGREEMENT (the "Agreement") is entered into
as of April 19, 2000 (the "Effective Date"), between Internet Pictures
Corporation, a Delaware corporation with an office located at 124 University
Avenue #201, Palo Alto, CA 94301 ("IPIX"), and eBay Inc., a Delaware corporation
with an office located at 2145 Hamilton Avenue, San Jose, CA 95125 ("eBay").

      WHEREAS, IPIX provides visual content and other digital media solutions to
operators of Internet websites;

      WHEREAS, eBay operates an Internet online listing and trading site that
brings together sellers and buyers of goods and services;

      WHEREAS, eBay desires to offer enhanced visual content services to
users of its website;


      WHEREAS, IPIX desires to be the exclusive provider of the Services
(defined below) for the Sites (defined below); and


      WHEREAS, eBay desires to engage IPIX as its exclusive provider of the
Services for the Sites as set forth below;


      NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

DEFINITIONS

      1.1 "Base Level Bandwidth" means the level of bandwidth consumed in
delivering the jointly developed Basic Service to Customers, as further
described in Exhibit A.

      1.2 "Basic Service" means the service that IPIX will offer each Customer
free of charge, as further described in Exhibit B.

      1.3 "Confidential Information" means any confidential or proprietary
information of a party (the "Disclosing Party") which is disclosed to the other
party (the "Receiving Party") in a writing marked confidential or, if disclosed
orally, is identified as confidential at the time of disclosure and is
subsequently reduced to a writing marked confidential and delivered to the other
party within 10 days of disclosure. The terms of this Agreement will constitute
Confidential Information.

      1.4   "Customer" means any person who accesses any page on a Site.


      1.5   "Deal Quarter" means a three-calendar-month period during the
Term.

      1.6 "eBay Marks" means the eBay trademarks, service marks and/or trade
names designated by eBay for use in the performance of this Agreement.

      1.7 "eBay Site" means the website owned and operated by eBay accessible at
www.ebay.com (or any successor URL) that provides online listing and trading
services to Customers, but shall not include eBay Great Collections(TM) or the
Automotive areas and any content or data related thereto.

      1.8 "eBay Templates" means the underlying data and structure for
          pages of the eBay Site and applicable Additional Sites (as defined in
          Section 4.3(b)) provided by eBay to IPIX pursuant to this Agreement,
          and any interfaces supplied by eBay during the Term to facilitate
          integration and operation of the Image Management Solution.

      1.9 "eBay Bulk Upload Tools" means bulk upload and listing tools owned
          or controlled by eBay and provided by eBay to IPIX during the Term.

      1.10 "Enhanced Services" means enhanced Image products and services
produced by IPIX that IPIX and/or eBay will offer Customers for a fee, as
further provided in Exhibit B.

      1.11 "First Level Support" means the customer support for the Services
eBay provides directly to Customers and the Help Tools, as further provided in
Section 3.3(a) and Exhibit H.
                                       1                          Confidential


      1.12  "Image" means any digital photographic image to be included
      in Listings.


      1.13  "IPIX Image" means any Image produced by or on behalf of
IPIX for a Customer.

      1.14 "IPIX Marks" means the IPIX trademarks, service marks and/or trade
names designated by IPIX for use in the performance of this Agreement.

      1.15 "IPIX Technology" means the proprietary software and hardware
developed by or licensed to IPIX and used to develop and/or implement the
Services and/or provide the Services to Customers (including but not limited to
the Image Management Solution and Plug-Ins).

      1.16  "Listing" means any listing submitted by a Customer on any Site.

      1.17 "Penetration Rate" means the total number of Listings utilizing the
Enhanced Services during a Deal Quarter divided by the total number of Listings
on the Sites during such Deal Quarter.

      1.18  "Performance Standards" means the parameters described in Exhibit
A.

      1.19 "Plug-In" means a plug-in module, Active X-based control or other
tool or application designed for integration and use with a web browser to
enable a Customer to use the Services.

      1.20 "Second Level Support" means IPIX support to eBay customer support
personnel, as further provided in Section 3.3(b) and Exhibit H.

      1.21 "Service Provider Network" means the managed network of trained
videographers/photographers with whom IPIX has entered into agreements to
capture images at designated sites.

      1.22  "Services" means collectively the Basic Service, Enhanced
Services and Virtual Tour Services.

      1.23  "Sites" means the eBay Site and the Additional Sites.

      1.24 "Standard Images" mean still Images up to 400 pixels by 300 pixels.

      1.25  "Term" means the term of this Agreement as set forth in
Section 6.

      1.26 "Third Level Support" means IPIX customer support directly to
Customers solely in the event that both First Level Support and Second Level
Support are inadequate, as further provided in Section 3.3(b) and Exhibit H.

      1.27 "Transferred Information" means any information passed from eBay to
IPIX regarding eBay users and their trading activities.

      1.28 "Virtual Tour Images" means Images used for display in a fully
interactive 360 degree virtual tour format targeted at automobiles, boats,
antique furniture, real estate, resort properties and other objects suitable for
panoramic imaging.

      1.29 "Virtual Tour Services" means the capture, processing, hosting and
distribution services for Virtual Tour Images offered by IPIX where the Images
are captured by the Customer or through the Service Provider Network, as further
described in Exhibit B.

2.     SERVICES AND IMPLEMENTATION

      2.1 Services. As further provided below, IPIX will provide a complete,
turn-key Image management solution for use by Customers (the "Image Management
Solution"), which will include: (i) an easy-to-use integrated Image submission
and hosting interface supporting the drag and drop of Customer-provided Images
(where applicable), and browser-based submission of such Images (where drag and
drop is infeasible) by Customers into the "Sell Your Item" pages of the Sites or
other similar pages on the Sites that Customers use to list items for trading;
and (ii) the uploading and hosting of such Images on IPIX servers and the
display and distribution of such Images on the Sites.

            (a)   Basic Service.  IPIX shall offer each Customer the Basic
Service in accordance with the schedule and criteria set forth in Exhibits A
and B.


            (b)   Enhanced Services.  IPIX shall offer Customers the Enhanced
Services in accordance with the roll-out schedule and criteria set forth in
Exhibits A and B.

            (c) Virtual Tour Services. IPIX shall also offer Virtual Tour
Services to Customers on a mutually agreeable off-site (i.e., not on the Sites),
co-branded website hosted by IPIX, the presentation

                                       2                           Confidential

of which shall be approved by eBay in writing before such services are made
commercially available (with such approval not to be unreasonably withheld or
delayed). Such website will be subject to Section 12 ("Customer Information")
regarding treatment of Referrals (as defined in Section 5.4) and use of Customer
Information. IPIX will make available the Virtual Tour Services to Customers and
at such prices as IPIX may determine in its discretion (subject to the
requirements of Section 2.1(d) below).

            (d) Services Pricing. During the Term, if IPIX furnishes a palette
of Image services substantially similar to the Services for online listing and
trading to any third party on pricing terms more favorable than the pricing
terms offered to eBay herein, eBay may elect to incorporate such pricing terms
into this Agreement in its sole discretion (provided that Virtual Tour Services
are excluded from such obligation). Moreover, if IPIX's then-current effective
national pricing for Virtual Tour Services is more favorable than the pricing
offered to eBay Customers, the parties shall immediately modify the Agreement to
reflect such favorable pricing. The parties will mutually agree on pricing for
all Services other than Virtual Tour Services, and will periodically review the
then-current pricing for the Services.

            (e) Current Version. Subject to Section 3.2, during the Term, IPIX
will offer to eBay the most current version of the Services offered by IPIX,
provided that eBay will not be obligated to introduce or accept such version
until eBay is ready to introduce or accept such version and has approved such
version pursuant to the approval process set forth in Section 2.2 (c). IPIX will
have no obligation to offer individual features of a version separate from the
version as a whole.

            (f) Access to Sites. Subject to the terms and conditions of this
Agreement, eBay will offer the Services on the Sites and will permit IPIX to
provide the Services on the Sites by means of the Image Management Solution;
provided that, other than with respect to patches and error corrections
necessary for compliance with the requirements of Exhibit A, IPIX shall not
alter, delete or modify the Image Management Solution or the Services (including
without limitation modifying the Plug-Ins or requiring any different or
additional Plug-Ins) or any parts thereof or the user experience associated with
the Image Management Solution or the Services without first receiving eBay's
prior written approval pursuant to Section 2.2(c) below.

            (g) Management Reviews. Executive representatives of each party will
meet every two months during the Term to discuss project performance, concepts
for the development and rollout of additional Enhanced Service consistent with
Exhibit B and other appropriate issues.

2.2   Implementation.


IPIX Obligations. IPIX will use commercially reasonable efforts to develop the
Image Management Solution and develop and host the Services under an eBay
private label including a prominent "Powered by IPIX" designation (as described
in Exhibit B, section 1(g)), and IPIX will reasonably cooperate with eBay to
integrate the Image Management Solution and Services into the "Sell Your Item"
and "View Item" pages of the eBay Site. IPIX will use commercially reasonable
efforts to develop and implement the Services pursuant to the development
schedule and specifications set forth in Exhibit B, and, commencing on the date
of the Initial Launch (as defined below), maintain the Services as specified in
Exhibit A and in compliance with eBay's general promotional guidelines (or, if
eBay develops unique guidelines for eBay-owned services, such unique guidelines)
set forth on the Sites. IPIX will also provide integration and functionality
such that the Services will be reasonably enabled to work in conjunction with
bulk upload and similar listing tools reasonably designated by eBay, and will be
enabled to work with Mr. Lister and Auction Assistant, and any additional eBay
Bulk Upload Tools mutually agreed by the parties, provided that it shall be
eBay's responsibility to implement any modifications of the eBay Bulk Upload
Tools required for integration of the Services. IPIX will, free of charge to
eBay, operate and maintain the IPIX Technology for the purpose of providing the
Services to Customers, and will cooperate with eBay to develop the interfaces
between the eBay listing and bidding processes and the Services. IPIX will use
commercially reasonable efforts to develop, support and maintain any Plug-Ins
required for eBay users to use the Services, and the parties will cooperate to
implement the mechanism for such Plug-Ins to be downloaded by Customers at no
charge.

            (b) eBay Obligations. eBay will use commercially reasonable efforts
to facilitate the integration of the Image Management Solution into the Sites
and the eBay Bulk Upload Tools, subject to this Section 2. Moreover, eBay will
use commercially reasonable efforts to cooperate with IPIX in

                                       3                         Confidential

fulfilling IPIX's obligations hereunder, including without limitation: providing
the eBay Templates and eBay Bulk Upload Tools to IPIX; modifying the eBay Bulk
Upload Tools as required for integration with the Services; working with IPIX to
implement the Image Management Solution on the Sell Your Item and other relevant
pages on the Sites; providing IPIX with technical information necessary to
enable IPIX to serve Images on the "View Item" pages on the Sites; and making
the appropriate introductions to the development teams of Mister Lister(TM) and
Auction Assistant(TM) to facilitate the integration of bulk upload and similar
listing tools. As further provided in Exhibit B, IPIX may implement an IPIX logo
watermark on all still Images submitted through the Services. eBay may, in its
reasonable discretion based on eBay user feedback, determine at any time that
the watermark should not be displayed on the Images linked or posted after that
time, and IPIX will cease inserting the watermark on the Images within 14 days
of notification of such determination from eBay; provided, however, that, in
such event, the parties shall mutually establish some other IPIX branding
mechanism of like frequency (and which complies with eBay's advertising
guidelines) to substitute for the IPIX logo watermark.

            (c) Approval. When IPIX has developed and is prepared to implement
the Services as provided in Section 2.2(a), a new version of the Services as
contemplated in Section 2.1(e), an Additional Site as provided in Section
4.3(b), an Additional Service or IPIX Proposed Service as provided in Section
4.3(c), or any other alteration, modification or addition to the Services as
contemplated in Section 2.1(f) (collectively, the "Offerings"), IPIX shall make
the Offerings available to eBay for review in a format mutually agreed by the
parties for review and acceptance by eBay. The parties will cooperate to develop
written specifications (such as an engineering requirements document (ERD)) for
the Offerings, which shall include specific acceptance test criteria and
procedures, and which both parties shall approve in writing prior to any
obligation of IPIX to commence or continue development or implementation. eBay
shall have 30 days, or such other period as may be stated in the specifications,
following the delivery of an Offering to determine in its reasonable judgment
whether the Offering conforms to the applicable specifications (the "Initial
Acceptance Period"). eBay agrees to inform IPIX during the Initial Acceptance
Period of any non-conformance describing the nature of the non-conformance. If
no notice of non-conformance is received by IPIX before the end of the Initial
Acceptance Period, the Offering shall be deemed to be accepted by eBay. If eBay
reasonably rejects an Offering as non-conforming, IPIX shall promptly correct
the non-conformance and deliver a modified Offering to eBay within the period
mutually agreed by the parties. If no period is specified, the period will be 30
days. eBay shall then determine in its reasonable judgment whether the modified
Offering conforms to the applicable specifications in accordance with the
procedures in this Section 2.2(c). If eBay then reasonably rejects the modified
Offering, eBay, in its sole discretion, based on the applicable specifications
and in accordance with the procedures set forth in this Section 2.2(c), (i) may
allow IPIX to continue resubmitting modified Offerings until they meet the
acceptance criteria; (ii) waive the unsatisfied acceptance criteria; (iii) if
the Offering is an Additional Service as defined in Section 4.3(c) and it has
not been launched in accordance with the schedule set forth in Section 4.3(c),
eBay may terminate any obligation by eBay with respect to such Offering in
accordance with Section 4.3(c); or (iv) if the Offerings are those to be
included in the Initial Launch and Final Launch, eBay may terminate this
Agreement with no liability.

            (d) Changes to eBay Templates. eBay may modify the eBay Templates
provided from time to time in its sole discretion, and IPIX will provide eBay
with guidance regarding implementation of such modified templates throughout the
Services promptly after receiving such templates. eBay will provide IPIX with
reasonable advance notice of such modifications, and IPIX's implementation of
any necessary changes in the Image Management Solution as a result of the new
templates will be subject to the approval process specified in Section 2.2(c).

            (e) Delay. The parties acknowledge that each is dependent on the
cooperation of the other to meet the development schedule set forth in Exhibit
B, and each party shall devote appropriate product management and technical
support adequate to meet such schedule. Unless otherwise mutually agreed by the
parties in writing, if the Final Launch (as defined in Exhibit B) has not


                                       4                           Confidential

occurred by December 31, 2000, except to the extent such failure is due to
eBay's failure to perform tasks which are identified as its responsibility in
this Section 2.2 and which are a prerequisite for IPIX's timely performance),
then eBay may thereafter terminate this Agreement upon written notice to IPIX at
any time.

3.    PERFORMANCE STANDARDS; CUSTOMER SUPPORT


      3.1 Performance Standards. IPIX will ensure that the provision of the
Services meets the criteria described in Exhibits A and B. * IPIX will provide
to eBay * dedicated product management and technical support available on a
24-hours, 7 days-a-week remote basis to support the integration of the Services
into the Sites and on an ongoing basis and will provide reasonable on-site
presence at eBay's Silicon Valley facilities during the launch and integration
phases to ensure smooth integration. Additionally, IPIX will ensure that, during
the term of the integration and, as further requested by eBay, for a reasonable
time thereafter, the dedicated integration team will include the following
members of the IPIX engineering team, so long as each remains an employee of
IPIX: Andy Mutz, Adam Sah, Joseph Molnar, Diana Stanley and Lisa Wood. IPIX will
treat eBay, with respect to service commitments, feature sets and user
experience, at least as favorably as it does its most strategic partners to
which IPIX provides analogous services.

      3.2 Current Technology. IPIX agrees to use commercially reasonable efforts
to keep the IPIX Technology current and at a level at least as high as the level
comparable to the level of technology generally used in the professional
photo-hosting industry for similar services; provided, however, that, in the
event, pursuant to Section 2.1(e), eBay declines to introduce or accept the most
current version of the Services offered by IPIX reasonably promptly following
IPIX's offer to eBay of such version, IPIX shall have no further obligation with
respect to that version pursuant to this Section 3.2.

      3.3   Customer Support; Training.


            (a) First Level Support. eBay will provide First Level Support to
Customers using the Services. IPIX will provide English-language FAQs,
tutorials, and similar aids ("Help Tools") to help eBay users in the use of the
Services, including automated, Web-based customer support for the Services
consisting of an HTML page with a menu of support topics. eBay will host and
maintain the Help Tools on an eBay server.

Second and Third Level Support. IPIX will provide Second Level Support to eBay
customer support personnel to enable such personnel to respond to Customer
inquiries about the Services. If eBay customer support personnel have contacted
IPIX to obtain Second Level Support and eBay reasonably determines after
following eBay's internal escalation process that IPIX's Second Level Support is
insufficient to enable eBay personnel to address a Customer inquiry, eBay
personnel may redirect such inquiry directly to IPIX for Third Level Support.

Training. IPIX will provide free, live training regarding Services support to
eBay's customer support organization. During the initial rollout of any new
Services or Services to any new Site and for 2 weeks after such rollout, IPIX
will provide a full-time employee in eBay's Salt Lake City location free of
charge to help address customer support issues. An IPIX representative will also
be available free of charge from time to time to participate in live, real-time
chat board discussions at eBay's request. If functional or design errors in the
Services result in an increased Customer support burden, IPIX will remedy such
errors promptly to the extent such remedy is not delayed as a result of eBay's
act or failure to act.

            (d)   Response Times and Reports.  IPIX will provide the customer
support specified in this Section 3 in accordance with the criteria set forth
in Exhibit H.

4.    MARKETING; EXCLUSIVITY

      4.1 Marketing Plan. Each party will use reasonable commercial efforts to
market and promote the Services to increase the usage thereof through a variety
of promotional mechanisms, in a mutually-agreeable manner, in accordance with
the marketing plan set forth in Exhibit C, as such plan may be modified from
time to time in writing by mutual agreement of the parties.

      4.2   Promotional Impressions.  *

                                       5                         Confidential



      4.3   Exclusivity.  *


            (c)   Additional Services.

                  (i)   *

                  (ii) IPIX Requests. To the extent IPIX desires to add an
additional Image submission or hosting service to the palette of Enhanced
Services (an "IPIX Proposed Service"), the parties shall discuss such IPIX
Proposed Service in good faith, subject to Exhibit B. In the event the parties
mutually agree that IPIX should provide such IPIX Proposed Service on a Site,
the parties will mutually agree upon a launch date and such IPIX Proposed
Service shall become an "Enhanced Service" upon the launch of such IPIX Proposed
Service on the Site. Such IPIX Proposed Service will be subject to the approval
process in Section 2.2(c).

            (d) Digitization Services. None of the restrictions set forth in
this Section 4.3 will limit eBay's ability to enter into any agreements or
relationships with any party, nor restrict promotional activities, with respect
to the digitization portion of any Image services (other than the capture and
digitization of Virtual Tour Images), but will only apply to the submission and
hosting portions of the process; provided, that eBay will discuss in good faith
with IPIX opportunities whereby IPIX would provide digitization services to
Customers.

            (e)   *

5.    FINANCIAL

      5.1   *
      5.2   *
      5.3   *
      5.4   *
      5.5   *

      5.6 Payment Terms; Taxes. Overdue payments shall accrue interest, at the
lesser of 1-1/2% per month or the maximum allowable interest under applicable
law, from due date until paid, and each party shall pay the other party's costs
of collection on such overdue payments, if any (including reasonable attorneys'
fees). Each party shall pay any sales, use or similar tax related to such
party's performance of its obligations or exercise of its rights under this
Agreement, exclusive of taxes based on the other party's net income.

      5.7 IPIX Reports. IPIX shall provide eBay weekly technical performance
reports (including, but not limited to bandwidth and availability) and shall
provide eBay with written notice each time the delivery of the Basic Service
consumes bandwidth at a level equal to 80%, 90% or 100% of the Base Level
Bandwidth ("Bandwidth Notice"). Such written notice shall be provided within two
business days of the occurrence of such event. If eBay unilaterally requests
IPIX to modify the Basic Service in a manner that requires materially greater
bandwidth consumption than the Base Level Bandwidth and IPIX has not provided
eBay with the required Bandwidth Notice, eBay shall not be required to pay the
Additional Bandwidth Costs.

      5.8 Inspection of Records. During the Term, and for 12 months thereafter,
each party will have the right, at its own expense and not more than twice in
any 12 month period, to authorize an independent auditor reasonably acceptable
to both parties to inspect those accounting records of the other party necessary
to verify the accuracy of funds paid to the auditing party pursuant to this
Section 5, provided that such independent auditor has executed a confidentiality
agreement with respect to such records that is reasonably acceptable to the
audited party. Such inspections will take place during the audited party's
normal business hours, upon not less than 10 days prior written notice to the
audited party.

      5.9 Warrant. Within 15 days following the Effective Date, IPIX will
grant eBay a warrant to purchase 600,000 shares of common stock of IPIX at an
exercise price per share equal to the closing price of the common stock of IPIX
on the Nasdaq National Market on the Effective Date (the "Warrant"). The Warrant
shall expire 12 months after the termination



                                                                    Confidential
                                       6


            or expiration of the Agreement. One-ninth (1/9) of the shares
            subject to the Warrant will vest and become exercisable at the end
            of each Deal Quarter during the term of the Agreement; provided,
            however, that no further vesting of shares subject to the Warrant
            shall occur following any expiration or termination of the
            Agreement, notwithstanding Section 6.5 or anything to the contrary
            herein. The Warrant will be exercisable on a net-exercise or
            cashless exercise basis and shall be substantially in the form
            attached hereto as Exhibit F.

6.    TERM AND TERMINATION

      6.1 Term. The term of the Agreement will commence on the Effective Date
and shall continue for 14 successive "Deal Quarters," with the first Deal
Quarter commencing on April 1, 2000.

                                       7

      6.2   Right of First Discussion. eBay will extend to IPIX, at least 180
days prior to the expiration of the Agreement, a right of first discussion under
which IPIX would be afforded the initial discussions with eBay regarding
extension of the Agreement. Such discussion period would continue for at least
30 days, but in the event that no agreement is reached during such period, eBay
shall be free to engage in discussions with other parties, without an obligation
to re-initiate discussions with IPIX. In no event will this right of discussion
preclude eBay from responding to solicitations from third parties during the
Agreement, provided that eBay may not engage in material discussions with such
third parties regarding providing Image submission and hosting services until
the IPIX 30-day discussion period has lapsed, or unless IPIX is in breach of the
Agreement (including without limitation the Performance Standards in Exhibit A
and the Customer Support standards in Exhibit I).

      6.3   Termination for Breach.

            (a) Unless otherwise agreed in writing between the parties, and
except as set forth in this Section 6.3 and Exhibit A, a party may terminate
this Agreement in the event the other party breaches a material term, condition
or representation of this Agreement, and fails to remedy such default within 30
days after being notified by the non-breaching party of such breach or failure.

                  (i) The failure by IPIX to meet any of the Performance
Standards in Exhibit A, other than a Client Application Failure (as defined in
Exhibit A) and other than a failure resulting from eBay's act or failure to act,
shall constitute a material breach of this Agreement. If IPIX does not cure a
Server Application Error (as defined in Exhibit A) within 30 days after IPIX
discovers or is notified of such Server Application Error, eBay may then
terminate this Agreement by written notice without any further cure period. If
IPIX does not cure failures with respect to the General Latency and Uptime
Performance Standards within the 15-day cure period set forth in Exhibit A, eBay
may terminate the Agreement as set forth in Exhibit A. eBay may also terminate
the Agreement in the event IPIX repeatedly fails to meet the Performance
Standards set forth in Section 1 of Exhibit A in accordance with the provisions
set forth in Exhibit A.

                  (ii) A substantial and ongoing failure by IPIX to conform to
the customer support requirements in Exhibit H, other than a failure resulting
from eBay's act or failure to act, shall constitute a material breach of this
Agreement.

      6.4   Effects of Termination.  Except as provided below, upon
expiration or termination of this Agreement:


            (a)   IPIX will immediately cease all use of the eBay Marks;

            (b) IPIX will continue to provide Services in a manner commensurate
with the quality of Services provided prior to such expiration or termination
and to support Customers who purchased such Services (or in the case of the
Basic Service, elected to use the Basic Service) during the Term for a minimum
of 75 days after the Listing corresponding to such Services is concluded, and
the licenses granted below under Section 7.2 and 7.3(b)(ii) will survive during
such period;

            (c) eBay will cease all use of the IPIX Marks, IPIX Images and the
IPIX Technology and shall purge all IPIX Technology and IPIX Images from its
servers 75 days after the conclusion of every Listing for which Customers
purchased Services (or in the case of the Basic Service, elected to use the
Basic Service) during the Term.

                                       8


            (d) Each party will promptly destroy or return any Confidential
Information of the other party in its possession.

Notwithstanding the foregoing, in the event of any termination of the Agreement
(but excluding the expiration of the Agreement, to which Section 6.2 applies,
termination by eBay pursuant to Section 2.2(e), and termination by IPIX pursuant
to Section 6.3) IPIX will continue, if requested by eBay, to provide the
Services and associated customer and technical support on a non-exclusive basis
for a period of 4 months after such termination (the "Transition Period"), in a
manner consistent with the manner in which the Services were provided during the
previous portion of the Term, in order to facilitate an orderly migration of the
Services. Each party shall continue to pay the other party amounts due under the
Agreement through the end of the Transition Period, and any licenses required
for such performance shall continue in effect during the Transition Period.

      6.5   Survival of Certain Terms. The provisions of Sections 5.6, 5.8, 5.9,
6.4, 6.5, 7.1(a), 7.1(b) (solely with respect to the license to derivative works
of the Help Tools), 7.1(b)(ii-iv), 7.2(a), 7.2(b)(iii-iv), 7.3(a)(i), 7.3(b)(i),
7.4, 8, 9, 10, 11, 12 and 13 will survive the expiration or termination of this
Agreement for any reason. Except as otherwise expressly provided herein, all
other rights and obligations of the parties will cease upon expiration or
termination of this Agreement.

7.    PROPRIETARY RIGHTS

      7.1   IPIX Technology; Help Tools; IPIX Images

            (a) All IPIX Technology, Help Tools and all IPIX Images are, and at
all times will remain, the exclusive property of IPIX, and no provision of this
Agreement implies any transfer to eBay of any ownership interest in the IPIX
Technology, Help Tools or the IPIX Images. The licenses set forth in Sections
7.1(b) confer neither title to, nor ownership in, the IPIX Technology, Help
Tools or the IPIX Images and are not a sale of any rights therein. eBay hereby
irrevocably assigns to IPIX all right, title and interest worldwide in and to
any modifications or derivative works of the IPIX Technology, Help Tools and
IPIX Images made by eBay, including without limitation any copyrights, trade
secrets, patent rights, moral rights, contract rights and licensing rights.

            (b) IPIX hereby grants to eBay a nonexclusive, fully-paid,
royalty-free, worldwide license to use, reproduce, display, digitally perform
and/or modify the IPIX Technology, Help Tools and IPIX Images solely as
necessary to provide the Services in accordance with the Agreement. eBay may
sublicense or distribute the IPIX Technology or any portion thereof (such as
Plug-Ins), Help Tools and IPIX Images to Customers, solely as necessary to make
the Services available to Customers on the Sites. In addition, IPIX hereby
grants to eBay a perpetual, irrevocable, nonexclusive, fully-paid, royalty-free,
worldwide foregoing license to use, reproduce, digitally perform, display,
modify and distribute for any purpose any derivative works of Help Tools which
eBay creates in the process for localizing such Help Tools for use on
international Sites.

                  (i) As reasonably requested by IPIX from time to time, eBay
agrees to include such ownership restrictions and other licensing provisions
regarding the IPIX Technology, IPIX Images and Help Tools in relevant legends,
disclaimers and license agreements presented to Customers on the Sites in
connection with the Services. eBay shall reproduce all copyright notices in the
original IPIX Technology, Help Tools and IPIX Images and on all copies or
modifications thereof where the omission of such notices would jeopardize or
impair IPIX's intellectual property rights therein.

                                       9

                  (ii) Any transfer, copying, distribution or other use of the
IPIX Technology, Help Tools and IPIX Images by eBay other than as expressly
provided herein constitutes a material breach of this Agreement.

                  (iii) eBay will not disassemble or decompile the IPIX
Technology including single Java class files under any circumstances. The
disassembly or decryption by eBay of the foregoing constitutes a material breach
of this Agreement.

                  (iv) eBay will not export or re-export the IPIX Technology or
any copy or adaptation in violation of any applicable laws or regulations.

      7.2   eBay Templates; eBay Bulk Upload Tools

                                       10


            (a) All eBay Templates and eBay Bulk Upload Tools are, and at all
times will remain, the exclusive property of eBay, and no provision of this
Agreement implies any transfer to IPIX of any ownership interest therein. The
license set forth in Section 7.2(b) confers neither title to, nor ownership in,
and is not a sale of, the eBay Templates, the eBay Bulk Upload Tools or any
other eBay proprietary technology. IPIX hereby irrevocably assigns to eBay all
right, title and interest worldwide in and to any modifications of the eBay
Templates made by IPIX, including without limitation any copyrights, trade
secrets, patent rights, moral rights, contract rights and licensing rights.

            (b) (i) eBay hereby grants to IPIX a nonexclusive, worldwide,
fully-paid, royalty-free license to use the eBay Templates during the Term
solely as necessary to develop and provide the Services on the Sites in
accordance with this Agreement. "Use" means reproducing, modifying storing,
loading, installing, digitally performing, and/or displaying the eBay Templates.
IPIX must reproduce all copyright notices in the original eBay Templates and
eBay Bulk Upload Tools and on all copies or modifications thereof.

                (ii) eBay hereby grants to IPIX a nonexclusive, fully-paid,
royalty-free license to internally use the eBay Bulk Upload Tools during the
Term solely to facilitate the integration of bulk upload and similar listing
tools into the Image Management Solution. "Use" means reproducing, modifying
storing, loading, installing, digitally performing, and/or displaying the eBay
Bulk Upload Tools. The Bulk Upload Tools shall be deemed eBay Confidential
Information and may not be distributed or sublicensed in any form for any
purpose.

                (iii) IPIX will not disassemble or decompile the eBay
Templates or eBay Bulk Upload Tools, including single Java class files under any
circumstances. The disassembly or decryption by IPIX of any Java class file
constitutes a material breach of this Agreement.

                (iv) IPIX will not export or re-export the eBay Templates or
eBay Bulk Upload Tools or any copy or adaptation in violation of any applicable
laws or regulations.

      7.3   Trademarks.

            (a)   IPIX Marks.

                  (i) IPIX owns and at all times will continue to own the IPIX
Marks. eBay will not take any actions inconsistent with IPIX's ownership rights.

                  (ii) Subject to the restrictions set forth herein, IPIX hereby
grants eBay a nonexclusive, worldwide, royalty-free, fully paid, nontransferable
right to use the IPIX Marks during the Term, subject to the prior approval of
IPIX, which IPIX shall not withhold or delay unreasonably, solely in connection
with the offering, promotion and marketing of the Services as provided in
Section 4. eBay's use of the IPIX Marks will not create in eBay any right, title
or interest therein or thereto. All use by eBay of the IPIX Marks will inure to
the exclusive benefit of IPIX. At IPIX's reasonable request, eBay will assist
IPIX with the protection and maintenance of the IPIX Marks. eBay may only use
the IPIX Marks as expressly permitted herein. eBay agrees to use the IPIX Marks
in a manner commensurate with the style, appearance and quality of IPIX's
services and/or products bearing such marks.

            (b)   eBay Marks.

                  (i) eBay owns and at all times will continue to own the eBay
Marks. IPIX will not take any actions inconsistent with eBay's ownership rights.

                                       11


                  (ii) Subject to the restrictions set forth herein, eBay hereby
grants IPIX a nonexclusive, worldwide, royalty-free, fully paid, nontransferable
right to use the eBay Marks during the Term, subject to the prior approval of
eBay, which eBay shall not withhold or delay unreasonably, solely in connection
with the offering, promotion and marketing of the Services as provided in
Section 4. IPIX's use of the eBay Marks will not create in IPIX any right, title
or interest therein or thereto. All use by IPIX of the eBay Marks will inure to
the exclusive benefit of eBay. At eBay's reasonable request, IPIX will assist
eBay with the protection and maintenance of the eBay Marks. IPIX may only use
the eBay Marks as expressly permitted herein. IPIX agrees to use the eBay Marks
in a manner commensurate with the style, appearance and quality of eBay's
services and/or products bearing such marks.

            (c) Guidelines. Each party's use of the other party's Mark will
comply with the standard written guidelines provided by such other party;
modifications or additions to such policies will be promptly provided to the
other party. If at any time any party determines that another party's use of the
Marks does not follow its guidelines, it will notify the other party and that
party will promptly revise its use of the Marks to so conform with the written
guidelines within 30 days. If a party has been notified of non-conforming use of
the other's Marks and fails to conform such use within 30 days, the other party
may, in its sole discretion, revoke the trademark license provided in this
Section 7.3.

            (d) Changes, Additions or Substitutions of Marks. Each party
reserves the right to change its Marks, add new Marks or substitute new Marks
for existing Marks. The party making such changes shall provide the other
parties with written notice and with examples of the new Marks. The party
receiving such notice shall make reasonable commercial efforts to promptly
change its use of the Marks to comply with such change, addition or
substitution.

      7.4 Limitation on Grant of Rights. Except as expressly provided herein,
neither party receives any other right or license to the technology or
intellectual property of the other party.

      7.5 Joint Development. Ownership of the intellectual property rights in
any materials jointly developed by the parties in connection with this Agreement
shall be specified in the applicable ERD, statement of work or other
specifications for such materials.

                                       12


8.    CONFIDENTIALITY

      8.1 General. Subject to Section 13.3, each party agrees that (a) it shall
not disclose to any third party or use any Confidential Information disclosed to
it by the other except as expressly permitted in this Agreement, and (b) it
shall treat the other party's Confidential Information with the same degree of
care it uses to protect its own information of a similar nature, but in no
instance shall it use less than reasonable care. Notwithstanding anything to the
contrary in this Agreement, in the event either party is required to publicly
disclose the Agreement (or any element of the Agreement) pursuant to any
regulatory or other governmental disclosure requirement, such party agrees to
notify the other of such requirement and agrees to work with the other party and
take all necessary steps to obtain confidential treatment of the Agreement and
all the terms and conditions therein.

      8.2 Exceptions. The foregoing restrictions will not apply to information
that (i) is known to the Receiving Party at the time of disclosure by the
Disclosing Party; (ii) is or becomes publicly known through no wrongful act of
the Receiving Party; (iii) is rightfully received from a third party without
restriction; (iv) is independently developed by the Receiving Party; (v) has
been approved for release by written authorization of the Disclosing Party; (vi)
is not marked or similarly designated as confidential, and is provided for a
purpose or in a manner that reasonably contemplates, or would naturally be
understood to contemplate, disclosure or use by others; and (vii) is disclosed
pursuant to a valid order of any governmental authority provided that the party
intending to make disclosure in such circumstances has given the other party
prompt notice prior to making such disclosure so that such party may seek a
protective order or other appropriate remedy prior to such disclosure.

9.    REPRESENTATIONS AND WARRANTIES

      9.1 Warranty. IPIX hereby represents and warrants to eBay that any content
provided by IPIX to eBay (including but not limited to content contained in the
Promotional Impressions and the Help Tools) will not contain any libelous,
defamatory, obscene or slanderous material, and is not materially false,
misleading or inaccurate, and will not contain any viruses, worms, time bombs,
cancelbots or other programming routines intended to damage, detrimentally
interfere with, surreptitiously intercept or expropriate any system, data, or
personal information.

      9.2 Disclaimer. THE WARRANTIES PROVIDED HEREIN ARE THE ONLY WARRANTIES
PROVIDED WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT. SUCH WARRANTIES
ARE IN LIEU OF, AND THE PARTIES HEREBY DISCLAIM, ALL OTHER WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, INCLUDING ANY IMPLIED WARRANTY OF TITLE, NONINFRINGEMENT
OF THIRD PARTY RIGHTS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Each
party acknowledges that it has not entered into this Agreement in reliance upon
any warranty or representation except those specifically set forth herein.

10.   INDEMNIFICATION

                                       13


      10.1 IPIX will indemnify, defend and hold harmless eBay and eBay
affiliates operating any Additional Sites and their officers, directors,
successors and permitted assigns from and against any and all losses, claims,
suits, proceedings, liabilities, expenses (including reasonable attorneys' fees
and expenses), causes of action, damages and costs (collectively "Claims")
arising out, relating to or in connection with any claim by a third party
regarding: (i) any Customer's use of the Services (other than Claims arising
solely from the unavailability of the eBay Site or an Additional Site due to
circumstances within eBay's or the applicable eBay affiliate's control and not
general problems with the infrastructure of the Internet or any eBay or
affiliate supplier); (ii) any infringement by the IPIX Technology, Help Tools,
IPIX Marks or IPIX Images, or by the Services of any third party's worldwide
patent, trademark, copyright, trade secret or other intellectual property right;
and (iii) any content provided by IPIX to eBay (including but not limited to
content contained in the Promotional Impressions and the Help Tools). Any Claim
arising with respect to any Image created and submitted by a Customer or a third
party on behalf of a Customer is expressly excluded from the foregoing
indemnification. If the Services, IPIX Technology, Help Tools, IPIX Marks or
IPIX Images are held to be infringing or their use is enjoined, or eBay believes
such a holding is likely, IPIX shall, at its option and expense, either (a)
procure for eBay the right to offer and use such Services, IPIX Technology, Help
Tools, IPIX Marks or IPIX Images; or (b) replace or modify such Services, IPIX
Technology, Help Tools, IPIX Marks or IPIX Images so that the substitute is
non-infringing and otherwise complies with the requirements of this Agreement.

      10.2 eBay will indemnify, defend and hold harmless IPIX and its officers,
directors, successors and permitted assigns from and against any and all Claims
arising out of, relating to or in connection with any claim by a third party
that the eBay Templates, eBay Bulk Upload Tools or the eBay Marks infringe on
the worldwide patent, trademark, copyright, trade secret or other intellectual
property rights of such third party. Any Claim arising with respect to any Image
created and submitted by a Customer or a third party on behalf of a Customer is
expressly excluded from the foregoing indemnification.

      10.3 The foregoing obligations are conditioned on (i) the indemnified
party notifying the indemnifying party promptly in writing of such action, (ii)
the indemnified party giving the indemnifying party the right to control the
defense and settlement of any such claim with counsel reasonably satisfactory to
the indemnified party (except that the indemnifying party shall not enter into
any settlement that affects the indemnified party's rights or interest without
the indemnified party's prior written approval), and (iii) the indemnified party
cooperating and, at indemnifying party's request and expense, assisting in such
defense.

11.   LIMITATION OF LIABILITY

      EXCEPT WITH RESPECT TO EACH PARTY'S INDEMNIFICATION OBLIGATIONS SET FORTH
IN SECTION 10 OR A BREACH BY EITHER PARTY OF ITS OBLIGATIONS DESCRIBED IN
SECTION 8, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR LOST PROFITS
OR ANY FORM OF INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER FROM ANY CAUSES OF ACTION OF ANY KIND WITH RESPECT TO THIS AGREEMENT
WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE,
AND WHETHER OR NOT THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE. EXCEPT WITH RESPECT TO EACH PARTY'S INDEMNIFICATION OBLIGATIONS SET
FORTH IN SECTION 10 OR A BREACH BY EITHER PARTY OF ITS OBLIGATIONS DESCRIBED IN
SECTION 8, NEITHER PARTY'S LIABILITY UNDER OR IN CONNECTION WITH THIS AGREEMENT
SHALL EXCEED AN AMOUNT EQUAL TO THE TOTAL AMOUNT PAID BY IPIX TO EBAY DURING THE
TWELVE (12) MONTHS PRECEDING THE CLAIM. THIS LIMITATION OF EACH PARTY'S
LIABILITY IS CUMULATIVE, WITH ALL PAYMENTS FOR CLAIMS OR DAMAGES UNDER OR IN
CONNECTION WITH THIS AGREEMENT BEING AGGREGATED TO DETERMINE SATISFACTION OF THE
LIMIT. THE EXISTENCE OF ONE OR MORE CLAIMS WILL NOT ENLARGE THE LIMIT.

                                       14


12.   CUSTOMER INFORMATION

      12.1 Collection Limitations. Any information that IPIX obtains from a
Customer ("Customer-Provided Information", and together with Transferred
Information, "Customer Information") will be limited to information reasonably
related to the use of the Services under this Agreement or otherwise required to
use the Services.

      12.2 Use Limitations. IPIX may use Customer Information to provide and
market the Services to Customers. IPIX will neither use itself nor permit any
third party to use Customer Information for any purpose other than to provide or
market the Services to Customers. Neither IPIX nor any third party will use
Customer Information to market any other products or services to Customers where
such product or service is then currently offered by eBay or a third party with
whom eBay has a contractual relationship that could include such product or
service.

      12.3 Use Subject to Privacy Policy. IPIX further agrees to use such
Customer Information only as authorized by eBay's privacy policy, the Customer
and subject to IPIX's reasonable privacy policy, such privacy policy to be
adequately displayed throughout the IPIX website. IPIX will neither use Customer
Information to target communications to Customers (or facilitate the same on
behalf of third parties) without the express written permission from eBay and
opt-in agreement from the Customers, nor will IPIX solicit or facilitate such
solicitation by any third party of Customers as a result of their status as an
eBay user, and IPIX will explicitly not refer to Customers as "eBay users" or
"eBay members" (or any similar reference) in any promotion, except with the
prior written consent of eBay.

      12.4 Certain Disclosures. IPIX agrees not to sell, rent, lease or
otherwise disclose Customer Information without eBay's prior written consent
(such consent to be in eBay's sole discretion). Notwithstanding the foregoing:
IPIX will provide eBay reasonable access to IPIX's database of Customers (and
related information) who have signed up with IPIX to use the Service through a
Site or eBay advertising.

13.   GENERAL PROVISIONS

      13.1 Real Estate. In the event eBay elects to pursue Listings for the real
estate market, IPIX will offer, at eBay's request, consulting, introductions to
strategic partners, technical advice, and additional support, utilizing IPIX's
extensive knowledge and relationships in the real estate industry.

      13.2 Independent Contractors. The relationship of IPIX and eBay
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement will be construed to (i) give either party the power
to direct and control the day-to-day activities of the other, (ii) constitute
the parties as partners, joint venturers, co-owners or otherwise as participants
in a joint undertaking, or (iii) allow either party to create or assume any
obligation on behalf of the other for any purpose whatsoever. All financial and
other obligations associated with a party's business are the sole responsibility
of that party.

      13.3 Press Plans. The parties will collaborate to release soon after the
Effective Date one mutually agreeable joint press release regarding the
relationship entered into hereunder. The parties shall agree to the content and
timing of such joint press release. Upon eBay's written approval, in its sole
and absolute discretion, the parties may also release a second mutually
agreeable joint press release upon the launch of the Services. Any other press
announcement by either party regarding the subject matter of this Agreement will
be subject to the other party's prior written approval in its sole and absolute
discretion.

                                       15

      13.4 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter herein and merges
all prior discussions between them. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will be effective
unless in writing signed by the party to be charged.

      13.5 Governing Law. This Agreement will be governed by and construed under
the laws of the State of California as applied to contracts entered into and
performed entirely within the State between residents thereof.

      13.6 Notices. Any notice required or permitted by this Agreement will be
deemed given if sent by prepaid overnight courier, addressed to the other party
at the address set forth above or at such other address for which such party
gives notice hereunder. Delivery will be deemed effective 1 day after deposit
with such overnight courier. Notwithstanding the foregoing, any notice of
failure or breach IPIX is required to give pursuant to Exhibit A or Exhibit H
may be in the form of an email with confirmed receipt, and delivery will be
deemed effective immediately. Any such email will be supplemented by a
confirmation copy delivered by facsimile or overnight courier.

      13.7 Force Majeure. Nonperformance of either party will be excused to the
extent that performance is rendered impossible by storm, lockout or other labor
trouble, riot, Internet infrastructure failure, hacker attack, war, rebellion,
strike, fire, flood, accident or other act of God, governmental acts, orders or
restrictions, or any other reason where failure to perform is beyond the
control, and not caused by the gross negligence or willful misconduct of, the
non-performing party.

      13.8 Non-Assignability; Change of Control. Neither party may assign,
transfer or delegate any right or obligation hereunder to a third party without
the other party's written consent; provided, however, that either party may
assign, transfer or delegate any right or obligation hereunder in the event such
party experiences a Change of Control (as defined below). In the event IPIX
experiences a Change of Control in connection with an eBay Competitor (as
defined below), within ten (10) days following such Change of Control, IPIX
shall provide written notice to eBay of such Change of Control. In the event of
such Change of Control, eBay may, within ninety (90) days following such Change
of Control, terminate this Agreement upon written notice to IPIX. "Change of
Control" means any Ownership Change Event or a series of related Ownership
Change Events (collectively, the "Transaction") wherein a party's shareholders
immediately preceding the Transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership of shares
of such party's voting stock or other voting interests immediately before the
Transaction, direct or indirect beneficial ownership of more than 50% of the
total combined voting power of the corporation or corporations to which
substantially all of such party's assets or stock were transferred, as the case
may be. An "Ownership Change Event" occurs if any of the following occur: (a)
the direct or indirect sale or exchange in a single series of related
transactions by such party's shareholders or other ownership interest holders of
more than 50% of its voting stock or other voting interests; (b) a merger or
consolidation in which such party is a party; (c) the sale, exchange or transfer
of all or substantially all of such party's assets; or (d) a liquidation or
dissolution of such party. However, an Ownership Change Event does not occur as
a result of any transaction or series of transactions that are effected solely
in connection with a (i) reincorporation, or (ii) a reorganization,
recapitalization or similar financing not in connection with the sale of all or
substantially all of such party's assets or stock or other ownership interests.
During the Term, upon written notice to IPIX, eBay shall have the right to
revise once during the first 30 days of each Deal Quarter the list of eBay
Competitors listed in Exhibit G to add entities which eBay reasonably believes
are or may become competitive with eBay (each an "eBay Competitor").

      13.9  Customer Data.  eBay will have no obligation to provide to IPIX
any Customer data under the Agreement.

                                       16


      13.10 Technology Escrow. Within 30 days following the Effective Date, IPIX
shall deposit, and maintain during the Term, a copy of the current and complete
source code for the software components of the IPIX Technology (other than those
used to solely to provide the Virtual Tour Service) with a mutually acceptable
escrow agent. Such escrow arrangement will be governed by a standard escrow
agreement between such escrow agent and IPIX (the "Escrow Agreement"). IPIX
shall name eBay in the Escrow Agreement as a contingent beneficiary of a
restricted, non-transferable, non-exclusive, non-sublicenseable technology and
source code license set forth in the Escrow Agreement, provided eBay executes
such customary documentation applicable to contingent beneficiaries as the
Escrow Agent shall specify from time to time. The foregoing license would only
become effective if IPIX (a) no longer continues in the business of providing
the Services, (b) experiences a Bankruptcy Event (as defined below) or (c)
ceases to operate as a going business concern. The scope of such contingent
license would be limited to a reasonable number of copies required for eBay's
internal use for maintenance and operation purposes only, and eBay would be
required as a condition of such license to maintain and secure such copies on a
confidential basis in the same manner it treats its own similar information, but
in no case with less than reasonable care. The escrow arrangement will not apply
to any code or products IPIX licenses from third parties. If such third party
code is necessary for the operation of the Image Management Solution and the
Services, IPIX will use its best efforts to obtain, or assist eBay in obtaining,
the necessary licenses to use such third party code to operate the Image
Management Solution and the Services. A "Bankruptcy Event" means: (w) voluntary
or involuntary proceedings by or against a party are instituted in bankruptcy
under any insolvency law, which proceedings, if involuntary, shall not have been
dismissed within sixty (60) days after the date of filing; (x) a receiver or
custodian is appointed for such party; (y) proceedings are instituted by or
against such party for corporate reorganization, dissolution, liquidation or
winding-up of such party, which proceedings, if involuntary, shall not have been
dismissed within sixty (60) days after the date of filing; or (z) substantially
all of the assets of such party are seized or attached and not released within
sixty (60) days thereafter.

      13.11 Modification; Waiver. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will be effective
unless in writing signed by the party to be charged, and the waiver of any
breach or default will not constitute a waiver of any other right hereunder or
any subsequent breach or default.

      13.12 Headings. The headings to the sections and subsections of this
Agreement are included merely for convenience of reference and will not affect
the meaning of the language included therein.

      13.13 Severability. In the event that it is determined by a court of
competent jurisdiction as part of a final ruling, government action or binding
arbitration, that any provision of this Agreement (or part thereof) is invalid,
illegal, or otherwise unenforceable, such provision will be enforced as nearly
as possible in accordance with the stated intention of the parties, while the
remainder of this Agreement will remain in full force and effect and bind the
parties according to its terms. To the extent any provision (or part thereof)
cannot be enforced in accordance with the stated intentions of the parties, such
provision (or part thereof) will be deemed not to be a part of this Agreement.


                                       17


      13.14 Counterparts; Facsimile Signatures. This Agreement may be executed
by exchange of signature pages by facsimile and/or in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument.

      IN WITNESS WHEREOF the parties hereto have executed this Visual Content
Services Agreement as of the day and year first above written.

INTERNET PICTURES CORPORATION                 eBAY INC.

By: /s/ Rudy Ruano                            By: /s/ Jeffrey Jordan
    ----------------------                        --------------------------
Name: Rudy Ruano                              Name: Jeffrey Jordan

Title: Senior Vice President                  Title: Vice President


                                       18


* Indicates material has been omitted pursuant to a request for confidential
information

                            AMENDMENT NO. 1 TO THE

                      VISUAL CONTENT SERVICES AGREEMENT

      THIS AMENDMENT NO. 1 (the "Amendment") to the VISUAL CONTENT SERVICES
AGREEMENT (the "Agreement") is effective as of January 1, 2001 (the "Amendment
Effective Date") by and between eBAY INC., a Delaware corporation with its
principal place of business at 2145 Hamilton Avenue, San Jose, California 95125
("eBay"), and INTERNET PICTURES CORPORATION, a Delaware corporation with its
principal place of business at 1009 Commerce Park Drive, Oak Ridge, Tennessee
37830 ("IPIX"). Capitalized terms not herein defined shall have the meanings
ascribed to them in the Agreement.

                                  BACKGROUND

A.    The parties entered into the Agreement, effective April 19, 2000.

B.    The parties desire to amend the Agreement to change the payment
      terms, promotional obligations, and technology escrow terms of the
      Agreement.

C.    All capitalized terms used in this Amendment shall have the meanings
      ascribed to them in the Agreement unless defined otherwise in this
      Amendment.

                                  AMENDMENT

1.    SERVICES AND IMPLEMENTATION.  Section 2.1(d) ("Services Pricing") of
the Agreement is amended to read as follows (insertions are indicated for
convenience):

            2.1(D) SERVICES PRICING. During the Term, if IPIX furnishes a
            palette of Image services substantially similar to the Services for
            online listing and trading to any third party on pricing terms more
            favorable than the pricing terms offered to eBay herein, eBay may
            elect to incorporate such pricing terms offered by IPIX to such
            third party into this Agreement in its sole discretion (provided
            that Virtual Tour Services are excluded from such obligation).
            Moreover, if IPIX's then-current effective national pricing for
            Virtual Tour Services is more favorable than the pricing offered to
            eBay Customers, the parties shall immediately modify the Agreement
            to reflect such favorable pricing. The parties will mutually agree
            on pricing for all Services other than Virtual Tour Services, and
            will periodically review the then-current pricing for the Services.*


2.    PROMOTIONAL IMPRESSIONS. Section 4.2 ("Promotional Impressions") of the
      Agreement is hereby amended and  restated in its entirety as follows:


                                       19


      4.2   PROMOTIONAL IMPRESSIONS.  *


3.    EXCLUSIVITY.

      A. Section 4.3(a)(iii) * of the Agreement is amended to read as follows
(insertions are indicated for convenience): *

      B. Section 4.3(a)(ii) * of the Agreement is amended to read as follows
(insertions are indicated for convenience): *

      C. SCOPE OF EXCLUSIVITY. Sections 4.3(a)(ii)(A) *, 4.3(a)(ii)(B) *,
4.3(a)(ii)(C) *, and 4.3(e) * of the Agreement are deleted in their entirety,
and neither party will have any obligations or restrictions under such sections.

4.    PROMOTIONAL IMPRESSIONS. Section 5.1 * is hereby amended and
restated in its entirety as follows (insertions are indicated for
convenience):  *


5.    TECHNOLOGY ACCESS FEES.

      A. CESSATION OF TECHNOLOGY ACCESS FEES. Section 5.2 * is hereby deleted in
its entirety, and neither party will have any obligations or restrictions under
such sections.

      B. EXHIBIT E. Exhibit E ("Payment Schedule") of the Agreement is hereby
amended and restated in its entirety as follows. *

6.    TECHNOLOGY ESCROW. Section 13.10 ("Technology Escrow") of the Agreement
is amended to read as follows:

      13.10  TECHNOLOGY ESCROW.

             (a) Within 30 days following the Effective Date, IPIX shall
             deposit, and maintain during the Term, a copy of the current and
             complete source code for the software components of the IPIX
             Technology (other than those used to solely to provide the Virtual
             Tour Service) (the "Source Code") with an escrow agent mutually
             agreeable to the parties. Such escrow arrangement will be governed
             by a standard escrow agreement between such escrow agent and IPIX
             (the "Escrow Agreement"). IPIX shall name eBay in the Escrow
             Agreement as a contingent beneficiary entitled to receive the
             Source Code if IPIX: (i) no longer continues in the business of
             providing the Services; provided, however that a Change of Control
             of IPIX (as defined in Section 13.8, but excluding a Change of
             Control Event occurring under Section 13.8(d)) shall not trigger a
             release of the Source Code from escrow, (ii) experiences a
             Bankruptcy Event (as defined below) or (iii) ceases to operate as a
             going business concern,


                                       20

             provided eBay executes such customary documentation applicable to
             contingent beneficiaries as the Escrow Agent may specify from time
             to time. The escrow arrangement will not apply to any code or
             products IPIX licenses from third parties. If such third party code
             is necessary for the operation of the Image Management Solution and
             the Services, IPIX will use its best efforts to obtain, or assist
             eBay in obtaining, the necessary licenses to use such third party
             code to operate the Image Management Solution and the Services. A
             "Bankruptcy Event" means: (w) voluntary or involuntary proceedings
             by or against a party are instituted in bankruptcy under any
             insolvency law, which proceedings, if involuntary, shall not have
             been dismissed within sixty (60) days after the date of filing; (x)
             a receiver or custodian is appointed for such party; (y)
             proceedings are instituted by or against such party for corporate
             reorganization, dissolution, liquidation or winding-up of such
             party, which proceedings, if involuntary, shall not have been
             dismissed within sixty (60) days after the date of filing; or (z)
             substantially all of the assets of such party are seized or
             attached and not released within sixty (60) days thereafter.

             (b) IPIX hereby grants to eBay a worldwide, fully-paid, perpetual,
             irrevocable license (with rights to sublicense such rights to third
             parties to enable such parties to support eBay) to use, reproduce,
             modify and otherwise exploit the Source Code, solely to support the
             uses contemplated under the Agreement, where such present license
             is exercisable upon the release of the Source Code under the Escrow
             Agreement. eBay will (and will require any third party to which it
             provides such Source Code to support the provision of the Services
             to eBay) to maintain and secure such copies on a confidential basis
             in the same manner it treats its own similar information, but in no
             case with less than reasonable care."

7.    GENERAL.

      7.1 GOVERNING LAW; VENUE. This Amendment shall be construed in accordance
with and governed exclusively by the laws of the State of California applicable
to agreements made among California residents and to be performed wholly within
such jurisdiction, regardless of such parties' actual domiciles. Both parties
submit to personal jurisdiction in California and further agree that any cause
of action arising under this Amendment shall be brought exclusively in a court
in Santa Clara County, CA.

      7.2   FULL FORCE AND EFFECT. Except as may be specifically amended by
this Amendment, the Agreement remains in full force and effect in accordance
with its terms.
                                       21


      IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
the Visual Content Services Agreement.

  eBAY INC. ("eBAY")                        INTERNET PICTURES CORPORATION
                                            ("IPIX")

  By:  /s/ Jeff Jordan                      By: /s/ Howard Field
      ----------------------------------       --------------------------------
  Name:  Jeff Jordan                        Name:  Howard Field
  Title: Senior Vice President, eBay U.S.   Title: Senior Vice President


                                       22


* Indicates material has been omitted pursuant to a request for confidential
information
                            AMENDMENT NO. 2 TO THE

                      VISUAL CONTENT SERVICES AGREEMENT

      THIS AMENDMENT NO. 2 (the "Amendment") to the VISUAL CONTENT SERVICES
AGREEMENT is effective as of September 26, 2001 (the "Amendment Effective Date")
by and between eBAY INC., a Delaware corporation with its principal place of
business at 2145 Hamilton Avenue, San Jose, California 95125 ("eBAY"), and
INTERNET PICTURES CORPORATION, a Delaware corporation with its principal place
of business at 1009 Commerce Park Drive, Oak Ridge, Tennessee 37830 ("IPIX").

                                   BACKGROUND

D.       The parties entered into the Visual Content Services Agreement,
         effective April 19, 2000 (the "Agreement").

E.       The parties entered into Amendment No. 1 to the Visual Content Services
         Agreement, effective January 1, 2001 (the "First Amendment") to adjust
         certain rights and obligations.

F.       The parties now desire to amend the Agreement to, among other things,
         modify the licenses, payment terms, promotional obligations, and
         technology escrow terms of the Agreement, as well as to make provisions
         for the purchase and sale-leaseback of certain IPIX hardware to eBay.


G.       All capitalized terms used in this Amendment shall have the meanings
         ascribed to them in the Agreement unless defined otherwise in this
         Amendment.

                                    AMENDMENT

1.    IPIX TECHNOLOGY.  Section 1.15 "IPIX Technology" is hereby amended and
      restated in its entirety as follows:

      1.15  "IPIX Technology" means any proprietary software, hardware, or other
            technology used or necessary in the development, implementation, or
            provision of Services to Customers (including but not limited to the
            Image Management Solution and Plug-Ins), any updates thereto, and
            all intellectual property rights (e.g., trademarks, trade secrets,
            copyrights, patents, and patent applications) associated therewith.

2.    ENHANCED SERVICES PAYMENTS. Effective October 1, 2001, Section 5.3 * is
      hereby amended and restated in its entirety as follows:  *

                                       23


3.    EXHIBIT I.  Effective October 1, 2001, Exhibit I as follows shall be
      added to the Agreement:  *

4.    PROPRIETARY RIGHTS. Section 7.1 ("IPIX Technology; Help Tools; IPIX
      Images") is hereby amended and restated in its entirety as follows
      (changes are indicated for convenience):


      7.1   IPIX Technology; Help Tools; IPIX Images. Except as modified by
            Sections 7.1(c) and 7.1(d) below:

                  (a) All IPIX Technology, Help Tools and all IPIX Images are,
      and at all times will remain, the exclusive property of IPIX, and no
      provision of this Agreement implies any transfer to eBay of any ownership
      interest in the IPIX Technology, Help Tools or the IPIX Images. The
      licenses set forth in Sections 7.1(b) and 7.1(c) confer neither title to,
      nor ownership in, the IPIX Technology, Help Tools or the IPIX Images and
      are not a sale of any rights therein. eBay hereby irrevocably assigns to
      IPIX all right, title and interest worldwide in and to any modifications
      or derivative works of the IPIX Technology, Help Tools and IPIX Images
      made by eBay ("eBay Modifications"), including without limitation any
      copyrights, trade secrets, patent rights, moral rights, contract rights
      and licensing rights.

                  (b) IPIX hereby grants to eBay a nonexclusive, fully-paid,
      royalty-free, worldwide license to use, reproduce, display, digitally
      perform and/or modify the IPIX Technology, Help Tools and IPIX Images
      (including any eBay Modifications) solely as necessary to provide the
      Services in accordance with the Agreement. eBay may sublicense or
      distribute the IPIX Technology or any portion thereof (such as Plug-Ins),
      Help Tools and IPIX Images to Customers, solely as necessary to make the
      Services available to Customers on the Sites. In addition, IPIX hereby
      grants to eBay a perpetual, irrevocable, nonexclusive, fully-paid,
      royalty-free, worldwide foregoing license to use, reproduce, digitally
      perform, display, modify and distribute for any purpose any derivative
      works of Help Tools which eBay creates in the process for localizing such
      Help Tools for use on international Sites.

                        (i) As reasonably requested by IPIX from time to time,
      eBay agrees to include such ownership restrictions and other licensing
      provisions regarding the IPIX Technology, IPIX Images and Help Tools in
      relevant legends, disclaimers and license agreements presented to
      Customers on the Sites in connection with the Services. eBay shall
      reproduce all copyright notices in the original IPIX Technology, Help
      Tools and IPIX Images and on all copies or modifications thereof where the
      omission of such notices would jeopardize or impair IPIX's intellectual
      property rights therein.

                        (ii) Any transfer, copying, distribution or other use of
      the IPIX Technology, Help Tools and IPIX Images by eBay other than as
      expressly provided herein constitutes a material breach of this Agreement.

                                       24


                        (iii) eBay will not disassemble or decompile the IPIX
      Technology including single Java class files under any circumstances. The
      disassembly or decryption by eBay of the foregoing constitutes a material
      breach of this Agreement.

                        (iv) eBay will not export or re-export the IPIX
      Technology or any copy or adaptation in violation of any applicable laws
      or regulations.

                  (c) IPIX hereby grants eBay a perpetual, irrevocable,
      nonexclusive, fully-paid, royalty-free, worldwide license to use,
      reproduce, display, perform, modify, create derivative works of,
      distribute copies, make, have made, import, use, and in any way exploit
      the IPIX Technology to provide the Services (including, but not limited
      to, IPIX hosting technology, server-based software (source code, object
      code, and executable code), client-based software (source code, object
      code, and executable code), and Plug-Ins), with the right to sublicense
      such IPIX Technology to support the foregoing. The foregoing license is
      granted presently and shall become exercisable only upon occurrence of a
      Triggering Event (as defined below). Each of the following is a
      "Triggering Event", and parties acknowledge and agree that the Triggering
      Events are noncurable: *

5.    EXHIBIT E.  Effective October 1, 2001, Exhibit E shall be amended and
restated as follows:  *


6.    6.3 TERMINATION FOR BREACH.  Section 6.3 ("Termination for Breach") is
      hereby amended by adding a new Section 6.3(b) as follows:

                  (b) An occurrence of any Triggering Event other than Cash
      Failure (as specified in Section 13.10(b)(1)) shall constitute a material
      breach of the Agreement, and eBay may terminate the Agreement after the
      occurrence of any such Triggering Event upon written notice to IPIX. In
      addition, in the event of the occurrence of a Triggering Event caused by
      Cash Failure and the exercise by eBay of its rights under Section 7.1(c)
      and payment under Section 7.1(d), then this Agreement shall terminate. The
      obligations of each party to make any payments accrued and owing up to the
      date of termination shall survive any such termination.

7.    REPRESENTATIONS AND WARRANTIES. Section 9.1 ("Warranty") of the
      Agreement is hereby amended and restated in its entirety as follows:


      9.1   Warranty. IPIX hereby represents and warrants to eBay that: (i) any
            content provided by IPIX to eBay (including but not limited to
            content contained in the Help Tools) will not contain any libelous,
            defamatory, obscene or slanderous material, and is not materially
            false, misleading or inaccurate, and will not contain any viruses,
            worms, time bombs, cancelbots or other programming routines intended
            to damage, detrimentally interfere with, surreptitiously intercept
            or expropriate any system, data, or personal information; (ii) IPIX
            has the necessary right, power and authority to enter into this
            Agreement, First Amendment, and this Amendment and to grant the
            licenses contained herein; and (iii) IPIX's execution, delivery, and
            performance of its obligations under this Amendment


                                       25

            will not cause a breach or constitute an event of default under any
            agreement to which IPIX is a party or by which IPIX is bound.

8.    TRANSITION ASSISTANCE. In the event that IPIX experiences a Triggering
      Event, IPIX will use commercially reasonable efforts to make available
      individuals familiar with the IPIX Technology (e.g., developers,
      operations, and quality assurance personnel), for hire by eBay to
      assist eBay in providing the Services.

9.    TECHNOLOGY ESCROW. Section 13.10(a) ("Technology Escrow") of the
      Agreement is amended and restated to read as follows (changes are
      indicated for convenience):


      13.10 TECHNOLOGY ESCROW.

            (a) Within 30 days following the Amendment Effective Date, IPIX
            shall amend the May 30, 2000 Two-Party Escrow Agreement; such
            amended escrow agreement shall be mutually agreeable to the parties
            and shall contain terms satisfactory to eBay (including reformation
            of Bankruptcy Events to conform to the Triggering Events and
            streamlined dispute resolution and release procedures as set forth
            in draft Amendment No. 1 to the Two-Party Escrow Agreement) (the
            "Escrow Agreement"). Under such Escrow Agreement, IPIX shall
            deposit, and maintain during the Term, a copy of the current and
            complete source code, object code, and executable code for the
            software components of the IPIX Technology as well as all associated
            documentation. IPIX shall name eBay in the Escrow Agreement as a
            contingent beneficiary entitled to receive the Code immediately upon
            the following events: (i) if IPIX no longer continues in the
            business of providing the Services; provided, however that a Change
            of Control of IPIX (as defined in Section 13.8, but excluding a
            Change of Control Event occurring under Section 13.8(d)) shall not
            trigger a release of the Code from escrow, (ii) upon the occurrence
            of a Triggering Event (as defined in Section 7.1(c) above) and eBay
            exercises its rights under Section 7.1(c); or (iii) if IPIX ceases
            to operate as a going business concern; provided eBay executes such
            customary documentation applicable to contingent beneficiaries as
            the Escrow Agent may specify from time to time. The escrow
            arrangement will not apply to any code or products IPIX licenses
            from third parties. If such third party code is necessary for the
            operation of Services, IPIX will assist eBay in obtaining, the
            necessary licenses to use such third party code to operate the
            Services.

            (b) An "Adverse Financial Event" means:

                (1) *;

                (2) IPIX (i) ceases to conduct its business in the ordinary
                course, or (ii) commences any insolvency proceeding with respect
                to itself, or (iii) takes any action to effectuate or authorize
                any of the foregoing;

                (3) voluntary or involuntary proceedings by or against IPIX are
                instituted in bankruptcy under any insolvency law, which
                proceedings, if

                                       26

                involuntary, shall not have been dismissed within thirty (30)
                days after the date of filing;

                (4) a receiver or custodian is appointed to effectuate or
                authorize any of the foregoing;

                (5) proceedings are instituted by or against such party for
                corporate reorganization, dissolution, liquidation or winding-up
                of such party, which proceedings, if involuntary, shall not have
                been dismissed within thirty (30) days after the date of filing;
                or

                (6) substantially all of the assets of such party are seized or
                attached and not released within thirty (30) days after the date
                of filing days thereafter.

10.   13.7 FORCE MAJEURE.  Section 13.7 ("Force Majeure") of the Agreement is
      amended and restated to read as follows (changes are indicated for
      convenience):

       Force Majeure. Nonperformance of either party will be excused to the
      extent that performance is rendered impossible by storm, lockout or other
      labor trouble, riot, Internet infrastructure failure, hacker attack, war,
      rebellion, act of terrorism, strike, fire, flood, accident or other act of
      God, governmental acts, orders or restrictions, or any other reason where
      failure to perform is beyond the control of the non-performing party.

11.   BANKRUPTCY CODE.  The parties acknowledge and agree that the Agreement
      is a contract under which IPIX is a licensor of intellectual property
      as provided in Section 365(n) of Title 11, United States Code (the
      "Bankruptcy Code").  IPIX acknowledges that if IPIX, as a debtor in
      possession or trustee in bankruptcy in a case under the Bankruptcy
      Code, rejects this Agreement, eBay may elect to retain its rights under
      this Agreement as provided in Section 365(n) of the Bankruptcy Code.
      Upon written request of eBay to IPIX or the bankruptcy trustee, IPIX or
      such bankruptcy trustee will not interfere with the rights of eBay as
      provided in this Agreement.

12.   NOTICE AND ADDITIONAL DOCUMENTS.  *

                                       27


13.   GENERAL.

      13.1  GOVERNING LAW; VENUE. This Amendment shall be construed in
            accordance with and governed exclusively by the laws of the State of
            California applicable to agreements made among California residents
            and to be performed wholly within such jurisdiction, regardless of
            such parties' actual domiciles. Both parties submit to personal
            jurisdiction in California and further agree that any cause of
            action arising under this Amendment shall be brought exclusively in
            a court in Santa Clara County, CA.

      13.2  FULL FORCE AND EFFECT. Except as may be specifically amended by
            this Amendment, the Agreement remains in full force and effect in
            accordance with its terms.

      13.3  CONFLICT. In the event of any conflict between the Visual Content
            Services Agreement, the First Amendment, and this Amendment, the
            terms set forth in this Amendment herein shall supersede any
            conflicting term(s) set forth in the Visual Content Services
            Agreement and the First Amendment.


      IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 to
the Visual Content Services Agreement.

  eBAY INC. ("eBAY")                          INTERNET PICTURES CORPORATION
                                              ("IPIX")

  By:/s/ Jeff Jordan                          By:  /s/ Donald Strickland
     ------------------------------               ------------------------------
  Name:  Jeff Jordan                          Name:  Donald Strickland
  Title: Senior Vice President, eBay U.S.     Title: Chief Executive Officer

                                       28

EX-10.2

                                                                    EXHIBIT 10.2


eBay Inc.
2145 HAMILTON AVENUE
SAN JOSE, CA  95125


                         PURCHASE AGREEMENT - LEASEBACK


      THIS AGREEMENT dated as of September 26, 2001 by and between INTERNET
PICTURES CORPORATION, a Delaware corporation, having its principal place of
business at 1009 Commerce Park Drive, Oak Ridge, Tennessee 37830, hereinafter
called SELLER and eBay Inc. a Delaware corporation, having its principal place
of business at 2145 Hamilton Avenue, San Jose, California, 95125, hereinafter
called BUYER.

      All capitalized terms used in this Agreement shall have the meanings
ascribed to them in the Visual Content Services Agreement, effective as of
September 7, 2001, Amendment No. 1 to the Visual Content Services Agreement,
effective January 1, 2001, and Amendment No. 2 to the Visual Content Services
Agreement, effective as of the date hereof, in each case by and between the
SELLER and BUYER (collectively, the "VCSA Agreement").

      WITNESSETH, that in consideration of the mutual undertaking herein
contained, the parties agree as follows:

1.    SALE.

      SELLER agrees to sell and BUYER agrees to purchase from SELLER the
equipment listed on Schedule A-1 attached hereto and incorporated by reference
herein together with all additions, attachments, parts or accessories
incorporated or attached therein or associated therewith (referred to as the
"Equipment") in accordance with the terms and conditions specified herein. All
associated licenses to third party software resident on the Equipment (the
"Third Party Licenses") are listed on Schedule A-2.

2.    PURCHASE PRICE.

      BUYER shall purchase the Equipment for an amount equivalent to two million
four hundred seventy four thousand four hundred forty five dollars and no cents
($2,474,445.00). SELLER shall provide BUYER with all of the purchase
documentation associated with SELLER's purchase of the Equipment from the
vendor(s) (the "Equipment Vendor(s)"), including but not limited to the purchase
documentation, invoices, and bill of sale provided to SELLER. If SELLER has not
yet paid the Equipment Vendor(s) from whom SELLER is purchasing the Equipment,
BUYER shall pay said Purchase Price directly to the Equipment Vendor(s), unless
otherwise agreed.

3.    DELIVERY.

      SELLER shall deliver and BUYER shall accept delivery of the Equipment on
the Closing Date at a location designated by BUYER prior to or on the Closing
Date. Irrespective of any other provision hereof, SELLER shall bear all risk of
damage from fire, the elements or otherwise until the full payment of the
purchase price is paid.

4.    CLOSING DATE.

      The Closing shall take place on September 26, 2001.

5.    LEASEBACK.

      This Agreement is contingent upon SELLER leasing the Equipment from BUYER
pursuant to Lease Schedule No. 1 to the Master Lease Agreement dated as of the
date hereof between SELLER, as Lessee, and BUYER, as Lessor (collectively, the
"Lease").

      SELLER represents and warrants to BUYER that the Equipment has been
installed, tested, inspected and accepted by SELLER from the Equipment Vendor(s)
and that the Equipment is in good working order.


6.    MAINTENANCE/WARRANTIES.

      (a) SELLER warrants that either (i) the Equipment is under "new" equipment
warranty from the manufacturer or (ii) the Equipment has been continuously under
a maintenance contract and will be eligible for the manufacturer's maintenance
agreement as of the Closing Date and all Equipment is at current manufacturer
release, revision and/or engineering change levels.

      (b) SELLER shall and hereby does assign to BUYER the benefit of all rights
applicable to the Equipment in connection with warranties, servicing, training,
patent and copyright indemnities and the like, including the right to use and
possess licensed products associated with the Equipment provided by the
manufacturer or Equipment Vendor(s).


7.    SELLER REPRESENTATIONS.

      (a) SELLER is a corporation duly existing and in good standing under the
laws of the state of its incorporation and qualified and licensed to do business
in, and is in good standing in, any state in which the conduct of its business
or its ownership of property requires that it be so qualified.

      (b) SELLER is duly authorized to execute, deliver and perform its
obligations under this Agreement and all corporate actions required on its part
for the due execution, delivery and performance of the transaction contemplated
herein have been duly and effectively taken.

      (c) SELLER's execution, delivery, and performance of its obligations under
this Agreement are not in conflict with nor constitute a breach of any provision
contained in


                                       2

SELLER's Certificate of Incorporation or Bylaws, nor will they constitute an
event of default under any agreement to which SELLER is a party or by which
SELLER is bound.

      (d) The Equipment, together with the Third Party Licenses, constitutes all
of the materials required to operate the IPIX Technology and to provide the
Services. Each item of Equipment is owned by SELLER free and clear of any liens
and encumbrances of any kind or description. Upon purchase of the Equipment
hereunder, BUYER will acquire good and marketable title in and to the Equipment.
Each item of Equipment (i) is currently located in the State of California and
(ii) has at all times been located in the State of California during SELLER's
ownership of the Equipment. The SELLER has paid in full the Equipment Vendor(s)
from whom SELLER purchased the Equipment. At the time of SELLER's purchase of
the Equipment, SELLER paid in full all sales taxes associated with the
Equipment.

      (e) Each item of Equipment is in good condition and repair (ordinary wear
and tear excepted) and is adequate and appropriate for the uses to which it is
currently being put by SELLER.

All representations and warranties herein shall survive the execution of this
Agreement and the purchase of the Equipment.

8.    TITLE.

      Title shall pass from SELLER to BUYER on the date BUYER tenders payment of
the purchase price. SELLER shall provide BUYER with a Bill of Sale in the form
of Schedule B attached hereto and incorporated by reference herein upon payment
of the full Purchase Price to evidence passage of title to the Equipment from
SELLER to BUYER free and clear of all claims, liens and encumbrances.

9.    TAXES AND TAX BENEFITS.

      SELLER hereby indemnifies and holds BUYER harmless for any sales or other
tax arising from the transaction between the Equipment Vendor and SELLER. BUYER
hereby agrees that with respect to Equipment, SELLER shall be entitled to all
the tax benefits that are afforded to an owner of equipment under the Internal
Revenue Code of 1986 (the "Code").

10.   NOTICES.

      Any notice provided for herein shall be in writing and sent by registered
or certified mail, postage prepaid, addressed to the party for which it is
intended at the address set forth in the first paragraph of this Agreement or to
such other address as either party shall from time to time indicate in writing,
and said notice shall be effective upon receipt or three days from the date of
mailing, whichever occurs first.

11.   COVENANTS.


                                       3

      (a) Upon request by BUYER, SELLER shall assist BUYER in obtaining all
licenses necessary or useful to operate the Services (including but not limited
to executing any consents and/or assignments to transfer and/or effectuate such
license(s) to BUYER for no additional incremental fees.

      (b) BUYER covenants that it shall pay any applicable California sales
taxes arising from the sale of the Equipment to BUYER pursuant to this
Agreement.

12.   MISCELLANEOUS.

      (a) This constitutes the entire Agreement between SELLER and BUYER solely
with respect to the purchase and sale of the Equipment and no representation or
statement not contained herein shall be binding upon SELLER or BUYER as a
warranty or otherwise, unless in writing and executed by the party to be bound
thereby.

      (b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.

      (c) This Agreement shall be governed by and construed in accordance with
the laws of the State of California, including all matters of construction,
validity, performance and enforcement. Any disputes arising under this Agreement
may be brought in the state courts and the federal courts located in San Jose,
California, and the parties hereby consent to the personal jurisdiction and
venue of these courts.

      (d) This Agreement is subject to acceptance by BUYER at its offices in San
Jose, California, and shall only become effective on the date thereof.

      (e) This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original and of equal force and effect.

      (f) SELLER agrees to and shall indemnify and hold BUYER harmless from and
against all claims, liens, costs, loss, expenses or damages arising out of the
breach by SELLER of its obligations or out of any misrepresentation by SELLER,
hereunder.

      (g) THE PARTIES HERETO EACH HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR
IN CONNECTION WITH THIS AGREEMENT.

                  [Remainder of page intentionally left blank.]


                                       4

      IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and do each hereby warrant and represent that its respective signatory whose
signature appears below has been and is on the date of this Agreement duly
authorized by all necessary and appropriate corporate action to execute this
Agreement.

INTERNET PICTURES CORPORATION           eBay Inc.,
AS SELLER                               AS BUYER



By:/s/ Donald Strickland                By:/s/ Michael R. Jacobson
   --------------------------              --------------------------

Title:  President and CEO               Title:  Vice President, Legal Affairs

Date:  September 26, 2001               Date:  September 26, 2001

EX-10.3

                                                                    EXHIBIT 10.3


                             MASTER LEASE AGREEMENT
                                    EBAY INC.
                         (INTERNET PICTURES CORPORATION)


      This MASTER LEASE AGREEMENT (this "MASTER LEASE") is made as of September
26, 2001, between eBay Inc., a Delaware corporation ("LESSOR"), with a place of
business at 2145 Hamilton Avenue, San Jose, California, 95125, and Internet
Pictures Corporation, a Delaware corporation ("LESSEE") with a primary place of
business at 1009 Commerce Park Drive, Oak Ridge Tennessee 37830.

      All capitalized terms used in this Agreement shall have the meanings
ascribed to them in the Visual Content Services Agreement, effective as of April
19, 2000, Amendment No. 1 to the Visual Content Services Agreement, effective
January 1, 2001, and Amendment No. 2 to the Visual Content Services Agreement,
effective as of the date hereof, in each case by and between the SELLER and
BUYER (collectively, the "VCSA Agreement").

1. DEFINITIONS. As used in this agreement:

      (a) "ASSIGNEE" means an assignee or secured party of Lessor under any
Lease.

      (b) "COMMENCEMENT DATE" means the date on which the term of any Lease
shall commence with respect to Equipment listed on the applicable Lease
Schedule, which date shall be the date specified on such Lease Schedule as the
Commencement Date.

      (c) "DEFAULT" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default.

      (d) "EVENT OF DEFAULT" shall have the meaning set forth in SECTION 14.

      (e) "EVENT OF LOSS" means any theft, damage to or destruction to any item
of Equipment, including, but not limited to, any condemnation, seizure, or
requisition of title or use thereof.

      (f) "EQUIPMENT" means, individually or collectively, any hardware or other
equipment listed on the applicable Lease Schedule, and all replacements thereof,
and repairs, additions, and accessories thereto.

      (g) "LEASE" means a Lease Schedule incorporating the terms of this Master
Lease. If more than one Lease Schedule which reference this Master Lease have
been executed, then each Lease Schedule, together with the referenced Master
Lease Agreement, shall constitute a separate and independent Lease; the original
of such Lease shall consist of the original, manually signed Lease Schedule and
a true copy of this Master Lease.

      (h) "LEASE SCHEDULE" means any lease schedule signed by Lessor and Lessee
incorporating by reference the terms and provisions of this Master Lease.

      (i) "LESSOR" means, collectively, eBay Inc., a Delaware corporation, and
any applicable Assignee.

      (j) "PURCHASE DATE" means the first day after the last day of the
applicable Term, in the event that any Equipment is purchased hereunder.

      (k) "RENTAL PAYMENT" means all rental payments due or that become due
hereunder, including any advance payments, specified on each Lease Schedule.

      (l) "RENT" means the aggregate of all Rental Payments.

      (m) "SUPPLIER" means any supplier of the Equipment subject to this Master
Lease.

      (n) "TERM" means three (3) years from the date of each such applicable
Lease Schedule.

2. SCOPE OF LEASE. Lessor hereby agrees to lease to Lessee and Lessee hereby
agrees to lease from Lessor the Equipment solely (a) for Lessee's business
purposes and not for personal or consumer use, and (b) under the terms and
conditions of this Master Lease and the terms and conditions set forth in the
applicable Lease Schedule. Any term or condition of any Lease Schedule that
conflicts with a term or condition of this Master Lease shall prevail over such
term or condition of this Master Lease.

3. PAYMENT OF RENT; TERM. Lessee shall pay Rental Payments to Lessor in the
amount specified on each Lease Schedule, for the use of the applicable Equipment
during the Term. If the Commencement Date does not fall on the first day of a
month, the payment for the partial month at the commencement of the Lease shall
be in amount as set forth on the Lease Schedule (the "INTERIM PAYMENT"). The
Interim Payment is due on the Commencement Date, and the remaining Rental
Payments shall be due and payable on the first day of the immediately following
month and, without further demand, on the first day of each subsequent month
during the Term thereafter, or as otherwise specified in the applicable Lease
Schedule. All payments due hereunder shall be payable to Lessor at the address
and in the manner specified in Lessor's invoice, or in the manner and at such
address as Lessor may notify Lessee of in writing. Lessee agrees that, if it
fails to make any Rental Payment or other payment when due hereunder, Lessee
will pay to Lessor interest on the overdue amount at the rate of one and
one-half percent (1.5%) per month, or the maximum legal interest rate, whichever
is less. LESSEE AGREES AND ACKNOWLEDGES THAT (a) EACH LEASE IS A NET LEASE AND
SHALL NOT BE CANCELED OR TERMINATED EXCEPT AS EXPRESSLY PROVIDED HEREIN OR ON
THE APPLICABLE LEASE SCHEDULE, AND (b) LESSEE'S OBLIGATION TO MAKE ALL RENTAL
PAYMENTS DUE OR THAT BECOME DUE HEREUNDER OR THEREUNDER SHALL BE ABSOLUTE,
UNCONDITIONAL, NONCANCELLABLE AND NONREFUNDABLE, AND SHALL NOT BE SUBJECT TO ANY
ABATEMENT, REDUCTION, SETOFF, DEFENSE, INTERRUPTION, CLAIM, COUNTERCLAIM,
ADJUSTMENT, OR DEFERMENT FOR ANY REASON WHATSOEVER. A handling and delivery
charge to cover all transportation, packing, installation, and handling of the
Equipment to and from Lessor's facilities shall be paid by Lessee.

4. INSTALLATION AND COMPLETION OF LEASE SCHEDULE. Lessee shall provide and
maintain an installation environment that is in accordance with Supplier's
Equipment specifications or user's manual. Except as otherwise specified in the
applicable Lease Schedule,


2

Lessee shall furnish all labor and materials required to install the Equipment.
Lessee agrees that it shall, with respect to the Equipment listed on Schedule 1
attached hereto, on the date hereof, and with respect to any subsequent
Schedule, promptly, but in no event later than ten (10) days after its receipt
of Equipment, (a) install such Equipment, and (b) complete and return to Lessor
a signed Lease Schedule for such Equipment.

5. WARRANTY; LIMITATION OF LIABILITY. Lessee acknowledges that it has made the
selection of each item of Equipment based upon its own judgment and expressly
disclaims any reliance upon statements made by Lessor. Lessee shall be provided
the benefit of any standard product warranties applicable to all Equipment that
are normally furnished by Supplier to purchasers of identical Equipment, and the
right to enforce any such warranty made by any Supplier is hereby assigned to
Lessee for the term of the applicable Lease Schedule. LESSOR MAKES NO, AND
DISCLAIMS ALL, WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF NON-INFRINGEMENT, MERCHANTABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL LESSOR BE LIABLE TO LESSEE
OR ANY OTHER PERSON FOR EXEMPLARY, INCIDENTAL, INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF THIS MASTER LEASE, ANY LEASE
SCHEDULE OR THE USE OR POSSESSION OF EQUIPMENT, INCLUDING WITHOUT LIMITATION,
THE COST OF COVER, LOSS OF PROFIT, USE, SAVINGS OR REVENUE, OR THE CLAIMS OF
THIRD PARTIES, WHETHER OR NOT LESSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
LOSS. Lessee understands and agrees that neither the Supplier nor any
salesperson of Supplier is an agent of Lessor.

6. TITLE. The Equipment shall always remain and be deemed personal property even
though it may become attached or affixed to realty. Lessor shall retain title to
the Equipment and no right, title, or interest in or to any Equipment shall pass
to Lessee, except as expressly set forth in this Master Lease. If requested by
Lessor, Lessee will affix plates or markings on the Equipment indicating the
interests of Lessor and its Assigns therein, and Lessee will not allow any other
indicia of ownership or other interest in the Equipment to be placed thereon.
Lessee shall (a) not convey, sell, transfer, assign, sublet or otherwise dispose
of, or permit any lien or encumbrance upon or against any interest in, this
Master Lease, any Lease Schedule or any Equipment, (b) give immediate written
notice to Lessor of any attempt to create such lien or encumbrance, and (c) at
its sole expense, defend, indemnify and hold Lessor harmless from and against
any claims, damages, costs, expenses, losses or the like relating to the
protection and preservation of Lessor's title and interest in any Equipment.

7. TAXES. Lessee or Lessor, at Lessor's option, agrees to pay when due all
sales, use, property or estimated property, excise and other taxes, fees or
other charges of any nature whatsoever (except for any taxes based on Lessor's
net income), however designated, together with any fines, penalties or interest
thereon, now or hereafter imposed by any governmental entity or paid or accrued
by Lessor, whether based upon any Lease, the Rental Payments or the purchase,
license, delivery, ownership, leasing, use, possession or return of any
Equipment. Lessee will pay all property or estimated property taxes on the
Equipment directly to the appropriate taxing authority. Lessee will reimburse
Lessor for any such payments made by Lessor promptly, but in no event later than
thirty (30) days after Lessor's request. Any fees,


3

taxes or other charges paid by Lessor upon failure of Lessee to make such
payments shall become immediately due from Lessee to Lessor.

8. LESSEE REPRESENTATIONS. Lessee hereby represents to Lessor that:

      (a) Lessee is a corporation duly existing and in good standing under the
laws of the state of its incorporation and qualified and licensed to do business
in, and is in good standing in, any state in which the conduct of its business
or its ownership of property requires that it be so qualified.

      (b) Lessee is duly authorized to execute, deliver and perform its
obligations under this Master Lease and all corporate actions required on its
part for the due execution, delivery and performance of the transaction
contemplated herein have been duly and effectively taken.

      (c) Lessee's execution, delivery, and performance of its obligations under
this Master Lease are not in conflict with nor constitute a breach of any
provision contained in Lessee's Certificate of Incorporation or Bylaws, nor will
they cause a breach or constitute an event of default under any agreement to
which Lessee is a party or by which Lessee is bound.

All representations and warranties herein shall survive the execution of this
Agreement.

9. REPLACEMENT AND UPGRADE OF EQUIPMENT. At any time during the Term and so long
as no Default or Event of Default shall have occurred and be continuing
hereunder, Lessee shall have the sole right (after good faith consultation with
Lessor) to replace or update the Equipment to the extent Lessee reasonably
determines it necessary or desirable to provide the Services in accordance with
the Performance Standards set forth in the VCSA Agreement. In any such instance,
Lessee shall provide Lessor with the first right to enter into a transaction to
purchase and/or enter into a sale/leaseback transaction (a "Purchase
Transaction") with respect to all or any portion of such upgraded or replacement
equipment to the Equipment (the "Replacement Equipment") by giving Lessor
written notice, with sufficient detail, describing the Replacement Equipment
desired to be purchased (a "Replacement Equipment Notice").

      Without limiting the foregoing, if the fair market value of the
Replacement Equipment contained in a Replacement Equipment Notice is an amount
that meets or exceeds $100,000 in the aggregate, Lessor shall have fifteen (15)
days after written receipt of such Replacement Equipment Notice to elect to
enter into a Purchase Transaction. In the alternative, if the fair market value
of the Replacement Equipment contained in the Replacement Equipment Notice is an
amount that is less than $100,000 in the aggregate (a "De Minimis Replacement
Notice"), Lessor's first right to enter into a Purchase Transaction for such
Replacement Equipment shall continue to remain vested in Lessor indefinitely,
unless Lessor waives in writing its right to enter into a Purchase Transaction
for such Replacement Equipment. If Lessor decides to proceed with a Purchase
Transaction, the Lessor shall decide whether to purchase any such Replacement
Equipment either directly from the vendor for such Replacement Equipment or, in
the event Lessee has purchased any Replacement Equipment set forth in a De
Minimis Replacement Notice, from the Lessee.

      To the extent Lessor agrees to finance the purchase of any Replacement
Equipment in accordance with this Section 9, the Lessee shall: (i) upon the
request of Lessor, execute a Lease


4

Schedule evidencing a Lease for such Replacement Equipment; (ii) promptly pay to
Lessor in cash the principal amount relating to the Equipment being replaced as
determined in accordance with the applicable Lease Schedule, and the Lessee's
rental payments under such Lease Schedule shall be appropriately reduced; and
(iii) promptly pay any and all Rental Payments then due and owing to Lessor.

10. USE; MAINTENANCE; ALTERATIONS; INSPECTION; REMOVAL. Lessee agrees to comply
with all laws and regulations applicable to this Master Lease and each Lease and
the use and possession of any Equipment. Lessee, at its sole cost and expense,
shall use each item of Equipment in accordance with Supplier's guidelines, meet
any and all recertification requirements and keep in effect an Equipment
maintenance agreement with Supplier or other party acceptable to Lessor. Lessee
shall furnish all parts, materials and labor required to make all necessary
repairs and keep the Equipment in good operating condition, and such parts and
material shall become part of the applicable Equipment and the property of
Lessor, subject to the applicable Lease. Lessee shall not make any alterations
or attachments to any Equipment without the prior written consent of Lessor, and
any permitted alteration or attachment that cannot be readily removed without
damaging such Equipment's performance or merchantability shall become part of
such Equipment and the property of Lessor. To the extent applicable, Lessor
shall have the right during normal business hours to enter the premises where
the Equipment is located to inspect the Equipment. Lessee shall not move the
Equipment from the location where the Equipment is located, WITHOUT LESSOR'S
PRIOR WRITTEN CONSENT.

11. PURCHASE; RETURN OPTION.

      (a) If no Default or Event of Default shall have occurred and be
continuing hereunder, and upon not less than ninety (90) days' or more than one
hundred and eighty (180) days' written notice to Lessor before the end of any
Term, Lessee shall have the option to (i) purchase or (ii) return the Equipment
at the end of the applicable Term.

      (b) Provided that Lessee shall have given notice pursuant to SECTION 11(a)
above, Lessee shall have the option to purchase on the Purchase Date, all (but
not less than all) of the Equipment on the applicable Lease Schedule for an
amount equal to the purchase option amount specified in the applicable Lease
Schedule. Upon exercise of such option, Lessee shall pay to Lessor on the
Purchase Date the aforementioned amount in cash, together with all sales and
other applicable taxes and any other amounts due and owing hereunder, whereupon
LESSOR SHALL CAUSE SUCH EQUIPMENT TO BE TRANSFERRED TO LESSEE WITHOUT RECOURSE
OR WARRANTY, ON AN "AS-IS," "WHERE-IS" BASIS.

      (c) If Lessee does not elect to purchase the Equipment, Lessee shall
return such Equipment at the end of the applicable Term at its own expense and
risk of loss, and Lessee agrees to (i) pay for any repairs to place the
applicable Equipment in the same condition as when received by Lessee,
reasonable wear and tear excepted, (ii) obtain certification of such Equipment
for maintenance by Supplier or its designee, (iii) promptly cause the Equipment
to be disassembled, de-installed, inspected and crated in accordance with
Supplier's recommendations, and (iv) deliver such Equipment, freight prepaid, to
a location specified by Lessor. If any Equipment is not received by Lessor
within fifteen (15) days after the end of the applicable Term, or if Lessee
fails to provide Lessor with written notification of Lessee's intention to


5

purchase or return the Equipment, the applicable Lease Schedule will be deemed
to be renewed for subsequent ninety (90) day periods at the original Rental
Payment amount, until such time as a ninety (90) day prior written notice of
purchase or return is given by Lessee.

      (d) Notwithstanding the foregoing, so long as (i) no Default or Event of
Default shall have occurred and be continuing hereunder, (ii) no Triggering
Event shall have occurred under the VCSA Agreement and (iii) the VCSA Agreement
has been terminated in accordance with its terms, Lessee shall, within ninety
(90) days of the effective termination date of the VCSA Agreement, purchase from
Lessor for cash all of the Equipment under each Lease in an amount equal to the
principal amount relating to all of such Equipment as determined in accordance
with each Lease Schedule. Upon Lessee's payment to Lessor in full of all such
amount made in accordance with this Section 11(d), this Master Lease and all
Lease Schedules shall terminate.

12. INSURANCE. Lessee shall obtain and maintain liability insurance and
insurance against loss or damage to the Equipment including, without limitation,
loss by fire (including extended coverage), theft and such other risks of loss
as are customarily insured against on that type of Equipment. Such insurance
shall be in such amounts, in such form and with such insurers as are acceptable
to Lessor, and shall contain a requirement that no material modification of,
cancellation of, or failure to renew coverage may occur unless thirty (30) days
prior written notice thereof has been provided to Lessor. Lessee shall cause its
insurer to name Lessor and any Assignees as loss payees and additional insureds,
and upon Lessor's request, Lessee shall cause its insurer to provide to Lessor a
certificate evidencing such coverage within fifteen (15) days thereafter. In
addition, Lessee shall maintain insurance coverage on the Equipment that meets
or exceeds the level and scope of insurance that Lessee maintained on the
Equipment during the period that Lessee owned the Equipment.

13. LOSS OR DAMAGE TO EQUIPMENT. Until the Equipment is returned to and received
by Lessor as provided in SECTION 11 above, Lessee shall bear the entire risk of
any Event of Loss. No Event of Loss shall relieve Lessee from its obligation to
pay Rent, except as provided in (c) below. If any Event of Loss occurs, Lessee
shall immediately notify Lessor and, at the option of Lessor, shall (a) place
the affected Equipment in good repair and working order, (b) replace such
Equipment with like Equipment in good repair and working order, with clear title
to the replacement Equipment vested in Lessor, or (c) promptly pay to Lessor an
amount equal to the sum of (i) all accrued and unpaid rent, (ii) the present
value discounted at five percent (5%) of all remaining Rental Payments, (iii)
the Lessor's original booked residual value, if any, of the Equipment,
discounted in accordance with GAAP at the discount rate of five percent (5%),
and (iv) any taxes, late fees, indemnity payments or other amounts due under
this Master Lease or the applicable Lease Schedule. If such Equipment is subject
to a fixed purchase option, the amount payable under SECTION 13(c) above shall
be the amount required to exercise such option. Upon payment of the amount
required by SECTION 13(c), Lessor shall transfer to Lessee, WITHOUT RECOURSE OR
WARRANTY (EXPRESS OR IMPLIED), ALL OF LESSOR'S INTEREST, IF ANY, IN AND TO SUCH
EQUIPMENT ON AN "AS IS," "WHERE IS" BASIS. The proceeds of any insurance payable
with respect to such Equipment shall be applied, at the option of Lessor, either
toward (1) replacement or repair of such Equipment, or (2) payment of any of
Lessee's obligations hereunder. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts


6

issued with respect to, any Event of Loss under any insurance policy relating to
the applicable Equipment.

14. EVENTS OF DEFAULT. Any of the following shall be an "EVENT OF DEFAULT": (a)
Lessee fails to pay (1) any portion of a Rental Payment within thirty (30) days
after its due date or (2) any portion of a payment due to eBay under any
sublicensing/subleasing agreement for space and/or bandwidth (the "Sublicensing
Agreement") within thirty (30) days after its due date; (b) Lessee fails to
perform or observe any other covenant, term or condition in this Master Lease,
any Lease Schedule or the Sublicensing Agreement, which failure is not remedied
within thirty (30) days after Lessee receives written notice from Lessor; (c)
any representation of Lessee in this Master Lease, any Lease Schedule, the
Sublicensing Agreement, the Purchase Agreement for the Equipment or the Bill of
Sale for the Equipment is found to be inaccurate, and such failure or inaccuracy
continues unremedied for thirty (30) days after written notice by Lessor; (d)
without Lessor's consent, Lessee shall or shall attempt to abandon, remove,
sell, encumber, assign, or sublet any item of Equipment; (e) Lessee shall
dissolve or discontinue its business, or become insolvent or make an assignment
for the benefit of creditors, or a trustee or receiver shall be appointed for
Lessee or for a substantial part of its assets, or bankruptcy, reorganization or
insolvency proceedings shall be instituted by or against Lessee, which
proceedings, if involuntary, shall not have been dismissed within thirty (30)
days after the date of filing; or (f) any Triggering Event shall have occurred
under the VCSA Agreement. THE PARTIES ACKNOWLEDGE THAT AN EVENT OF DEFAULT
CAUSED BY THE OCCURRENCE OF ANY OF SECTIONS 14(d), (e) OR (f) ABOVE ARE
NON-CURABLE BY LESSEE.

15. REMEDIES. Upon the occurrence of an Event of Default and at any time
thereafter, Lessor may, in its sole discretion, to the extent permitted by and
in conformity with applicable law, do any one or more of the following: (a) upon
notice to Lessee, terminate this Master Lease and any or all Lease Schedules;
(b) declare the total amount or any portion thereof of unpaid Rent and other
amounts due and to become due hereunder or under any Lease Schedule immediately
due and payable; (c) demand that the Equipment be returned in accordance with
SECTION 11 hereof; (d) enter the premises where any Equipment is located and
take immediate possession thereof and remove any such Equipment; (e) re-lease or
sell any Equipment at a public or private sale on such notice and terms as
Lessor shall deem reasonable, or (f) exercise any other right or remedy
available to Lessor under applicable law or proceed by court action to enforce
the terms of this Master Lease or any Lease or to recover damages or expenses
resulting from the Event of Default. In addition, Lessee shall be liable for and
shall pay to Lessor all attorneys' fees and other costs incurred by Lessor in
exercising Lessor's remedies, including placing any Equipment in the condition
required by SECTION 11 hereof. If this Master Lease or any Lease Schedule is
deemed at any time to be intended as security, Lessee hereby grants to Lessor a
security interest in the applicable Equipment to secure, in addition to the
indebtedness herein, all other indebtedness at any time owing by Lessee to
Lessor. This Master Lease shall constitute a security agreement under applicable
law if the transactions contemplated herein are deemed not to constitute a
lease. Lessee agrees to make any and all filings, and to take any actions
necessary or, in the view of counsel, advisable, to perfect the grant of such
security interest under the applicable Uniform Commercial Code or to maintain
perfection thereof. No remedy referred to in this Master Lease is intended to be
exclusive, but each shall be in addition to any other remedy referred to or
otherwise available to Lessor at law or in equity. No express or implied waiver
by Lessor of any Default or Event of Default shall constitute a waiver of any


7

other Default or Event of Default by Lessee or a waiver of any of Lessor's
rights, and no delay by Lessor in enforcing any right or requiring performance
of any provisions of this Master Lease or any Lease Schedule by Lessee shall be
a waiver of such right or affect the right of Lessor to enforce such provision.

16. ASSIGNMENT. Without Lessor's prior written approval, Lessee shall not (a)
assign, transfer, pledge, hypothecate, or otherwise dispose of this Master
Lease, any Lease Schedule, any Equipment or any interest therein, or (b) sublet
or lend any Equipment or permit it to be used by anyone other than Lessee or
Lessee's employees. Lessee agrees that any such assignment shall not materially
change Lessee's duties or obligations under this Master Lease or any Lease
Schedule. Each Assignee shall have all the rights but none of the obligations of
Lessor under this Master Lease or any such Lease Schedule unless Lessee is
otherwise notified by Lessor. Lessee shall recognize such assignments and/or
security agreements and agrees that upon notice of such assignment it shall pay
directly to the Assignee (unless otherwise directed by such Assignee) without
abatement, deduction or setoff all amounts which become due hereunder and
further agrees that it will not assert against such Assignee any defense, claim,
counterclaim, or setoff for any reason whatsoever in any action for Rent or
possession brought by the Assignee.

17. GENERAL INDEMNITY. Lessee agrees to indemnify and to defend and hold Lessor
and any of its successors and Assignees harmless from and against all claims,
costs, expenses (including, but not limited to, attorneys' fees), damages,
losses, and liabilities of any nature whatsoever that may be imposed on,
incurred by or asserted against any such indemnified party in any way relating
to or arising out of this Master Lease, any Lease Schedule, or any item of
Equipment or its purchase, acceptance, delivery, ownership, leasing, possession,
maintenance, use, operation, or transportation, whether or not other parties are
involved. The provisions of this SECTION 17 shall survive the termination of
this Master Lease and all Lease Schedules.

18. GENERAL.

      (a) FURTHER ASSURANCES. Lessee shall promptly execute and deliver to
Lessor such further documents and take such further action as Lessor may request
to more effectively carry out the intent and purpose of this Master Lease and
the Lease Schedules. Lessee hereby appoints Lessor as its attorney-in-fact for
the purposes of executing, delivering, filing, registering and/or recording, as
applicable, all documents, instruments and agreements that Lessor deems
necessary or reasonably desirable to perfect and maintain a first priority
perfected security interest in the Equipment.

      (b) NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing (including facsimile communication),
unless expressly indicated to the contrary herein, and mailed, faxed or
delivered to each party at the address first set forth above or at such other
address as each party may designate in a written notice to the other parties,
complying as to delivery with the terms of this SECTION 18(b). All such notices,
requests, demands and other communications shall be effective when received
(whether through the mails or by facsimile or delivery).

      (c) GOVERNING LAW. This Master Lease and all Lease Schedules shall be
governed by and construed in accordance with the internal laws of the State of
California, excluding its


8

choice of law rules. Any disputes arising under this Master Lease and all Lease
Schedules may be brought in the state courts and the federal courts located in
San Jose, California, and the parties hereby consent to the personal
jurisdiction and venue of these courts. The parties hereby waive any right to a
trial by jury in any action to enforce or defend any matter arising from or
related to this Master Lease or any Lease Schedule.

      (d) UNENFORCEABLE PROVISIONS. If any term of this Master Lease or any
Lease Schedule is found to be illegal or unenforceable, the remaining portions
of this Master Lease or such Lease Schedule shall remain in effect, provided
that the parties agree to negotiate in good faith substitute enforceable terms
reflecting the parties' original intent in entering into this Master Lease or
such Lease Schedule.

      (e) COMPLETE AGREEMENT; MODIFICATIONS. This Master Lease and all Lease
Schedules constitute the entire understanding and agreement between Lessor and
Lessee and there is no other understanding or agreement between the parties,
oral or written, which is not set forth herein. This Master Lease and any Lease
Schedule may not be amended except by a writing signed by Lessor and Lessee and
shall be binding upon and inure to the benefit of the parties hereto, Assigns
and their permitted successors.


LESSOR:  EBAY INC.,                     LESSEE:  INTERNET PICTURES CORPORATION
a Delaware corporation                  a Delaware corporation


By: /s/ Michael R. Jacobson             By: /s/ Donald Strickland
    ------------------------------          ------------------------------

Name: Michael R. Jacobson               Name: Donald Strickland

Title: Vice President, Legal Affairs    Title: President and CEO

Date: September 26, 2001                Date: September 26, 2001


9