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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): December 16, 1999
VerticalNet, Inc.
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(Exact name of registrant specified in Charter)
Pennsylvania 000-25269 23-2815834
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(State or other (Commission (IRS Employee
jurisdiction of File Number) Identification No.)
incorporation)
700 Dresher Road
Horsham, PA 19044
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(Address of principal executive offices) Zip Code
REGISTRANT'S TELEPHONE, INCLUDING AREA CODE: 215-328-6100
(Former name and former address, if changed since last report)
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ITEM 2. ACQUISITION OF ASSETS
(a) On December 16, 1999 (the "Closing Date"), the Registrant completed its
previously announced acquisition of substantially all of the assets (the
"Acquisition") of NECX Exchange Trust (the "Seller"). The Acquisition was
consummated by NECX.com LLC (the "Acquisition Sub"), a wholly-owned subsidiary
of the Registrant. The Acquisition was accomplished pursuant to the terms of
the Asset Purchase Agreement (the "Purchase Agreement"), dated as of November
16, 1999 by and among the Registrant, the Acquisition Sub, New England Circuit
Sales, Inc., NECX Exchange, LLC, the Seller and the sole stockholder of New
England Circuit Sales, Inc. The terms of the Purchase Agreement were the result
of arm's length negotiations among the parties.
The consideration paid by the Registrant for the Acquisition included the
repayment of approximately $36,016,000 of indebtedness, $10,000,000 in cash and
the issuance of notes convertible into shares of the Registrant's common stock.
If the convertible notes were converted on the Closing Date, the convertible
notes would have converted into 1,002,130 shares of the Registrant's common
stock. The value of the shares underlying the convertible notes fluctuates
based on the average market price of the Registrant's common stock during a
period prior to the conversion of such notes. The convertible notes will be
automatically converted upon the U.S. Securities and Exchange Commission
declaring effective a registration statement (the "Registration Statement")
covering the shares underlying the convertible notes. Under the terms of the
Purchase Agreement, the Registrant must prepare and use its best efforts to file
the Registration Statement on or prior to February 24, 2000. The maximum number
of shares of the Registrant's common stock issuable under the convertible notes
is 1,838,458. The Registrant's working capital was used to repay the
aforementioned indebtedness and to make the cash payment.
(b) The Seller operates a business-to-business marketplace for the
electronics industry. Specifically, the Seller services the open market segment
of the electronics industry buying and selling semiconductors, electronic
components, computer products and networking equipment. The Registrant intends
to continue such business.
The Registrant issued a press release announcing the completion of the
Acquisition, which release is filed herewith as Exhibit 99.1 and is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
To be filed on Form 8-K/A as soon as practicable, but not later than
75 days from the Closing Date.
(b) Pro forma Financial Information.
To be filed on Form 8-K/A as soon as practicable, but not later than
75 days from the Closing Date.
(c) Exhibits.
Exhibit No. Description of Document
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2.1 Asset Purchase Agreement dated as of November 16, 1999.
4.1 Convertible Promissory Note in the Principal Amount of
$10.5 million.
4.2 Convertible Promissory Note in the Principal Amount of
$34.5 million.
4.3 Convertible Promissory Note in the Principal Amount of
$25.0 million.
99.1 Press Release dated December 16, 1999
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SIGNATURE
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 hereunto duly authorized.
VERTICALNET, INC.
Date: December 29, 1999 By: /s/ Gene S. Godick
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Gene S. Godick
Senior Vice President,
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT
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2.1 Asset Purchase Agreement dated as of November 16, 1999.
4.1 Convertible Promissory Note in the Principal Amount of $10.5
million.
4.2 Convertible Promissory Note in the Principal Amount of $34.5
million.
4.3 Convertible Promissory Note in the Principal Amount of $25.0
million.
99.1 Press Release dated December 16, 1999
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ASSET PURCHASE AGREEMENT
BY AND AMONG
VERTICALNET, INC.
(A PENNSYLVANIA CORPORATION),
NECX ACQUISITION LLC
(A DELAWARE LIMITED LIABILITY COMPANY),
NEW ENGLAND CIRCUIT SALES, INC.
(A MASSACHUSETTS CORPORATION),
NECX EXCHANGE, LLC
(A DELAWARE LIMITED LIABILITY COMPANY),
NECX EXCHANGE TRUST
(A MASSACHUSETTS BUSINESS TRUST)
AND
HENRY J. BERTOLON, JR.
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TABLE OF CONTENTS
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Section Page
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1. Definitions................................................................. 1
2. Sale and Purchase........................................................... 11
2.1. Agreement to Sell and Purchase....................................... 11
2.2. Purchase Price....................................................... 12
2.3. Escrow Account....................................................... 13
2.4. Allocation of the Purchase Price..................................... 13
2.5. Assumption of Liabilities............................................ 13
2.6. Consent of Third Parties............................................. 14
3. Closing..................................................................... 14
3.1. Location, Date....................................................... 14
3.2. Deliveries........................................................... 14
4. Representations and Warranties with respect to the Seller Parties........... 16
4.1. Corporate Status..................................................... 16
4.2. Authorization........................................................ 16
4.3. Consents and Approvals............................................... 16
4.4. Stock Ownership...................................................... 17
4.5. Financial Statements................................................. 17
4.6. Title to Purchased Assets and Related Matters........................ 18
4.7. Real Property........................................................ 18
4.8. Certain Personal Property............................................ 19
4.9. Non-Real Estate Leases............................................... 20
4.10. Accounts Receivable.................................................. 20
4.11. Inventory............................................................ 20
4.12. Liabilities.......................................................... 20
4.13. Taxes................................................................ 20
4.14. Subsidiaries......................................................... 21
4.15. Legal Proceedings and Compliance with Law............................ 21
4.16. Contracts............................................................ 21
4.17. Insurance............................................................ 23
4.18. Intellectual Property................................................ 23
4.19. Software............................................................. 27
4.20. Employee Relations................................................... 28
4.21. ERISA................................................................ 28
4.22. Corporate Records.................................................... 30
4.23. Absence of Certain Changes........................................... 30
4.24. Previous Sales; Warranties........................................... 31
4.25. Customers and Suppliers.............................................. 31
4.26. Operation of the Business............................................ 31
4.27. Finder's Fees........................................................ 32
4.28. Investment Representations........................................... 32
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4.29. Additional Information............................................... 33
4.30 Transactions with Affiliates......................................... 34
4.31 Accuracy of Information.............................................. 34
5. Representations and Warranties of the Buyer and VERT........................ 34
5.1. Organizational Status................................................ 34
5.2. Authorization........................................................ 34
5.3. Financing............................................................ 34
5.4. Consents and Approvals............................................... 34
5.5 Finder's Fees........................................................ 35
5.6 Reports.............................................................. 35
5.7 Accuracy of Information.............................................. 35
6. Covenants of the Seller Parties............................................. 35
6.1. Conduct of the Business.............................................. 35
6.2. Access to Information................................................ 37
6.3. Satisfaction of Liabilities.......................................... 37
6.4. No Solicitation...................................................... 37
6.5. Competition and Confidentiality...................................... 38
6.6. Transfer of Purchased Assets and Business............................ 39
6.7. Employees and Business Relations..................................... 39
6.8 Related Parties...................................................... 39
6.9 Restrictions on Transfer............................................. 39
6.10 Additional Financial Statements...................................... 40
6.11 Update Disclosure Schedules.......................................... 40
7. Covenants of Buyer and VERT................................................. 40
7.2. Bulk Sales........................................................... 40
7.3 Registration Rights.................................................. 40
7.4 Tax Payment.......................................................... 42
8. Mutual Covenants............................................................ 43
8.1. Fulfillment of Closing Conditions.................................... 43
8.2. Employees............................................................ 43
8.3. Disclosure of Certain Matters........................................ 45
8.4. Public Announcements................................................. 45
8.5. Transfer Taxes....................................................... 45
8.6. Confidentiality...................................................... 45
8.7. Expenses............................................................. 46
8.8. Accounts Receivable Insurance........................................ 46
8.9. Representation and Warranty Insurance................................ 46
8.10. Lease............................................................... 46
9. Conditions Precedent to Obligations of the Seller Parties.................. 46
9.2. Agreements, Conditions and Covenants................................ 46
9.3. Legality............................................................ 47
10. Conditions Precedent to Obligations of the Buyer........................... 47
10.1. Representations and Warranties...................................... 47
10.2. Agreements, Conditions and Covenants................................ 47
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<TABLE>
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10.3. Legality............................................................. 47
10.4. Disclosure Schedules................................................. 47
10.5. Seller Required Consents and Approvals............................... 47
10.6 Third Party Consents................................................. 48
10.7 Consent of Sumitomo Corporation...................................... 48
11. Indemnification............................................................. 48
11.1. By the Seller Parties................................................ 48
11.2. By VERT and the Buyer................................................ 49
11.3. Procedure for Claims................................................. 49
11.4 Claims Period........................................................ 51
11.5. Third Party Claims................................................... 52
11.6. Effect of Investigation or Knowledge................................. 52
11.7. Indemnification Remedy............................................... 52
12. Termination................................................................. 52
12.1 Grounds for Termination.............................................. 52
12.2. Effect of Termination................................................ 53
13. General Matters............................................................. 53
13.1 Contents of Agreement................................................ 53
13.2. Amendment, Parties in Interest, Assignment, Etc...................... 53
13.3. Further Assurances................................................... 54
13.4. Interpretation....................................................... 54
13.5. Counterparts......................................................... 54
13.6. Disclosure Schedules................................................. 54
14. Remedies.................................................................... 54
15. Notices..................................................................... 54
16. Governing Law............................................................... 55
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Schedules
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<S> <C>
Schedule 2.1(a) Encumbrances
Schedule 2.1(b) Excluded Assets
Schedule 2.5 Unassumed Liabilities
Schedule 4.3 Consents and Approvals
Schedule 4.5 Financial Statements
Schedule 4.6 Title to Purchased Assets and Related Matters
Schedule 4.7 Real Property
Schedule 4.8 Certain Personal Property
Schedule 4.9 Non-Real Estate Leases
Schedule 4.11 Inventory
Schedule 4.12 Liabilities
Schedule 4.13 Taxes
Schedule 4.14 Subsidiaries
Schedule 4.15(a) Legal Proceedings
Schedule 4.15(b) Environmental Condition
Schedule 4.15(c) Environmental Reports
Schedule 4.15(d) Governmental Permits
Schedule 4.16 Contracts
Schedule 4.17 Insurance
Schedule 4.18(a)(i) Intellectual Property - Contracts
Schedule 4.18(a)(iii) Intellectual Property - Restrictions on Employees and
Consultants
Schedule 4.18(b)(i) Intellectual Property - Encumbrances
Schedule 4.18(b)(ii) Intellectual Property - Assignment of Inventions and Know-how
Schedule 4.18(c)(i) Intellectual Property - Patents
Schedule 4.18(d)(i) Intellectual Property - Trademarks
Schedule 4.18(e)(i) Intellectual Property - Copyrights
Schedule 4.19(a) Software Products
Schedule 4.19(b) Software - Components
Schedule 4.19(d) Software - Source Codes
Schedule 4.19(e) Software - Year 2000
Schedule 4.19(f) Electronic Commerce
Schedule 4.19(g) Non-Competition / Confidentiality / Non-Disclosure
Schedule 4.20 Employee Relations
Schedule 4.21 ERISA
Schedule 4.23 Absence of Certain Changes
Schedule 4.25 Customers and Suppliers
Schedule 4.26 Operation of the Business
Schedule 4.29 Additional Information
Schedule 4.30 Transactions with Affiliates
Schedule 10.6 Third Party Consents
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Exhibits
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Exhibit A - Bill of Sale, Assignment and Assumption Agreement
Exhibit B - Escrow Agreement
Exhibit C - Escrow Note
Exhibit D - Fixed Note
Exhibit E - Floating Note
Exhibit F - Marshall Employment Agreement
Exhibit G - Secondment Agreement
Exhibit H - Summary of Lease Term
</TABLE>
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made as of the 16th day of November 1999,
by and among NECX EXCHANGE TRUST, a Massachusetts business trust (the "Trust"),
NECX EXCHANGE, LLC, a Delaware limited liability company and the sole owner of
all of the outstanding beneficial interests of the Trust ("NECX" and together
with the Trust, the "Seller" or the "Company"), NEW ENGLAND CIRCUIT SALES, INC.,
a Massachusetts corporation and the sole owner of the membership interests of
NECX (the "Parent Company"), HENRY J. BERTOLON, JR., an individual and the sole
stockholder of the Parent Company ("Bertolon" and together with the Trust, NECX
and the Parent Company, the "Seller Parties"), VERTICALNET, INC., a Pennsylvania
corporation ("VERT") and NECX ACQUISITION LLC, a Delaware limited liability
company (the "Buyer," and together with VERT and the Seller Parties, the
"Parties"). Certain other terms are used herein as defined below in SECTION 1
or elsewhere in this Agreement.
BACKGROUND
NECX is the sole owner of all of the outstanding beneficial interests of
the Trust. The Parent Company owns all of the issued and outstanding membership
interests of NECX. Bertolon owns all of the issued and outstanding shares of
the capital stock of the Parent Company. Prior to execution of this Agreement,
NECX transferred all of its interest in and to the Business to the Trust. The
Trust owns and operates the Business (defined below).
This Agreement sets forth the terms and conditions upon which the Buyer is
purchasing the Purchased Assets (defined below) and assuming the Assumed
Liabilities (defined below) from the Seller and the Seller is selling the
Purchased Assets and transferring the Assumed Liabilities to the Buyer.
WITNESSETH
NOW, THEREFORE, the Parties, intending to be legally bound hereby, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of the mutual covenants contained herein,
hereby agree as follows:
1. Definitions.
For convenience, certain terms used in more than one part of this Agreement
are listed in alphabetical order and defined or referred to below (such terms as
well as any other terms defined elsewhere in this Agreement shall be equally
applicable to both the singular and plural forms of the terms defined).
"AA" is defined in SECTION 6.10.
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"Accounts Receivable" means, as of any date, any trade accounts receivable,
notes receivable, bid, performance, lease, utility or other deposits, employee
advances and other miscellaneous receivables of the Business.
"Acquisition Proposal" means, with regard to the Seller or the Parent
Company, a proposal or offer (other than pursuant to this Agreement) for a
tender or exchange offer, merger, consolidation or other business combination,
purchase or sale of an equity interest or purchase or sale of all or
substantially all of the Seller, the Parent Company, the Business or the
Seller's assets.
"Affiliates" means, with respect to a particular Party, Persons or entities
controlling, controlled by or under common control with that Party, as well as
any officers and their nuclear family members, directors and their nuclear
family members, and majority-owned entities of that Party and of its other
Affiliates. For the purposes of the foregoing, ownership, directly or
indirectly, of any of the voting stock or other equity interest shall be deemed
to constitute control.
"Agreement" means this Agreement, the Exhibits and the Disclosure Schedules
hereto.
"Assumed Liabilities" is defined in SECTION 2.5(A).
"Bertolon" is defined above in the preamble.
"Balance Sheet" is defined in SECTION 4.5.
"Balance Sheet Date" is defined in SECTION 4.5.
"Benefit Plan" means (x) any pension plan, 401(k) plan, profit-sharing
plan, health or welfare plan, and any other employee benefit plan (within the
meaning of Section 3(3) of ERISA) that is maintained or sponsored by the Seller
or to which the Seller contributes or for which the Seller otherwise has or may
have any liability, contingent or otherwise, either directly or as a result of
an ERISA Affiliate, and (y) any other benefit arrangement, obligation, or
practice, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to one or more present or former
employees, directors, agents, or independent contractors, that is maintained or
sponsored by the Seller or to which the Seller contributes or for which the
Seller otherwise has or may have any liability, contingent or otherwise, either
directly or as a result of an ERISA Affiliate, including, without limitation,
employment agreements, severance policies or agreements, executive compensation
arrangements, incentive arrangements, sick leave, vacation pay, salary
continuation, consulting or other compensation arrangements, workers'
compensation, bonus plans, stock option, stock grant or stock purchase plans,
medical insurance, life insurance, tuition reimbursement programs or scholarship
programs, any plans subject to section 125 of the Code, and any plans providing
benefits or payments in the event of a change of ownership or control.
"Bertolon Notes" means the (i) promissory note dated as of December 20,
1994 in the
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principal amount of $4,000,000, (ii) promissory note dated as of August 11, 1998
in the principal amount of $2,000,000, (iii) promissory note dated January 8,
1999 in the principal amount of $1,000,000 and (iv) promissory note dated
February 24, 1999 in the principal amount of $3,000,000, each payable by the
Seller to Bertolon.
"Bill of Sale, Assignment and Assumption Agreement" means a bill of sale,
assignment and assumption agreement by and between the Seller, the Parent
Company and the Buyer in substantially the same form as EXHIBIT A.
"Building Leases" means the leases for (i) 4 Technology Drive, Peabody,
Massachusetts and (ii) 2 Corporation Way, Peabody, Massachusetts.
"Business" means the entire business, operations, facilities and Assets of
the Seller.
"Business Day" means a day other than a Saturday or Sunday, or a day on
which the banking institutions of the Commonwealth of Pennsylvania are
authorized or obligated by law or executive order to close.
"Buyer" is defined above in the preamble.
"Charter Documents" means a Person's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in SECTION 3.1.
"Closing Balance Sheet" is defined in SECTION 6.10.
"Closing Certificates" means the certificates to be delivered by the Seller
at the Closing under SECTION 3.2 and any other provisions hereof.
"Closing Date" is defined in SECTION 3.1.
"Closing Payment" is defined in SECTION 2.2(A).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of VERT, $0.01 par value per share.
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"Component" means any software, Software Product, Custom Software,
Hardware, Database or Embedded Control.
"Confidential Information" means any confidential information or Trade
Secrets of the Seller, including personnel information, advertising and
marketing plans or systems, distribution and sales methods or systems, sales and
profit figures, customer and client lists, customer, client and supplier
information and any relationships with dealers, distributors, wholesalers,
customers, clients, suppliers and any other Persons who have, or have had,
business dealings with the Business.
"Contract" means any written or oral contract, agreement, lease,
instrument, or other document or commitment, arrangement, undertaking, practice
or authorization that is binding on any Person or its property under any
applicable Law.
"Copyrights" means any copyrights in both published and unpublished works.
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
authority that is binding on any person or its property under applicable Law.
"Custom Software" means any computer software that has been developed or
designed for use in the Business.
"Database" means any data and other information recorded, stored,
transmitted and retrieved in electronic form by a System or any Component,
whether located on any Components of a System or archived in storage media of a
type employed or used in conjunction with any Component or System.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or cause an Encumbrance to
arise, or (c) with respect to any Contract, the occurrence of an event that with
or without the passage of time or the giving of notice, or both, would give rise
to a right of termination, renegotiation or acceleration or a right to receive
damages or a payment of penalties.
"Designated Employee" is defined in SECTION 8.2.
"Disclosure Schedule" means any of the Schedules hereto containing
information relating to the Company pursuant to SECTION 4 and other provisions
hereof that has been provided to the Buyer on the date hereof.
"Embedded Control" means any microprocessor, microcontroller, smart
instrumentation or other sensor, driver, monitor, robotic or other device
containing a semiconductor, memory circuit, BIOS, PROM or other microchip, all
as the same is used in the operation of the Business.
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"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest,
including any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"Environmental Condition" is defined in SECTION 4.15(B).
"Environmental Law" means all Laws and Court Orders relating to pollution
or protection of the environment as well as any principles of common law under
which a Party may be held liable for the Release or discharge of any Hazardous
Substance into the environment.
"Environmental Liability" means any liability, known or unknown, relating
to or arising out of an Environmental Condition.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations and rules issued thereunder, or any successor law.
"ERISA Affiliate" means any person that, together with the Seller, is or
was, during the applicable statute of limitations period, at any time treated as
a single employer under Section 414 of the Code or Section 4001 of ERISA and any
general partnership of which the Seller is or has been, during the applicable
statute of limitations period, a general partner. For purposes of Section 4.21,
the term "Seller" includes any ERISA Affiliate.
"Escrow Agent" means an Escrow Agent mutually acceptable to VERT and the
Seller.
"Escrow Agreement" means the escrow agreement by and among the Seller, the
Buyer and the Escrow Agent in the form of EXHIBIT B.
"Escrow Note" means the Promissory Note in the principal amount of
$10,500,000 payable by VERT to the Trust in the form of EXHIBIT C.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" is defined in Section 2.1(b).
"Fixed Note" means the Promissory Note in the principal amount of
$34,500,000 payable by VERT to the Trust in the form of EXHIBIT D.
"Floating Note" means the Promissory Note in the initial principal amount
of $25,000,000 payable by VERT to the Trust in the form of EXHIBIT E.
"GAAP" means generally accepted US accounting principles.
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"Governmental Permits" means any governmental permits, licenses,
registrations, certificates of occupancy, approvals and other governmental
authorizations.
"Hardware" means any mainframe, midrange computer, personal computer,
notebook or laptop computer, server, switch, printer, modem, driver, peripheral
or any component of any of the foregoing, all as the same is used in the
operation of the Business.
"Hazardous Substances" means any toxic, carcinogenic or hazardous gaseous,
liquid or solid material or waste that may or could pose a hazard to the
environment or human health or safety including (a) any "hazardous substances"
as defined by the federal Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. " 9601 et seq., (b) any "extremely hazardous
substance," "hazardous chemical," or "toxic chemical" as those terms are defined
by the federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. "
11001 et seq., (c) any "hazardous waste," as defined under the federal Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. " 6901 et seq., (d) any "pollutant," as defined under the federal Water
Pollution Control Act, 33 U.S.C. " 1251 et seq., as any of such laws in clauses
(a) through (d) as amended, and (e) any regulated substance or waste under any
Laws or Court Orders that have been or will be enacted, promulgated or issued by
any federal, state or local governmental authorities concerning protection of
the environment.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Intellectual Property" means any Copyrights and registrations or
applications for registration of Copyrights in any jurisdiction, and any
renewals or extensions thereof, Patents, Trademarks, technology rights and
licenses, Trade Secrets, franchises, inventions, discoveries, know-how,
formulae, specifications and ideas, rights in research and development, and
commercially practiced processes and inventions, whether patentable or not in
any jurisdiction and any other intellectual property used by the Company.
"Inventory" means all inventory of the Company, including raw materials,
supplies, packaging supplies, work in process and finished goods.
"KPMG" is defined in SECTION 7.4.
"Law" means any statute, law, ordinance, regulation, order or rule of any
federal, state, local, foreign or other governmental or quasi-governmental
agency or body or of any other type of regulatory body, including those covering
environmental, energy, safety, health and welfare, transportation, bribery,
record keeping, zoning, antidiscrimination, antitrust, retirement, wage and
hour, and price and wage control matters.
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"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative, quasi-
administrative or other proceeding, criminal prosecution or governmental
investigation or inquiry.
"Marshall Employment Agreement" means the Employment Agreement between the
Buyer and Lauriston B. Marshall in the form of EXHIBIT F.
"Material Adverse Effect" means a material adverse effect on the Business,
including the Purchased Assets, financial condition or results of operations. A
Material Adverse Effect shall not include any Material Adverse Effect resulting
from the announcement of the Transactions or general economic conditions.
"Minor Contract" means any Contract that is terminable by a party on not
more than 30 days' notice without any Liability and any Contract under which the
obligation of a party (fulfilled and to be fulfilled) involves an amount of less
than $25,000; provided, however, that Minor Contracts shall not include purchase
and sale contracts relating to the trading activities of the Business entered
into in the ordinary course of business.
"NECX" is defined in the preamble.
"Non-Assignable Contract" is defined in SECTION 2.6.
"Non-Competition Period" is defined in SECTION 6.5.
"Non-Real Estate Leases" is defined in SECTION 4.9.
"Notes" means the Escrow Note, the Fixed Note and the Floating Note.
"Off-the-Shelf-Software" is defined in SECTION 4.18(A)(I).
"Offset Dispute Notice" is defined in SECTION 7.4.
"Offset Notice" is defined in SECTION 7.4.
"Offset Shares" is defined in SECTION 7.4.
"Offset Taxes" is defined in SECTION 7.4.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business for the Business that is consistent with past practices.
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"Other Real Estate Leases" is defined in SECTION 4.7.
"Parent Company" is defined above in the preamble.
"Parties" is defined above in the preamble.
"Party" is defined above in the preamble.
"Patents" means any patents together with any extensions, reexaminations
and reissues of such patents, patents of addition, patent applications,
divisions, continuations, continuations-in-part, and any subsequent filings in
any country or jurisdiction claiming priority therefrom.
"Person" means any natural person, business trust, corporation,
partnership, limited liability company, joint stock company, proprietorship,
association, trust, joint venture, unincorporated association or any other legal
entity of whatever nature.
"Prime Rate" means the prime lending rate as announced from time to time in
The Wall Street Journal.
"Purchased Assets" is defined in SECTION 2.1(A).
"Real Property" is defined in SECTION 4.7.
"Release" means any release, spill, emission, leaching, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, or leaching into the indoor
or outdoor environment, or into or out of any property.
"Secondment Agreement" means the Secondment Agreement by and between NECX, the
Buyer and the Trust in substantially the same form as Exhibit G.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" is defined above in the preamble.
"Seller Parties" is defined above in the preamble.
"Seller Representatives" means any investment advisors, accountants,
counsel, agents or other Persons who may act on behalf of the Seller.
"Seller Required Consents" is defined in SECTION 4.3.
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"Seller's knowledge" or "knowledge of the Seller" means the actual
knowledge of Bertolon, Lauriston B. Marshall or Bruce Haskin.
"Shares" means (i) those shares of Common Stock that are payable upon the
maturity of the Notes and (ii) the Offset Shares.
"Software Products" means any computer software products sold, distributed
or marketed by the Seller, and all computer operating, security or programming
software, that is owned by or licensed to the Seller or used, in whole or in
part, directly or indirectly, or has been developed or designed for or is in the
process of being developed or designed for use, in whole or in part, directly or
indirectly, in the conduct of the Business of any nature whatsoever, including
all systems software, all applications software, whether for general business
usage (e.g., accounting, finance, word processing, graphics, spreadsheet
analysis, etc.) or specific, unique-to-the-Business usage (e.g., telephone call
processing, etc.), and any and all documentation and object and source codes
related thereto, all as used in the operation of the Business. "Software
Products" does not include any Off-the-Shelf Software.
"System" means any combination of any software, Software Product, Custom
Software, Hardware, Database or Embedded Control.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Taxes" means all taxes, duties, charges, fees, levies or other assessments
imposed by any taxing authority including income, gross receipts, value-added,
excise, withholding, personal property, real estate, sale, use, ad valorem,
license, lease, service, severance, stamp, transfer, payroll, employment,
customs, duties, alternative, add-on minimum, estimated and franchise taxes
(including any interest, penalties or additions attributable to or imposed on or
with respect to any such assessment).
"Termination Date" is defined in SECTION 3.1.
"Trade Secrets" means any know-how, trade secrets, customer lists,
software, know-how and other technical information, data, process technology,
plans, drawings (including engineering and auto-cad drawings), innovations,
designs, ideas, proprietary information and blue prints, owned, used or licensed
either directly or indirectly (as licensor or licensee) by the Seller and used
in the operation of the Business, except for any such item that is generally
available to the public.
"Trademarks" means any registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks, brand names, certification marks, trade dress, goodwill associated with
the foregoing and registrations in any jurisdictions of,
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and applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application used
by the Seller in the operation of the Business.
"Transaction Documents" means this Agreement, the Bill of Sale, Assignment
and Assumption Agreement, the Escrow Agreement, the Notes, the Secondment
Agreement and the Marshall Employment Agreement.
"Transactions" means the purchase and sale of the Purchased Assets at the
Closing and the other transactions contemplated by the Transaction Documents.
"US" means the United States of America.
"VERT" is defined in the preamble.
"Welfare Plan" is defined in SECTION 4.21(G).
"Year 2000 Compliant" means:
(a) As applied to any Component or product, that each such Component
or product: (i) is designed (or has been modified) to be used prior to and after
January 1, 2000; (ii) will operate without error arising from the creation,
recognition, acceptance, calculation, display, storage, retrieval, accessing,
comparison, sorting, manipulation, processing or other use of dates or date-
based, date-dependent or date-related data, including century recognition, day-
of-the-week recognition, leap years, date values and interfaces of date
functionalities; and (iii) will not be adversely affected by the advent of the
year 2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century.
(b) As applied to any System, that: (i) each Component of such System
is designed (or has been modified) in conformance with the criteria set forth in
subparagraph (a), above; (ii) the design architectures and functionalities
embodying, reflecting or affecting the criteria set forth in subparagraph (a),
above, of all Components of such System (or the methods used to modify them) are
compatible and, when operated in, on or in conjunction with any other Component
of such System, will not cause such System or any of its Components to fail to
satisfy the criteria set forth in subparagraph (a), above.
(c) As applied to the Company, that: (i) each information system and
infrastructure system that is material to its Business conforms to the criteria
set forth in subparagraphs (a) and (b) above; (ii) to the Seller's knowledge,
except as set forth on SCHEDULE 1, no information system or infrastructure
system that is material to the Business receives data from or communications
with any Component or System external to itself (whether or not such external
Component or System is the Company's or any third party's) that does not conform
to the criteria set forth in subparagraphs (a) and (b) above; and (iii) each
customer, supplier, vendor or other entity: (A) with which the Company has a
material contractual relationship, or (B) whose non-performance
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of any obligation or duty to the Company could have a Material Adverse Effect is
Year 2000 Compliant as defined in this subparagraph (c).
"Year 2000 Problem" means any actual or potential failure of the Company or
any of its Systems, Components or products to be Year 2000 Compliant.
2. Sale and Purchase.
2.1. Agreement to Sell and Purchase.
(a) At the Closing, the Seller shall grant, sell, convey, assign,
transfer and deliver to the Buyer, and the Buyer shall purchase from
the Seller, all right, title and interest of the Seller in and to all
of the assets, properties, and rights of every kind, and description,
real, personal and mixed, tangible and intangible wherever situated
constituting or used in the Business on the Closing Date other than
the Excluded Assets (the "Purchased Assets"), free and clear of all
Encumbrances except for those set forth on SCHEDULE 2.1(A), but
including the following:
(i) all Accounts Receivable;
(ii) all Inventory;
(iii) all furniture, fixtures, automobiles, leasehold improvements,
tooling, machinery and equipment;
(iv) all customer records, including principal contacts, addresses
and telephone numbers, purchasing history, equipment
demographics, payment information and any other information;
(v) all records with respect to suppliers, employees and other
aspects of the Business;
(vi) all Patents;
(vii) all Trade Secrets;
(viii) all Copyrights;
(ix) all manufacturing, warehouse and office supplies;
(x) all Software Products, Off-the-Shelf Software and Custom
Software (including documentation and related object and source
codes);
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(xi) all Trademarks;
(xii) all rights under the Building Leases, the Other Real Estate
Leases and the Non-Real Estate Leases, and any easements,
deposits or other rights pertaining thereto;
(xiii) all rights under any Governmental Permits;
(xiv) all rights related to any prepaid expenses;
(xv) all the assets of the Seller as set forth on the Balance Sheet;
(xvi) all equity interests owned by the Seller in any entity,
including the ownership of equity in the entities set forth on
SCHEDULE 4.14;
(xvii) all rights under any insurance contracts; and
(xviii) all rights under any Contracts except to the extent specified
in SECTION 2.5.
(b) Notwithstanding the foregoing, the Purchased Assets shall not
include any of the following (the "Excluded Assets"):
(i) cash in an amount not to exceed $4,142,778;
(ii) the corporate seals, Charter Documents, minute books, stock
books, tax returns, books of account or other records having to do
with the corporate organization of the Seller;
(iii) the rights that accrue or will accrue to the Seller under
this Agreement; or
(iv) the Excluded Assets specified on SCHEDULE 2.1(B).
2.2. Purchase Price.
In addition to the assumption of the Assumed Liabilities, the
aggregate price to be paid by the Buyer to the Trust for the purchase of the
Purchased Assets shall be $80 million (the "Purchase Price"). The Buyer shall
pay the Purchase Price at Closing as follows:
(a) the Buyer shall pay to the Trust $10,000,000 (the "Closing Payment")
by a wire transfer of immediately available funds, in accordance with written
instructions provided by the Trust to the Buyer prior to the
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Closing Date, net of the reductions specified in SECTION 2.2(E);
(b) the Buyer shall deliver the Escrow Note to the Escrow Agent in
accordance with the Escrow Agreement. Such consideration delivered to the Escrow
Agent, together with any investment proceeds thereon and any distributions with
respect thereto as provided in the Escrow Agreement, are referred to
collectively herein as the "Escrow Funds;"
(c) the Buyer shall deliver the Floating Note and the Fixed Note to the
Trust; and
(d) the Buyer shall pay to Bertolon, on behalf of the Trust, the
principal and accrued interest outstanding under the Bertolon Notes. In the
event the Buyer does not pay in full the indebtedness for borrowed money assumed
from the Seller, the Buyer shall use its best efforts to make the holder of such
indebtedness to waive any subordination provisions that would otherwise limit
the payment of the Bertolon Notes.
2.3. Escrow Account. At the Closing Date, the Seller and the Buyer
shall enter into the Escrow Agreement with the Escrow Agent under which the
Escrow Agent shall hold the Escrow Funds for possible claims against the Seller
under SECTION 11 hereof.
2.4. Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets in accordance with the respective fair
market values of the Inventory and other Purchased Assets pursuant to an
allocation schedule prepared by the Buyer after the Closing in accordance with
Section 1060 of the Code and the regulations adopted thereunder. Although the
Parties agree that no portion of the Purchase Price will be allocated to the
covenant contained in SECTION 6.5 hereof, the allocation of the Purchase Price
set forth herein is for tax purposes only and shall not in any way affect the
enforceability of the covenant contained in SECTION 6.5. Neither the Seller nor
the Buyer will take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the terms of this SECTION 2.4,
and the Seller and the Buyer shall file Form 8594 with the US Internal Revenue
Service in a manner consistent with this allocation.
2.5. Assumption of Liabilities.
(a) At the Closing, the Buyer shall assume and agree to pay, discharge
or perform, as appropriate, all Liabilities of the Trust (the "Assumed
Liabilities"), regardless of when made or asserted, except for those Liabilities
set forth on SCHEDULE 2.5 (A) (the "Unassumed Liabilities").
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(b) Notwithstanding paragraph (a) above or any other provision of this
Agreement, the Buyer is not assuming under this Agreement or any other
Transaction Document any Liability identified on SCHEDULE 2.5(A).
2.6. Consent of Third Parties. Nothing in this Agreement shall be
construed as an attempt by the Company to assign to the Buyer pursuant to this
Agreement any Contract, permit, franchise, claim or asset included in the
Purchased Assets that is by its terms or by law nonassignable without the
consent of any other party or parties, unless such consent or approval shall
have been given, or as to which all the remedies for the enforcement thereof
available to the Company would not by law pass to the Buyer as an incident of
the assignments provided for by this Agreement (a "Non-Assignable Contract").
To the extent that any Seller Required Consent in respect of, or a novation of,
a Non-Assignable Contract which is a contract listed on SCHEDULE 4.3 (a
"Material Non-Assignable Contract") shall not have been obtained on or before
the Closing Date, the Buyer may elect to proceed with the Closing, in which
case, the Company shall continue to use reasonable efforts to obtain any such
Seller Required Consent or novation in respect of such Material Non-Assignable
Contract after the Closing Date until such time as it shall have been obtained,
and the Company shall cooperate with the Buyer in any economically feasible
arrangement to provide that the Buyer shall receive the interest of the Company
in the benefits under such Non-Assignable Material Contract, including
performance by the Company as agent if economically feasible, provided that the
Buyer shall undertake to pay or satisfy the corresponding Liabilities under the
terms of such Non-Assignable Material Contract to the extent that the Buyer
would have been responsible therefor if such consent or approval had been
obtained. The Company shall pay and discharge, and shall indemnify and hold
harmless the Buyer and its Affiliates from and against, any and all out-of-
pocket costs of seeking to obtain or obtaining any such Seller Required Consent
in respect of such Material Non-Assignable Contract whether before or after the
Closing Date. Nothing contained in this SECTION 2.6 or elsewhere in this
Agreement shall be deemed a waiver by the Buyer of its right to have received on
the Closing Date an effective assignment of all of the Purchased Assets or of
the covenant of the Company to obtain all of the Seller Required Consents in
respect of such Material Non-Assignable Contract, nor shall this SECTION 2.6 or
any other provision of this Agreement be deemed to constitute an agreement to
exclude from the Purchased Assets any Contracts as to which a Seller Required
Consent may be necessary.
3. Closing.
3.1. Location, Date. The closing for the Transactions (the "Closing")
shall be held at the offices of Morgan, Lewis & Bockius LLP in Philadelphia,
Pennsylvania, at 10:00 a.m. (local time) as promptly as practicable (and in any
event within three Business Days) after the date on which there has been a
satisfaction or waiver of the conditions to the consummation of the Transactions
set forth in SECTIONS 9 and 10, but in any event not later than December 31,
1999 (the "Termination Date"), unless the Parties agree in writing to another
date or place. The date on which the Closing occurs is referred to herein as
the "Closing Date."
3.2. Deliveries. At the Closing, subject to the terms and conditions
contained herein:
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(a) The Seller Parties shall deliver to the Buyer the following items:
(i) an executed copy of each Transaction Document to which they are
each a party;
(ii) a certificate of the Trustee of the Trust to the effect set forth
in SECTIONS 10.1 and 10.2, and each such certificate shall be deemed a
representation of the related parties for the purposes of SECTION 11;
(iii) executed releases of any Encumbrance identified on SCHEDULE 4.6
in forms satisfactory to the Buyer in its sole discretion;
(iv) all Seller Required Consents (or in lieu thereof waivers). Such
Seller Required Consents (or in lieu thereof, waivers) shall (A) be in a form
and substance reasonably satisfactory to the Buyer, (B) not be subject to the
satisfaction of any condition that has not been satisfied or waived and (C) be
in full force and effect, except where the failure to obtain any such consent
(or in lieu thereof, waiver) could not reasonably be expected, individually or
in the aggregate with other such failures, to materially adversely affect the
Buyer, the Purchased Assets, the Assumed Liabilities or the Business; and
(v) such other instruments and documents of conveyance and transfer, in
form reasonably satisfactory to the Buyer and its counsel, as shall be necessary
and effective to transfer and assign to, and vest in, the Buyer all of the
Company's right, title and interest in and to the Purchased Assets.
Simultaneously with such deliveries, all such steps will be taken by the Company
as may be required to put the Buyer in actual possession and operating control
of the Purchased Assets.
(b) The Buyer shall deliver to the Seller Parties:
(i) an executed copy of each Transaction Document to which it is a
party;
(ii) a certificate of an executive officer of the Buyer to the effect
set forth in SECTIONS 9.1 and 9.2 with respect to the Buyer, and each such
certificate shall be deemed a representation of the related parties for the
purposes of SECTION 11.
(c) Buyer shall deliver the Purchase Price to the Trust and the Escrow
Funds to the Escrow Agent in accordance with SECTION 2.2(B) (as adjusted
pursuant to SECTION 2.2(C)).
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(d) The Parties shall also deliver to each other the respective agreements,
legal opinions and other documents and instruments in addition to good standing
certificates, certified resolutions, cross receipts and such other items as may
be reasonably requested.
4. Representations and Warranties with respect to the Seller Parties.
The Seller Parties, jointly and severally, hereby represent and warrant to
the Buyer as follows:
4.1. Corporate Status. The Trust is a business trust duly created,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and is qualified to do business as a foreign entity in any
jurisdiction where it is required to be so qualified, except where the failure
to so qualify would not have a Material Adverse Effect. NECX is a limited
liability company duly organized, validly existing and in good standing under
the Laws of Delaware and is qualified to do business as a foreign corporation in
any jurisdiction where it is required to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect. The Charter
Documents and bylaws of the Seller that have been delivered to the Buyer as of
the date hereof are effective under applicable Laws and are current, correct and
complete.
4.2. Authorization. The Seller has the requisite power and authority to
(a) own the Purchased Assets, (b) carry on the Business, (c) execute and deliver
the Transaction Documents to which it is or will be a party, and (d) perform the
Transactions performed or to be performed by the Seller that Seller is or will
be a party thereto. Such execution, delivery and performance by the Trust has
been duly authorized by all necessary trust action. Each of NECX and the Parent
Company has the requisite power and authority to execute and deliver the
Transaction Documents to which it is or will be a party and to perform the
Transactions performed or to be performed by the Parent Company or NECX. Each
Transaction Document executed and delivered by a Seller Party has been duly
executed and delivered by such party and constitutes a valid and binding
obligation of such party, enforceable against it in accordance with its terms,
subject to applicable laws of bankruptcy, insolvency, moratorium and other laws
affecting the rights of creditors generally.
4.3. Consents and Approvals. Except for any filings, consents or
approvals (including any consent of landlords, mortgagees or equipment lessors)
specified in SCHEDULE 4.3 (collectively the "Seller Required Consents"), neither
the execution and delivery by the Seller of the Transaction Documents to which
it is a party, nor the performance of the Transactions performed or to be
performed by the Seller, require any filing, consent, renegotiation or approval,
constitute a Default or cause any payment obligation to arise under (a) any Law
or Court Order to which the Seller is subject, (b) the Charter Documents or
bylaws of the Seller or (c) any Contract (other than a Minor Contract),
Governmental Permit or other document to which the Seller is a party or by which
the Business, Purchased Assets or other assets of the Seller may be bound. The
transfer of leasehold interests will not trigger any requirement that a new
certificate of occupancy or like recertifications be obtained.
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4.4. Stock Ownership. NECX is the record and beneficial owner of all of
the issued and outstanding beneficial interests of the Trust. The Parent
Company is the record and beneficial owner of all of the issued and outstanding
membership interests of NECX.
4.5. Financial Statements.
(a) The Seller has delivered to Buyer correct and complete copies of
unaudited monthly financial statements of the Business consisting of the balance
sheet of the Business as of the end of each month for January 1999 through
September 1999 and the related statements of income and cash flows for the
months then ended. All such financial statements are referred to herein
collectively as the "Unaudited Financial Statements." Complete and correct
copies of the Unaudited Financial Statements are attached hereto as SCHEDULE
4.5(A). The Unaudited Financial Statements are consistent in all material
respects with the books and records of NECX, and there have not been or will not
be any material transactions that have not been recorded in the accounting
records underlying such Unaudited Financial Statements that are required to be
reflected thereon under GAAP. The balance sheets included in the Unaudited
Financial Statements (a) present accurately the financial condition of NECX, and
the Purchased Assets and, to the Seller's knowledge, any Assumed Liabilities
which are required to be reflected on the balance sheets in accordance with
GAAP, as of the dates thereof and (b) do not include any assets that are not
intended to constitute part of the Business or the Purchased Assets after giving
effect to the Transactions (other than the Excluded Assets). The income
statements included in the Unaudited Financial Statements present, accurately
the results of operation of the Business for the periods indicated thereon. The
income statements included in the Unaudited Financial Statements do not reflect
any operations that are not intended to constitute part of the Business or the
Purchased Assets after giving effect to the Transactions, and such statements
reflect all costs that historically have been incurred by the Business (other
than Unassumed Liabilities) that are required to be reflected thereon under
GAAP. To the Seller's knowledge, there are no Liabilities arising out of,
relating to or connected with the Business that are required to be reflected on
the Unaudited Financial Statements in accordance with GAAP except (a) as set
forth or reflected on the Unaudited Financial Statements, (b) for items
disclosed in the Disclosure Schedules to this Agreement, (c) for purchase
contracts and orders for Inventory in the normal course of the Business, (d) for
Liabilities incurred since the Balance Sheet Date and not in violation of this
Agreement in the ordinary course of the Business consistent with past practice
and (e) Liabilities pursuant to this Agreement. The Unaudited Financial
Statements have been prepared in accordance with GAAP consistently applied and
present fairly the financial position and Assets and Liabilities of the Business
as of the dates thereof, and the results of its operations for the periods then
ended, subject to normal recurring year-end adjustments and the absence of
notes. The balance sheet of NECX as of September 30, 1999 that is included in
the Unaudited Financial Statements is referred to herein as the "Balance Sheet,"
and the date thereof is referred to as the "Balance Sheet Date."
(b) The Seller has delivered to Buyer correct and complete copies of
audited financial statements of the Parent Company consisting of the balance
sheet of the Parent Company
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as of December 31, 1997 and 1998 and the related statements of income and cash
flows for the years then ended, each of which includes the assets, Liabilities
and results of operations of the Business. All such financial statements are
referred to herein collectively as the "Audited Financial Statements." Complete
and correct copies of the Audited Financial Statements are attached hereto as
SCHEDULE 4.5(B). The Audited Financial Statements are consistent in all material
respects with the books and records of the Parent Company, and there have not
been or will not be any material transactions that have not been recorded in the
accounting records underlying such Audited Financial Statements that are
required to be reflected thereon under GAAP. The balance sheets included in the
Audited Financial Statements (a) present accurately the financial condition of
the Parent Company, as of the dates thereof. The income statements included in
the Audited Financial Statements present, accurately the results of operation of
the Parent Company for the periods indicated thereon. To the Seller's knowledge,
there are no Liabilities (relating to the Business) arising out of, relating to
or connected with the Parent Company that are required to be reflected on the
Audited Financial Statements in accordance with GAAP except (a) as set forth or
reflected on the Audited Financial Statements, (b) for items disclosed in the
Disclosure Schedules to this Agreement, (c) for purchase contracts and orders
for Inventory in the normal course of the business, (d) for Liabilities incurred
since the Balance Sheet Date and not in violation of this Agreement in the
ordinary course of the Business consistent with past practice and (e)
Liabilities pursuant to this Agreement. The Audited Financial Statements have
been prepared in accordance with GAAP consistently applied and present fairly
the financial position and Assets and Liabilities of the Parent Company (which
includes the assets, Liabilities and results of operations of the Business) as
of the dates thereof, and the results of its operations for the periods then
ended.
4.6. Title to Purchased Assets and Related Matters. The Seller has good
and marketable title to, valid leasehold interests in or valid licenses to use,
all of the Purchased Assets, free from any Encumbrances except those specified
in SCHEDULE 4.6. The use of the Purchased Assets is not subject to any
Encumbrances (other than those specified in the preceding sentence), and, to the
knowledge of Seller, such use does not encroach on the property or rights of any
Person. All Real Property and tangible personal property (other than Inventory)
included in the Purchased Assets are suitable for the purposes for which they
are used, in good working condition, reasonable wear and tear excepted, and are
free from any known defects. The Purchased Assets constitute all of the assets
and services required for the continued operation of the Business by the Buyer
as operated by the Seller during the past 12 months. The Purchased Assets,
taken as a whole, constitute all the properties and assets relating to or used
or held for use in connection with the Business during the past 12 months
(except for Inventory sold, cash disposed of, Accounts Receivable collected,
prepaid expenses realized, Contracts fully performed, properties or assets
replaced by equivalent or superior assets, in each case in the ordinary course
of business and the Excluded Assets). Except for the Excluded Assets, there are
no assets or properties used in the operation of the Business that are owned by
any Person other than the Seller that will not be licensed or leased to the
Buyer under valid, current license arrangements or leases.
4.7. Real Property. SCHEDULE 4.7 accurately describes all real estate
used in the operation of the Business as well as any other real estate possessed
or leased by the Seller (collectively, the
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"Real Property"), and lists any leases other than the Building Leases under
which any such Real Property is possessed (the "Real Estate Leases"). Except as
set forth on SCHEDULE 4.7, neither the Seller nor any Affiliate thereof has any
ownership interest in any real property used in the Business. SCHEDULE 4.7 also
accurately describes any other real estate previously owned, leased or otherwise
operated by the Seller or any predecessor thereof during the last five years and
the time periods of any such ownership, lease or operation. All of the Real
Property (a) is usable in the ordinary course of business and is in good
operating condition and repair and (b) conforms in all material respects and, in
any event, to the extent necessary to allow the lawful operation of the
Business, with any applicable Laws relating to its construction, use and
operation. The Real Property and the Seller's use thereof complies with
applicable zoning Laws. The Seller, or the landlord of any Real Property leased
by the Seller, has obtained all licenses and rights-of-way from governmental
entities or private parties that are necessary to ensure vehicular and
pedestrian ingress and egress to and from the Real Property. Each Real Estate
Lease is in full force and effect and has not been assigned, modified,
supplemented or amended and, to the Seller's knowledge, neither landlord nor
tenant under any such lease is in default under any such lease, and no
circumstance or set of facts exist which, with the giving of notice or passage
of time, or both, would permit landlord or tenant to terminate any such lease.
The Seller is current on all payments relating to the Real Estate Leases
including, without limitation, rent, utilities, taxes and insurance. The Seller
has not subleased, licensed or in any manner underlet any portion of real
property subject to a Real Estate Lease. The Seller has good and marketable
leasehold title to each Real Estate Lease, free of all Encumbrances, insurable
as such at regular rates by any reputable title insurer selected by the Buyer.
All leasehold interests of the Seller are evidenced of record in accordance with
the requirements of applicable Law by the filing or recording, as appropriate,
of a notice of lease, short form lease or memorandum of lease in respect of such
leasehold interest.
4.8. Certain Personal Property. SCHEDULE 4.8 is a complete schedule of
all fixed assets, describing all items of tangible personal property that were
included in the Balance Sheet at a carrying value of at least $1,000. Except as
specified in SCHEDULE 4.8, since the Balance Sheet Date, the Seller has not
acquired any items of tangible personal property that have a carrying value in
excess of $50,000. All of such personal property included in SCHEDULE 4.8 is,
and any such personal property acquired after the date hereof in accordance with
SECTION 6.1 will be, usable in the ordinary course of business, and conforms and
will conform in all material respects with any applicable Laws relating to its
construction, use and operation. Except for those items subject to the Non-Real
Estate Leases, no Person other than the Seller owns any vehicles, equipment or
other tangible assets located on the Real Property that have been used in the
Business or that are necessary for the operation of the Business. The Purchased
Assets are suitable for the purposes for which such assets are currently used or
are held for use, and are in good working condition, subject to normal wear and
tear, and, to the Seller's knowledge, there are no facts or conditions affecting
the Purchased Assets that could, individually or in the aggregate, interfere in
any material respect with the use, occupancy or operation thereof as used,
occupied or operated for the 12 months preceding the date hereof or their
adequacy for such use.
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4.9. Non-Real Estate Leases. SCHEDULE 4.9 lists all assets and property
used in the Business (other than Real Property) that are possessed by the Seller
under an existing lease, including all trucks, automobiles, forklifts,
machinery, equipment, furniture and computers, except for any lease under which
the aggregate annual payments are less than $50,000 (each, an "Immaterial
Lease"). SCHEDULE 4.9 also lists the leases under which such assets and
property listed in SCHEDULE 4.9 are possessed. All of such leases (excluding
Immaterial Leases) are referred to herein as the "Non-Real Estate Leases."
4.10. Accounts Receivable. The Accounts Receivable included in the
Purchased Assets are bona fide Accounts Receivable created in the ordinary
course of business. All of the Accounts Receivable included in the Purchased
Assets are collectible within 120 days from the Closing Date. The Seller does
not know of any facts or circumstances (other than general economic conditions)
that are likely to result in any increase in the uncollectability of such
Accounts Receivable.
4.11. Inventory. The Inventory reported on the Seller's books and
records properly values the Inventory in accordance with GAAP. The Inventory is
recorded on the Seller's books and records at the net realizable value set forth
on the balance sheet attached on SCHEDULE 4.11.
4.12. Liabilities. The Seller does not have any Liabilities required to
be disclosed in accordance with GAAP, other than (a) Liabilities specified on
SCHEDULE 4.12, (b) Liabilities specified in the Balance Sheet (except as
heretofore paid or discharged) or (c) Liabilities incurred in the ordinary
course since the Balance Sheet Date that, individually or in the aggregate, are
not material to the Business.
4.13. Taxes. Except as set forth in SCHEDULE 4.13, the Seller has duly
filed all returns for Tax Returns that it was required to file. All such Tax
Returns were true correct and complete in all material respects. Seller has
paid all Taxes that have come due whether or not shown on such returns or
pursuant to any assessment received. All Taxes that the Seller has been
required by Law to withhold or to collect have been duly withheld and collected
and have been paid over to the proper governmental authorities or are properly
held by the Seller for such payment. The Seller has not received any notice
from any taxing authority in any jurisdiction where the Seller does not pay
Taxes that it is or may be subject to taxation by that jurisdiction. There are
no proceedings or other actions, nor, to the knowledge of the Seller, is there
any basis for any proceedings or other actions, for the assessment and
collection of additional Taxes of any kind for any period for which returns have
or should have been filed. There are no liens for Taxes on any of the assets of
Seller (except for liens for Taxes not yet due and payable). None of the
Assumed Liabilities is an obligation to make payments that will not be
deductible under Section 280G of the Code. Except as set forth on SCHEDULE
4.13, each of the entities identified on SCHEDULE 4.14 has been treated as a
disregarded entity for US federal income tax purposes under Section 7701 of the
IRC and the applicable Treasury Regulations thereunder.
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4.14. Subsidiaries. Except as set forth on SCHEDULE 4.14, the Seller
does not own, directly or indirectly, any interest or investment (whether equity
or debt) in any corporation, partnership, limited liability company, trust,
joint venture or other legal entity.
4.15. Legal Proceedings and Compliance with Law.
(a) Except as set forth in SCHEDULE 4.15(A), there is no Litigation
that is pending or, to the Seller's knowledge, threatened against the Seller or
any Purchased Asset. The Seller is in compliance in all material respects with
all Laws, including Environmental Laws, applicable to the Business or any
Purchased Asset, and the Seller has not received any notices from any
governmental entity regarding any alleged Defaults applicable to the Seller or
any Purchased Asset under any Laws. There has been no Default with respect to
any Court Order applicable to the Seller or any Purchased Asset.
(b) Without limiting the generality of SECTION 4.15(A), except as
described in SCHEDULE 4.15(B), there has not been any Environmental Condition
(i) at the premises at which the Business is or has been conducted by the
Seller, any Affiliate thereof or any predecessor of any of them, or (ii) at any
property at which wastes have been deposited or disposed by or at the behest or
direction of any of the foregoing, nor has the Seller received notice of any
such Environmental Condition. "Environmental Condition" means any condition or
circumstance, including a Release or the presence of Hazardous Substances,
whether created by the Seller or any third party, at or relating to any such
property or premises specified in any of clauses (i) through (iii) of this
paragraph (b) that has or may reasonably be expected to (A) requires abatement
or correction under an Environmental Law, (B) gives rise to any civil or
criminal liability on the part of the Seller under an Environmental Law, or (C)
has created a public or private nuisance.
(c) The Seller has delivered to the Buyer complete copies of any
written reports, studies or assessments in the possession or control of the
Seller or any Affiliate thereof that relate to any Environmental Condition.
SCHEDULE 4.15(C) identifies any other reports, studies or assessments that
relate to any Environmental Condition of which any Seller Party has knowledge.
(d) The Seller has obtained and is in material compliance with all
Governmental Permits relating to the Business or any Purchased Asset, all of
which are listed in SCHEDULE 4.15(D) along with their respective expiration
dates, that are required for the operation of the Business as currently
operated. All of such Governmental Permits are currently valid and in full
force and the Seller has filed such timely and complete renewal applications as
may be required with respect to such Governmental Permits. To the knowledge of
the Seller, no revocation, cancellation or withdrawal thereof has been
threatened.
4.16. Contracts.
(a) SCHEDULE 4.16 lists all Contracts of the following types to which
the Seller is a party or by which it is bound, except for Minor Contracts:
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(i) Contracts with any present or former stockholder, director,
officer, employee, partner or consultant of the Seller or any
Affiliate thereof;
(ii) Contracts for the future purchase of, or payment for,
supplies or products, or for the lease of any real or personal
property from or the performance of services by a third party, in
excess of $100,000 in any individual case, or any Contracts for the
sale of products that involve an amount in excess of $100,000 with
respect to any one supplier or other party;
(iii) Contracts to sell or supply products or to perform
services that involve an amount in excess of $100,000 in any
individual case;
(iv) Contracts to lease to or to operate for any other party any
real or personal property that involve an amount in excess of $50,000
in any individual case;
(v) Any license, franchise, distributorship, sales agency or
other arrangements, including those that relate in whole or in part to
any software, technical assistance or other know-how used in the past
24 months;
(vi) Any notes, debentures, bonds, conditional sale agreements,
equipment trust agreements, letter of credit agreements, reimbursement
agreements, loan agreements or other Contracts for the borrowing or
lending of money (including loans to or from officers, directors,
partners, stockholders or Affiliates of the Seller or any members of
their immediate families), agreements or arrangements for a line of
credit or for a guarantee of, or other undertaking in connection with,
the indebtedness of any other Person;
(vii) Contracts for any capital expenditure or leasehold
improvements;
(viii) Any Contracts under which any Encumbrances exist; and
(ix) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (ix) above) not made in the ordinary
course of business, including any agreement that restricts the ability
of the Seller to compete with any Person.
(b) The Seller has delivered to the Buyer complete and correct copies
of all written Contracts, together with all amendments thereto, and accurate
descriptions of all material terms of all oral Contracts, set forth or required
to be set forth on SCHEDULE 4.16.
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(c) The Contracts listed in SCHEDULE 4.16 and the Minor Contracts
excluded from SCHEDULE 4.16 based on the term or amount thereof are referred to
herein as the "Seller Contracts." The Seller is not in Default under any Seller
Contracts (including any Real Estate Leases and Non-Real Estate Leases), which
Default is reasonably likely to result in a Liability on the part of the Seller
in excess of $50,000 in any individual case, and the aggregate Liabilities that
are reasonably likely to result from all such Defaults do not exceed $100,000.
The Seller has not received any communication from, or given any communication
to, any other party indicating that the Seller or such other party, as the case
may be, is in Default under any Seller Contract. To the knowledge of the
Seller, (i) none of the other parties in any such Seller Contract is in Default
thereunder and (ii) each such Seller Contract is enforceable against any other
parties thereto in accordance with terms thereof, subject to applicable laws of
bankruptcy, insolvency, moratorium, and other Laws affecting the rights of
creditors generally.
4.17. Insurance. SCHEDULE 4.17 lists all policies or binders of
insurance held by or on behalf of the Seller other than those listed on SCHEDULE
4.21, specifying with respect to each policy the insurer, the amount of the
coverage, the type of insurance, the risks insured, the expiration date, the
policy number and any pending claims thereunder. No Seller Party is in Default
with respect to any such policy or binder, nor has there been any failure to
give any notice or present any claim under any such policy or binder in a timely
fashion or in the manner or detail required by the policy or binder. There is
no notice of non-renewal or cancellation with respect to, or disallowance of any
claim under, any such policy or binder that has been received by the Seller.
4.18. Intellectual Property.
(a) Contracts.
(i) SCHEDULE 4.18(A)(I) contains a complete and accurate list and
summary description, including any royalties paid or received by the
Seller, of all Contracts relating to the Intellectual Property to
which the Seller is a party or by which the Seller is bound, except
for any license implied by the sale of a product and perpetual, paid-
up royalty free and transferable license rights for "off-the-shelf"
third party application software that the Seller licenses for use in
the Business, in any individual case, under a license with a maximum
payment obligation on the part of the Seller of less than $50,000
("Off-the-Shelf Software"). There are no outstanding and, to the
Seller's knowledge, no threatened disputes or disagreements with
respect to any such Contract. Except for any rights under written
licenses or other written Contracts related to Intellectual Property,
no current or former employee of the Seller and no other Person owns
or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, and including any right to royalties or
other compensation, in any of the Intellectual Property, or in any
application therefor.
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(ii) All employees and consultants of the Seller who have
executed a nondisclosure and assignment of inventions agreement (a
"Confidentiality Agreement") are set forth SCHEDULE 4.18(A)(II).
(iii) To the Seller's knowledge, except as specified on SCHEDULE
4.18(A)(III), none of the employees or consultants of the Seller is
subject to any contractual or legal restrictions that might interfere
with the use of his or her best efforts to promote the interests of
the Business. To the Seller's knowledge, no employee of the Seller
has entered into any Contract that restricts or limits in any way the
scope or type of work in which the employee may be engaged or requires
the employee to transfer, assign or disclose information concerning
his or her work to anyone other than the Seller.
(iv) To the Seller's knowledge, no employee or consultant of the
Seller (a) has used any other Persons Trade Secrets or other
information that is confidential in the course of his or her work or
(b) is, or is currently expected to be, in Default under any term of
any employment contract, agreement or arrangement relating to the
Intellectual Property, or any Confidentiality Agreement or any other
Contract or any restrictive covenant relating to the Intellectual
Property, or the development or exploitation thereof.
(b) Know-How Necessary for the Business.
(i) The Intellectual Property constitutes all of the Intellectual
Property that has been used or relied upon in the operation of the
Business during the past 12 months. Except as described on SCHEDULE
4.18(B)(I), the Seller is the owner of all right, title and interest
in and to each item of the Intellectual Property, free and clear of
any Encumbrances, and has the right to use without payment to a third
party all of the Intellectual Property.
(ii) All employees of the Seller who have executed written
Contracts with Seller that assign to the Seller all rights to any
inventions, improvements, discoveries or information made during or
derived from their relationship to the Seller are set forth in
SCHEDULE 4.18(B)(II).
(c) Patents.
(i) SCHEDULE 4.18(C)(I) contains a complete and accurate list and
summary description of all Patents in which the Seller has an
ownership interest. The Seller owns all right, title and interest in
and to each of the Patents, free and clear of any Encumbrances.
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(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing, examination,
and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within 90 days after the Closing Date.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the Seller's
knowledge, there is no potentially interfering patent or patent
application of any third party.
(iv) To the Seller's knowledge, no Patent is infringed or has
been challenged or threatened in any way. To the Seller's knowledge,
the Seller does not infringe, nor has the Seller received notice
alleging that the Seller is infringing, any patent or other
proprietary right of any other Person.
(v) All products made, used or sold under the Patents have been
marked with the proper patent notice.
(d) Trademarks.
(i) SCHEDULE 4.18(D)(I) contains a complete and accurate list and
summary description of all Trademarks in which the Seller has an
ownership interest. The Seller is the owner of all right, title and
interest in and to each of the Trademarks, free and clear of any
Encumbrances.
(ii) All Trademarks that have been registered with the US Patent
and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration applications),
are valid and enforceable, and are not subject to any maintenance fees
or taxes or actions falling due within 90 days after the Closing Date.
(iii) No Trademark has been or is now involved in any
opposition, invalidation or cancellation and, to the Seller's
knowledge, no such action is threatened with respect to any of the
Trademarks.
(iv) To the Seller's knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) To the Seller's knowledge, no Trademark is infringed or has
been challenged or threatened in any way. To the Seller's knowledge,
the Seller does not infringe, nor has the Seller received notice
alleging that the Seller is infringing, any trade name, trademark or
service mark of any third party.
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(vi) All products and materials containing a Trademark bear the
proper federal registration notice where permitted by law.
(e) Copyrights.
(i) SCHEDULE 4.18(E)(I) contains a complete and accurate list and
summary description of all Copyrights in which the Seller has an
ownership interest. The Seller is the owner of all right, title and
interest in and to each of the Copyrights, free and clear of any
Encumbrances.
(ii) All of the Copyrights have been registered and are currently
in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within 90 days after the date of Closing.
(iii) To the Seller's knowledge, no Copyright is infringed or
has been challenged or threatened in any way. To the Seller's
knowledge, the Seller does not infringe, nor has the Seller received
notice alleging that the Seller is infringing, any copyright or any
third party or is a derivative work based on the work of at third
party.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
(f) Trade Secrets.
(i) With respect to each Trade Secret, the documentation relating
to such Trade Secret is current, accurate, and sufficient in detail
and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any
individual.
(ii) The Seller has taken all reasonable precautions to protect
the secrecy, confidentiality and value of its Trade Secrets.
(iii) The Seller has good title and an absolute right to use its
Trade Secrets. The Trade Secrets are not part of the public knowledge
or literature, and, have not been used, divulged, or appropriated
either for the benefit of any Person (other than the Seller) or to the
detriment of the Business. No Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
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4.19. Software.
(a) SCHEDULE 4.19(A) contains a complete list of all the Software
Products. Each Component performs substantially in accordance with the
specifications, documentation and other written material used in connection with
the sale, license, distribution, marketing or use thereof and is free of defects
in programming and operation except such defects as would not materially and
adversely affect the use of such Component for its intended purposes.
(b) Except as specified on SCHEDULE 4.19(B), all right, title and
interest in and to each Component is owned by the Seller, free and clear of all
Encumbrances. No government funding was utilized in the development of any of
the Software Products. The sale, license, distribution, marketing or use of
each Component or the Off-the-Shelf-Software by the Seller does not violate any
rights of any other Person, and the Seller has not received any communication
alleging such a violation. Except as specified on SCHEDULE 4.19(B), to the
Seller's knowledge, the Seller does not have any obligation to compensate any
Person for the sale, license, distribution, marketing or use of the Components.
Other than as set forth on SCHEDULE 4.19(B), the Seller has not granted to any
other Person any license, option or other right in or to any of the Software
Products, except for non-exclusive, royalty-bearing, end-user licenses (the
"End-User Licenses") granted by the Seller pursuant to license agreements,
substantially in the forms attached as part of SCHEDULE 4.19(B).
(c) The Seller does not have any obligation owing to any Person to
maintain, modify, improve or upgrade any of the Components, except for any such
obligation set forth in an End-User License or under a customer-specific
services agreement.
(d) The Seller has kept secret and has not disclosed the source codes
for the Software Products to any Person other than to those Persons identified
on SCHEDULE 4.19(D).
(e) Except as set forth on SCHEDULE 4.19(E), to the Seller's
knowledge, there is no Year 2000 Problem with respect to the Business. Any
license for the use of any Component permits the Seller or a third party to make
all modifications, conversions or corrections necessary to permit such Component
used in the Business to operate compatibly, in conformance with their respective
specifications and to be Year 2000 Compliant, and any source code necessary to
take any such action is validly in the possession of the Seller or an authorized
agent or is subject to a source code escrow agreement. Except as disclosed in
SCHEDULE 4.19(E), to the Seller's knowledge, no Software Product contains any
"backdoor" or concealed access or any "software locks" or similar devices which,
upon the occurrence of a certain event, the passage of a certain amount of time
or the taking of any action (or failure to take any action) by or on behalf of
the Seller, will cause any Component used in the operation of the Business to be
destroyed, erased, damaged, or otherwise rendered inoperable or inaccessible.
Except as set forth on SCHEDULE 4.19(E), and to the Seller's knowledge, no
Component of any System used in the Business is subject to the federal export
control Laws.
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(f) Except as set forth on SCHEDULE 4.19(F), the Seller is not a party
to electronic data interchange, electronic funds transfer or electronic commerce
either through direct transmission to or from a third party's information system
or infrastructure system or through the Internet or any website of the Seller or
any third party.
(g) SCHEDULE 4.19(G) lists all Contracts between or among the Seller,
any employee thereof and a third party that imparts or that imparted an
obligation of noncompetition, secrecy, confidentiality or non-disclosure upon
the Seller, any employee thereof or any third party. Except as described in
SCHEDULE 4.19(G), the Seller has no knowledge that the Seller or any employee
thereof either is or was under any obligation of noncompetition, secrecy,
confidentiality or non-disclosure to any third party.
(h) Any Custom Software included in the Purchased Assets, together
with all know-how and processes used in connection therewith, functions
substantially as intended, is in machine-readable form, and includes all
computer programs, materials, tapes, know-how, object and source codes and
procedures used by the Seller.
4.20. Employee Relations. Except as set forth on SCHEDULE 4.20, the
Seller is not (a) a party to, involved in or, to the Seller's knowledge,
threatened by, any labor or employment dispute, unfair labor practice charge,
employment discrimination charge or other employment or labor related claims,
nor (b) currently negotiating any collective bargaining agreement. The Seller
has not experienced during the last three years any work stoppage. The Seller
has delivered to the Buyer a complete and correct list of the names and
salaries, bonus and other cash compensation of all employees (including
officers) of the Seller engaged in performing services for the Seller whose cash
compensation for 1999 is expected to be at least $20,000.
4.21. ERISA.
(a) SCHEDULE 4.21 contains a complete and accurate list of all Benefit
Plans applicable to all Seller employees, and that is sponsored or maintained by
the Seller or under which the Seller is obligated to contribute or participate.
The Seller has delivered to the Buyer (i) accurate and complete copies of all
such Benefit Plan documents, all formal and informal amendments, and all other
material documents relating thereto, including (if applicable) all summary plan
descriptions, trust agreements, service agreements, summary annual reports and
insurance contracts, (ii) all employee manuals and handbooks containing
personnel or employee relations policies, (iii) all Internal Revenue Service
determination letters for the Benefit Plans, if applicable, (iv) accurate and
complete detailed summaries of all unwritten Benefit Plans, (v) accurate and
complete copies of the most recent financial statements and actuarial reports
with respect to all such Benefit Plans for which financial statements or
actuarial reports are required or have been prepared, and (vi) accurate and
complete copies of all annual reports for all such Benefit Plans (for which
annual reports are required) prepared within the last three years. Each such
Benefit Plan providing benefits that are funded through a policy of insurance is
indicated by the word "insured" placed by the listing of the Benefit Plan in the
SCHEDULE 4.21.
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(b) Except as set forth in SCHEDULE 4.21, all such Benefit Plans conform
(and at all times have conformed) in all material respects to, and are being
administered and operated (and have at all time been administered and operated)
in material compliance with, the requirements of ERISA, the Code and all other
applicable Laws. Except as set forth in SCHEDULE 4.21, all returns, reports and
disclosure statements required to be made under ERISA and the Code with respect
to all such Benefit Plans have been timely filed or delivered. There have not
been any "prohibited transactions," as such term is defined in Section 4975 of
the Code or Section 406 of ERISA involving any of the Benefit Plans that could
subject Seller to any material penalty or tax imposed under the Code or ERISA.
(c) Except as is set forth in SCHEDULE 4.21, any such Benefit Plan that
is intended to be qualified under Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code has been determined by the Internal Revenue
Service to be so qualified or an application for such determination is pending.
Any such determination that has been obtained remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination that is
reasonably likely to adversely affect such qualification or exemption, or result
in the imposition of excise taxes or income taxes on unrelated business income
under the Code or ERISA with respect to any such Benefit Plan.
(d) The Seller does not sponsor, maintain or contribute to, and has
never sponsored, maintained or contributed to, or had any liability with respect
to any employee benefit plan subject to Section 302 of ERISA, Section 412 of the
Code or Title IV of ERISA, nor does it have a current or contingent obligation
to, or ever had an obligation to, or have any other liability with respect to,
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA).
(e) There are no pending or, to the knowledge of the Seller, any
threatened claims by or on behalf of any such Benefit Plans, or by or on behalf
of any individual participants or beneficiaries of any such Benefit Plans,
alleging any breach of fiduciary duty on the part of the Seller or any of its
officers, directors or employees under ERISA or any other applicable Law, or
claiming benefit payments (other than those made in the ordinary operation of
such plans), nor is there, to the knowledge of the Seller, any basis for such
claim. Except as set forth in SCHEDULE 4.21, the Benefit Plans are not the
subject of any pending (or to the knowledge of the Seller, any threatened)
investigation or audit by the Internal Revenue Service, the Department of Labor
or the Pension Benefit Guaranty Corporation ("PBGC").
(f) Except as set forth in SCHEDULE 4.21, the Seller has timely made all
required contributions under such Benefit Plans. All monies withheld from
employee paychecks with respect to Benefit Plans have been transferred to the
appropriate Benefit Plan in a timely manner as required by applicable Law.
(g) The Seller does not maintain any welfare benefit fund within the
meaning of Section 419 of the Code. With respect to any such Benefit Plan that
is an employee welfare benefit
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plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan") and except
as specified in SCHEDULE 4.21, (i) each Welfare Plan for which contributions are
claimed by the Seller as deductions under any provision of the Code complies
with all applicable requirements pertaining to such deduction, and (ii) any
Benefit Plan that is a group health plan (within the meaning of Section
4980B(g)(2) of the Code) complies, and in each and every case has materially
complied, with all of the applicable requirements of Section 4980B of the Code,
ERISA, the applicable provisions of the Social Security Act, the Health
Insurance Portability and Accountability Act of 1996, and other applicable Laws.
Except as specified in SCHEDULE 4.21, no Benefit Plan provides any health, life
or other welfare coverage to employees of the Seller beyond termination of their
employment with the Seller by reason of retirement or otherwise, other than
coverage as may be required under Section 4980B of the Code or Part 6 of ERISA,
or under the continuation of coverage provisions of the Laws of any state or
locality.
(h) Except as otherwise set forth on SCHEDULE 4.21, neither the
execution and delivery of this Agreement nor the consummation of the
Transactions will (i) result in any payment to be made by the Seller or an
Affiliate of the Seller becoming due to any employee or former employee, officer
or director, or (ii) increase or vest any benefits payable under any Benefit
Plan.
(i) Except as otherwise set forth on SCHEDULE 4.21, any amount that
could be received (whether in cash or property or the vesting of property) as a
result of any of the Transactions by any employee, officer or director of the
Seller who is a disqualified individual (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment, severance or
termination agreement, other compensation arrangement or Benefit Plan currently
in effect will not be characterized as an excess parachute payment (as such term
is defined in Section 280(b)(1) of the Code).
(j) All Persons classified by the Seller as independent contractors
satisfy and have at all times satisfied the requirements of all applicable Law
to be so classified; the Seller has fully and accurately reported their
compensation on IRS Forms 1099 when required to do so; and the Seller has no
obligations to provide benefits with respect to such Persons under the Benefit
Plans or otherwise. There are no individuals currently providing or have ever
provided, services to the Seller pursuant to a leasing agreement or similar type
of arrangement, nor has the Seller entered into any arrangement whereby services
will be provided by such Persons.
4.22. Corporate Records. The minute books of the Seller contain complete,
correct and current copies of its Charter Documents and bylaws and of all
minutes of meetings, resolutions and other proceedings relating to material
actions taken by its trustees, members, managers, Board of Directors and
stockholders, as the case may be. The stock record books of the Seller are
complete, correct and current.
4.23. Absence of Certain Changes. Except as contemplated by this Agreement,
the Business has been conducted in the ordinary course since the Balance Sheet
Date, and there has not been with respect to the Seller any of the items
specified below since the Balance Sheet Date:
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(a) any change that has had or is reasonably likely to have a Material Adverse
Effect;
(b) any distribution or payment declared or made in respect of its capital
stock by way of dividends, purchase or redemption of shares or otherwise;
(c) any increase in the compensation payable or to become payable to any
director, officer, employee or agent, except for increases for non-officer
employees made in the ordinary course of business, nor any other change in
any employment or consulting arrangement, except as specified in SCHEDULE
4.23;
(d) any sale, assignment or transfer of Purchased Assets, or any additions to
or transactions involving any Purchased Assets, other than those made in
the ordinary course of business;
(e) other than in the ordinary course of business, any waiver or release of any
claim or right or cancellation of any debt held; or
(f) any payments to any Affiliate of a Seller Party, other than wages and
reimbursements in accordance with past practices and except as specified in
SCHEDULE 4.23.
4.24. Previous Sales; Warranties. The Seller has not breached any
express or implied warranties in connection with the sale or distribution of
goods or the performance of services, except for breaches that, individually and
in the aggregate, are not material and are consistent with past practice of the
Business.
4.25. Customers and Suppliers. Seller has used reasonable business
efforts to maintain, and currently maintains, good working relationships with
all of the customers and suppliers of the Business. SCHEDULE 4.25 specifies for
each year of the three years ending December 31, 1996, 1997 and 1998 the names
of the respective customers that were, in the aggregate, the 20 largest
customers in terms of dollar value of products or services, or both, sold by the
Business. Except as specified on SCHEDULE 4.25, none of such customers has
given Seller notice terminating, canceling or threatening to terminate or cancel
any Contract or relationship with the Seller. SCHEDULE 4.25 also specifies for
each year of the three years ending December 31, 1996, 1997 and 1998 the names
of the respective suppliers that were, in the aggregate, the 20 largest
suppliers in terms of dollar value of products or services, or both, used by the
Seller. None of such suppliers has given the Seller notice terminating,
canceling or threatening to terminate or cancel any Contract or relationship
with the Seller.
4.26. Operation of the Business. Except as described on SCHEDULE 4.26,
(a) the Business has been conducted only through the Seller and not through any
other divisions or any direct or indirect subsidiary or Affiliate of the Seller,
and (b) no part of the Business has been operated by any
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Person other than the Seller. No Person other than the Seller owns or possesses
any assets or properties that have been used in the Business, other than Persons
who have granted to the Seller leasehold interests in or valid licenses to use
other assets or properties used in the Business pursuant to Contracts that are
listed on SCHEDULE 4.16. No Seller Party engages, directly or indirectly, in any
business activities that are competitive with the Business; provided that the
activities of NECX Direct, LLC shall be deemed for purposes of this Section 4.26
not to be competitive with the Business.
4.27. Finder's Fees. Except for Lehman Brothers Inc., no Person
retained by the Seller is or will be entitled to any commission or finder's or
similar fee in connection with the Transactions.
4.28 Investment Representations.
(a) No Seller Party has relied on any purchaser representative, or the
Buyer, in connection with the acquisition of the Notes or the Shares hereunder.
Each Seller Party (i) has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Notes and the Shares, (ii) fully understands the
nature, scope and duration of the limitations on transfer contained in this
Agreement and (iii) can bear the economic risk of an investment in the Notes and
the Shares and can afford a complete loss of such investment. Each Seller Party
has had an adequate opportunity to ask questions and receive answers from the
officers of the Buyer concerning any and all matters relating to the
transactions described herein including without limitation the background and
experience of the officers and directors of the Buyer. Each Seller Party has
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to its satisfaction. Each Seller Party
acknowledges that the officers of the Buyer have not assured, guaranteed or
otherwise led any Seller Party to expect any particular level of performance in
the market value or other value of the Shares or the Notes. Nothing contained
in this SECTION 4.28 is intended to diminish or affect the representations or
warranties of the Buyer made herein.
(b) Each Seller Party further represents, warrants, acknowledges and agrees
that it (i) is acquiring the Notes and the Shares under this Agreement for its
own account, and not on behalf of other persons, and for investment and not with
a view to the resale or distribution of all or any part of such Notes or Shares
and (ii) will not sell or otherwise transfer the Notes or the Shares unless, in
the opinion of counsel who is satisfactory to the Buyer, the transfer can be
made without violating the registration provisions of the Securities Act and the
rules and regulations promulgated thereunder. Nothing in this Agreement (other
than any restrictions contained in the Notes) shall limit the Seller from
assigning an interest in the Notes or Shares to Lauriston B. Marshall.
(c) Each Seller Party further represents, warrants, acknowledges and agrees
that it is making an investment decision based solely on its review of the
documents filed publicly by the Buyer with the Securities and Exchange
Commission and the terms of the
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Transaction Documents and is not relying, and has not relied, upon anything
outside of the immediately aforementioned sources in making its investment
decision.
(d) Each Seller Party, individually, represents and warrants that it is an
accredited investor as that term is defined in Rule 501(a) of Regulation D. Each
Seller Party understands that the Notes and the Shares are being offered and
sold to it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Buyer is relying upon the truth and accuracy of, and the Seller Parties'
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Seller Parties set forth herein in order to determine
the availability of such exemptions and the eligibility of the Seller Parties to
acquire the Notes and the Shares.
(e) The Seller Parties each understand that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Notes or the Shares.
(f) Each Seller Party understands that, until such time as the Notes or the
Shares have been registered under the Securities Act or otherwise may be sold
pursuant to Rule 144 or any other applicable exemption without any restriction
as to the number of securities as of a particular date that can then be
immediately sold, the Shares and the Notes may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER, IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
4.29 Additional Information SCHEDULE 4.29 accurately sets forth the
following:
(a) the names of all officers, directors, managers and members of the
Seller and the Parent Company;
(b) the names of all Persons holding powers of attorney from a Seller
Party and a summary statement of the terms thereof; and
(c) all names under which each Seller Party has conducted any
Business or which they have otherwise used at any time during the past five
years.
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4.30 Transactions with Affiliates. Except as set forth on SCHEDULE 4.30, no
Affiliate of any Seller Party owns or has a controlling ownership interest in
any Person that is a party to any Contract with respect to the Purchased Assets
or the Business.
4.31 Accuracy of Information. No representation or warranty by the
Seller or the Parent Company in any Transaction Document, and no information
contained therein contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which such
statements were made.
5. Representations and Warranties of the Buyer and VERT.
Buyer and VERT, jointly and severally, hereby represent and warrant to the
Seller Parties, as follows:
5.1. Organizational Status. VERT is a corporation duly organized,
validly existing and in good standing under the Laws of Pennsylvania and is
qualified to do business in any jurisdiction where it is required to be so
qualified except where the failure to so qualify would not have a Material
Adverse Effect. The Buyer is a limited liability company duly organized,
validly existing and in good standing under the Laws of Delaware and is
qualified to do business in any jurisdiction where it is required to be so
qualified except where the failure to so qualify would not have a Material
Adverse Effect.
5.2. Authorization. Each of VERT and the Buyer have the requisite power
and authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions performed or to be performed by it. Such
execution, delivery and performance by VERT or the Buyer has been duly
authorized by all necessary corporate action. Each Transaction Document
executed and delivered by VERT or the Buyer has been duly executed and delivered
by such party and constitutes a valid and binding obligation of such party,
enforceable against it in accordance with its terms, subject to applicable laws
of bankruptcy, insolvency, moratorium and other laws affecting the rights of
creditors generally.
5.3. Financing. VERT has the funds required to pay the Purchase Price
in accordance with SECTION 2.2 and to consummate the Transactions.
5.4. Consents and Approvals. Except for filings that may be required to
comply with the HSR Act, neither the execution and delivery by the Buyer of the
Transaction Documents to which it is a party, nor the performance of the
Transactions performed or to be performed by the Buyer, require any filing,
consent or approval (other than the approval of the Board of Directors of the
Buyer), constitute a Default or cause any payment obligation to arise under (a)
any Law or Court Order to which the Buyer is subject, (b) the Charter Documents
or bylaws of the Buyer or (c) any
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Contract, Governmental Permit or other document to which the Buyer is a party or
by which the properties or other assets of the Buyer may be bound.
5.5 Finder's Fees. Except for Lehman Brothers Inc. and Hambrecht &
Quist LLC, no Person retained by VERT or the Buyer is or will be entitled to any
commission or finder's or similar fee in connection with the Transactions.
5.6. Reports. VERT has heretofore delivered or made available to the Seller
Parties, in the form filed with the Commission, together with any amendments
thereto, all documents that VERT has filed with the Commission (collectively,
the "SEC Reports"). The SEC Reports were prepared substantially in accordance
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations promulgated under such act, and did not at the
time they were filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. VERT has filed with the Commission all SEC Reports that
VERT was required to file.
5.7. Accuracy of Information. No representation or warranty by the VERT
or the Buyer in any Transaction Document, and no information contained therein
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which such statements were made.
6. Covenants of the Seller Parties.
6.1. Conduct of the Business. Between the Balance Sheet Date and the
Closing Date:
(a) The Seller shall conduct its Business in all material respects in
the ordinary course and use commercially reasonable efforts to maintain the
good will of all current business relationships.
(b) The Seller shall use commercially reasonable efforts to preserve
substantially intact its business organization and keep available the
services of each of its present officers and employees.
(c) The Seller shall not, without the prior written consent of the
Buyer, amend its Charter Document or bylaws, if applicable, and shall not,
without the prior written consent of the Buyer:
(i) issue, sell or otherwise dispose of any of its membership
interests, or create, sell or otherwise dispose of any options,
rights, conversion rights or other agreements or commitments of any
kind relating to the issuance, sale or disposition of any of its
membership interests;
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(ii) reclassify, split up or otherwise change its membership
interest;
(iii) be party to any merger, consolidation or other business
combination; or
(iv) sell, lease, license or otherwise dispose of any of the
Purchased Assets (including, but not limited to rights with respect to
the Intellectual Property), except in the ordinary course of business;
(d) The Seller shall not, without the prior written consent of the
Buyer:
(i) declare, make or pay any dividends or other distributions;
(ii) borrow any funds or otherwise become subject to, whether
directly or by way of guarantee or otherwise, any indebtedness for
borrowed money other than an increase of the outstanding borrowings
under the Amended and Restated Loan Agreement with BankBoston, N.A. up
to an aggregate outstanding principal amount of $40,000,000; provided,
however, that the Seller shall provide written notification to the
Buyer each time borrowings are increased under such loan agreement;
(iii) acquire or dispose any of the Purchased Assets, other than
Inventory in the ordinary course of business consistent with past
practices;
(iv) create any material Encumbrance on any of the Purchased
Assets;
(v) except in the ordinary course of business and except as set
forth on SCHEDULE 6.1, increase in any manner the compensation of any
partner, director or officer or increase in any manner the
compensation of any class of employees;
(vi) create or materially modify any bonus, deferred
compensation, pension, profit sharing, retirement, insurance, stock
purchase, stock option, or other fringe benefit plan, arrangement or
practice or any other employee benefit plan;
(vii) enter into, amend, modify, terminate (partially or
completely), grant any waiver under or give any consent with respect
to any Contract;
(viii) violate, breach or default under in any material respect,
or take or fail to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach
of, or default under any term or provision of any Contract or any
License;
(ix) engage in any transaction with respect to its Business with
any
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partner, officer, director, Affiliate or associate of a Seller
Party or any associate of any such partner, officer, director or
Affiliate;
(x) make any capital expenditure or acquire any property or
assets (other than raw materials and supplies) for a cost in excess
of $50,000 in any one case or $150,000 in the aggregate;
(xi) enter into any agreement that materially restricts it from
carrying on its Business;
(xii) cancel any material debts of others or waive any material
claims or rights;
(xiii) act or omit from taking any action that would cause any
of the representations and warranties in SECTION 4 to be inaccurate;
or
(xiv) enter into any Contract to do or engage in any of the
foregoing.
6.2. Access to Information. From the date hereof and up to and
including the Closing Date, each Party shall give the other Party and its
respective representatives (including their accountants, counsel, consultants,
employees and such other representatives as such Party may designate from time
to time), upon reasonable notice and during normal business hours, full access
to the Real Property, Contracts, books, records and affairs of such Party. The
Parties shall cause their respective officers and employees to furnish to the
other Party all documents, records and information (and copies thereof) related
to the Business or the Buyer, as the case may be, as such Party or its
representatives may reasonably request.
6.3. Satisfaction of Liabilities. After the Closing, Bertolon and the
Parent Company shall cause the Seller to satisfy, in accordance with the terms
thereof, any and all Unassumed Liabilities. The Buyer will provide the Seller
with reasonable access to personnel and records in order to assist the Seller
perform its obligations under this SECTION 6.3.
6.4. No Solicitation. From and after the date hereof and up to and
including the Termination Date, without the prior written consent of the Buyer,
the Seller Parties will not, and will not authorize or permit any Seller
Representative to, directly or indirectly, solicit, negotiate, initiate or
encourage (including by way of furnishing information) or take any other action
to facilitate any inquiries or the making of any proposal that constitutes or
may reasonably be expected to lead to an Acquisition Proposal from any Person,
or engage in any discussion or negotiations relating thereto or accept any
Acquisition Proposal. Any Seller Party that receives any such inquiries, offers
or proposals shall (a) notify the Buyer orally and in writing of any such
inquiries, offers or proposals (including the terms and conditions of any such
proposal and the identity of the Person making it), within 48 hours of the
receipt thereof, (b) keep the Buyer informed of the status and details of any
such inquiry, offer or proposal, and (c) give the Buyer five days' advance
notice of any agreement
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to be entered into with, or any information to be supplied to, any Person making
such inquiry, offer or proposal.
6.5. Competition and Confidentiality.
(a) During the period beginning on the Closing Date and ending on the
third anniversary thereof (the "Non-Competition Period"), no Seller Party (nor
any direct or indirect subsidiary thereof) nor any Affiliate of Bertolon (each,
a "Restricted Party") shall, within North America, directly or indirectly, in
any capacity, render services, engage or have a financial interest in, any
business that shall be competitive with any of those business activities that
have constituted part of the Business at any time during the past 12 months from
the date hereof, nor shall any Restricted Party assist any Person that shall be
engaged in any such business activities, including making available any
information or funding to any such Person. During the Non-Competition Period,
no Restricted Party shall solicit any employee of the Business for the purposes
of having any such employee terminate his or her employment with the Business.
If a court determines that the foregoing restrictions are too broad or otherwise
unreasonable under applicable Law, including with respect to time or space, the
court is hereby requested and authorized by the Parties to revise the foregoing
restriction to include the maximum restrictions allowable under applicable Law.
Each Restricted Party acknowledges, however, that this SECTION 6.5 has been
negotiated by the Parties and that the geographical and time limitations, as
well as the limitation on activities, are reasonable in light of the
circumstances pertaining to the Business. For purposes of this Section 6.5, the
historical and current business activities of NECX Direct, LLC shall not be
deemed to be a business that is competitive with any business activities that
have constituted a part of the Business at any time during the past 12 months
from the date hereof. Nothing in this Agreement shall be deemed to prohibit, or
in any way limit, NECX Direct, LLC from engaging in those business activities in
which it was engaged as of the date hereof. In addition, in no event shall
Gateway Companies, Inc. or any of its subsidiaries be deemed to be subject to,
or in any way bound by, the provisions of this Agreement.
(b) No Restricted Party will, at any time, represent that it is
continuing to carry on the Business.
(c) Each Seller Party recognizes and acknowledges that by reason of
its involvement with the Business, it has had access to Trade Secrets relating
to the Restricted Business. Each Seller Party acknowledges that such Trade
Secrets are a valuable and unique asset and covenants that it will not disclose
any such Trade Secrets to any Person for any reason whatsoever, unless such
information is in the public domain through no wrongful act of such Seller Party
or such disclosure is required by law.
(d) The terms of this SECTION 6.5 shall apply to any Restricted Party
that is not one of the Parties to the same extent as if it were a party hereto,
and each Seller Party shall take whatever actions may be necessary to cause any
of its controlled Affiliates to adhere to the terms of this SECTION 6.5.
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(e) In the event of any breach or threatened breach by any Restricted
Party of any provision of this SECTION 6.5, the Buyer shall be entitled to
injunctive or other equitable relief, restraining such party from using or
disclosing any Trade Secrets in whole or in part, or from engaging in conduct
that would constitute a breach of the obligations of a Restricted Party under
this SECTION 6.5. Such relief shall be in addition to and not in lieu of any
other remedies that may be available, including an action for the recovery of
Damages.
(f) It is expressly acknowledged and emphasized that the agreements of
the Seller Parties to be bound by the terms and conditions of this Section 6.6
are material and indispensable to this Agreement and that without the agreements
of the Seller Parties to be bound by this Section 6.5, as well as the other
provisions of this Agreement, the Buyer would not have entered into this
Agreement.
6.6. Transfer of Purchased Assets and Business. On and prior to the
Closing Date, the Seller shall take such reasonable steps as may be necessary or
appropriate, in the judgment of the Buyer, at and after the Closing so that the
Buyer shall be placed in actual possession and control of all of the Purchased
Assets and the Business. In furtherance thereof, the Seller shall, at the
Buyer's expense, execute and deliver such additional instruments of conveyance
and transfer as the Buyer may reasonably require, in the judgment of the Buyer,
in order to more effectively vest in it, and put it in possession of, the
Purchased Assets.
6.7. Employees and Business Relations. From the date hereof and up to
and including the Closing Date, the Seller shall use commercially reasonable
efforts (but shall not be required to increase wages or benefits) to keep
available the services of the current employees and agents of the Seller and to
maintain its relations and goodwill with the suppliers, customers, distributors
of the Seller and any others having a business relation with the Seller. The
Seller authorizes the Buyer to offer employment to any of the Seller's employees
as of the Closing Date, and the Seller shall terminate on the Closing Date the
employment of any of its employees who desire to accept offers of employment
from the Buyer. In addition, between the date of this Agreement and the Closing
Date, to the extent requested by the Buyer, the Seller shall introduce the Buyer
to the customers and suppliers of Seller and recommend that they continue doing
business with the Buyer after the Closing Date.
6.8 Related Parties None. Bertolon and the Parent Company shall cause the
Seller and any other controlled Affiliate to the take or refrain from taking any
action that may be necessary to carry out the Transactions.
6.9 Restrictions on Transfer. None of the Seller Parties, nor any of
their respective transferees, shall sell, transfer or dispose of more than
300,000 shares of Common Stock issuable upon payment of the Fixed Note or the
Escrow Note in any one day. In furtherance of the foregoing, the Seller Parties
acknowledge and understood that VERT and its transfer agent, are hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a
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violation or breach of this SECTION 6.9.
6.10 Additional Financial Statements. None Within 30 days after the Closing
Date, the Seller shall cause AA to prepare and deliver to the Buyer audited
financial statements of the Business (the "8-K Financial Statements") consisting
of a balance sheet as of December 31, 1997, 1998 and as of the Closing Date and
the related statements of operations, cash and stockholder' equity for the years
then ended and for the period from January 1, 1999 through the Closing Date. The
financial statements shall conform to Regulation S-X under the Securities Act.
In addition, the Seller shall cause AA to deliver its consent to include the
above statements in VERT's Form 8-K to be filed with the Commission.
6.11 Update Disclosure Schedules. None Between the date hereof and the
Closing Date, the Seller Parties shall promptly disclose to the Buyer in writing
any information set forth in the Disclosure Schedules that is no longer
complete, true or applicable and any information of the nature of that set forth
in the Disclosure Schedules that arises after the date hereof and that would
have been required to be included in the Disclosure Schedules if such
information had been obtained on the date of delivery thereof.
7. Covenants of Buyer and VERT. None
7.1. Related Parties. VERT shall, and shall cause any other controlled
Affiliate to, take or refrain from taking any action that may be necessary to
carry out the Transactions.
7.2. Bulk Sales. The Buyer and VERT hereby waive the Seller's
compliance with any bulk sales laws that may apply to the Transactions,
including with respect to Taxes; provided, however, that the Seller Parties
hereby jointly and severally indemnify the Buyer and VERT against any Damages
that the Buyer or VERT may incur that would not have been incurred if the Seller
had complied with any such bulk sales laws.
7.3 Registration Rights.
(a) VERT shall prepare and use its best efforts, on or prior to
February 24, 2000 (the "Required Filing Date") to file with the Commission a
registration statement with respect to the resale of the Shares by the Seller or
its permitted assignees (the "Required Registration Statement") and thereafter
shall cause such registration statement to be declared effective under the
Securities Act as promptly as practicable but in no event later than May 31,
2000 (the "Required Effective Date"). VERT shall file a notification form for
the listing of additional shares to cover the listing of the Shares on the
Nasdaq National Market, or such other market or exchange, if any, on which the
Common Stock shall trade. VERT shall use its best efforts to cause the Required
Registration Statement to remain effective for a period of one year. If for any
reason VERT shall fail to file the Required Registration Statement by the
Required Filing Date, then the Notes shall commence to bear interest at the rate
of 13% per annum, calculated on the basis of a 360 day year and payable in cash
on the last day of each month, commencing on the day after the Required Filing
Date and continuing
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until such Required Registration Statement is filed. In addition, if for any
reason VERT shall not cause the Required Registration Statement to be declared
effective by the Required Effective Date, the Notes shall commence to bear
interest at such rate (as so calculated and paid) through the date of such
effectiveness. Notwithstanding the foregoing, if the Seller does not deliver the
8-K financial statements to VERT within 30 days after the Closing Date as
required by Section 6.10 hereof, then the Required Filing Date and the Required
Effective Date shall be extended by one day for each day past such deadline
until the 8-K Financial Statements are delivered to VERT. VERT acknowledges that
Seller is relying on VERT's commitment to cause the Required Registration
Statement to become effective not later than the Required Filing Date, and
agrees that if for any reason the Required Registration Statement is not
declared effective by such date (as it may be extended as herein provided), even
if VERT is using its best efforts to cause such effectiveness to be declared,
then Seller shall be entitled to recover damages for any consequential loss
incurred.
(b) If VERT proposes to file a registration statement with respect to
the Common Stock prior to the filing of the Required Registration Statement,
VERT shall give prompt notice to the Seller Parties and will include in such
registration (the "Piggyback Registration") subject to the allocation provisions
discussed in SECTION 7.3(D) and 7.3(E), all Shares with respect to which VERT
has received written request for inclusion within five Business Days after such
notice is given by VERT; provided, however, that the Seller Parties shall have
no Piggyback Registration rights in connection with a registration statement
filed in connection with VERT's 5 1/4% Convertible Subordinated Debentures (the
"Convertible Debentures"). No VERT registration statement shall be declared
effective unless and until the Required Registration Statement shall have been
declared effective, except for the registration statement for the Convertible
Debentures or if the Required Registration Statement is not being declared
effective due to a comment from the Commission that relates only to a Seller
Party.
(c) VERT will pay the expenses related to registration of the Shares;
provided, however, the Seller Parties shall pay any underwriting commissions
related to the registration of the Shares.
(d) If a Piggyback Registration is an underwritten primary
registration on behalf of VERT and the managing underwriter advises VERT in
writing that marketing factors require a limitation on the number of Shares to
be offered and sold, there shall be included in the offering only that number of
Shares, if any, that such managing underwriter reasonably believes, in its sole
discretion, will not jeopardize the success of the offering.
(e) If a Piggyback Registration is initiated as an underwritten
secondary registration on behalf of the holders of the Common Stock, and the
managing underwriters advise VERT in writing that marketing factors require a
limitation on the number of Shares to be offered and sold, VERT will allocate
the securities to be included as follows: pro rata on the basis of the number of
shares of Common Stock owned among (i) any other Person selling in the
registration and (ii) the Seller Parties.
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(f) If a Piggyback Registration is underwritten, the Seller Parties
shall not be entitled to select the investment bank(s) or manager(s) nor shall
the Seller Parties be entitled to make decisions regarding the underwriting
arrangements for the offering.
(g) If, prior to the Required Filing Date, VERT files a registration
statement with the Commission covering shares of its Common Stock underlying the
Convertible Debentures, VERT shall, within 5 Business Days of such filing, file
the Required Registration Statement.
(h) VERT shall have no obligations under this SECTION 7.3 until the
Closing Date. If VERT files a registration statement covering shares of its
Common Stock underlying the Convertible Debentures prior to the Closing, VERT
shall, within 5 Business Days after the Closing, file a registration statement
covering the Shares.
7.4 Tax Payment. VERT shall make additional payments to the Trust in the
form specified in this SECTION 7.4 as is necessary to compensate the Trust for
any additional taxes (the "Offset Taxes") that the Trust may incur as a result
of the Closing taking place on the Closing Date rather than on January 1, 2000.
Within 45 days following the Closing, the Trust shall provide VERT with written
notice (the "Offset Notice") providing (a) detailed calculations setting forth
the amount of the Offset Taxes and (b) a calculation of the additional cash flow
cost on a present value basis to March 15, 2000, using a 5% discount rate, of
the Massachusetts excise tax imposed on net taxable income of the Trust (the
"Special Tax") if the Trust were not a Massachusetts business trust. In
calculating the Offset Taxes, the Trust shall disregard any change in the tax
law that occurs in 2000 and shall assume that the corporate structure of the
Seller Parties, including the business trust arrangement, will not be
challenged. VERT shall have 10 days from the date of receipt of the Offset
Notice to provide written notice ("Offset Dispute Notice") to the Buyer that it
disputes the calculation of the Offset Taxes or the Special Tax. If VERT fails
to provide an Offset Dispute Notice within such period, VERT shall be deemed to
agree with the Trust's calculation of the Offset Taxes and the Special Tax. If
VERT disputes the amount of either of the Offset Taxes or the Special Tax, the
Parties shall meet and attempt to resolve the dispute. To the extent the
Parties cannot reach agreement within 10 days from the date on which VERT
delivers the Offset Dispute Notice to the Trust, the Buyer shall retain KPMG LLP
("KPMG"), at the Buyer's expense, to determine the Offset Taxes or the Special
Tax. If the Trust disagrees with the calculation computed by KPMG, AA and KPMG
shall designate, within 10 days of the delivery of such calculation by KPMG, an
independent, nationally recognized, accounting firm to calculate the Offset
Taxes or the Special Taxes, the expense of such calculation to be shared equally
by the Buyer and the Trust. The calculation of the Offset Taxes or the Special
Taxes by such independent accounting firm shall be conclusive. The amount of the
Offset Taxes shall be payable by VERT to the Trust by delivering to the Trust,
within 10 days of the conclusive determination of the amount of the Offset
Taxes, a stock certificate representing the number of shares of Common Stock
(rounding up in the event of fractional shares) equal to the quotient determined
by dividing the amount of the Offset Taxes by the average closing price of the
Common Stock on the Nasdaq National Market, or on such other
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market or exchange, if any, on which the Common Stock shall then trade, during
the 20 trading days immediately prior to the date of issuance (the "Offset
Shares"). In the event any of the Seller Parties becomes obligated to pay to the
Commonwealth of Massachusetts the Special Tax in connection with the sale of the
Purchased Assets hereunder, such Seller Party shall deliver written notice of
such fact to the Buyer (the "Tax Notice"). The Buyer shall, within 30 days of
receipt of the Tax Notice, pay to the Trust the amount of the Special Tax set
forth on the Offset Notice (the "Special Tax Notice") by delivering to the Trust
that number of shares of its Common Stock equal to the Special Tax divided by
the average closing price of the Common Stock on the Nasdaq National Market, or
on such other market or exchange, if any, on which the Common Stock shall then
trade, during the 20 days immediately preceding the date of the Tax Notice.
8. Mutual Covenants.
8.1. Fulfillment of Closing Conditions. At and prior to the Closing,
each Party shall use commercially reasonable efforts to fulfill, and to cause
each other to fulfill, as soon as practicable after the Termination Date the
conditions specified in SECTIONS 9 and 10 to the extent that the fulfillment of
such conditions is within its or his control. In connection with the foregoing,
each Party will (a) refrain from any actions that would cause any of its
representations and warranties to be inaccurate as of the Closing, and take any
reasonable actions within its control that would be necessary to prevent its
representations and warranties from being inaccurate as of the Closing, (b)
execute and deliver the applicable agreements and other documents referred to in
SECTIONS 9 and 10, (c) comply with all applicable Laws in connection with its
execution, delivery and performance of this Agreement and the Transactions, (d)
use commercially reasonable efforts to obtain in a timely manner all necessary
waivers, consents and approvals required under any Laws (including any approval
required under the HSR Act), Contracts or otherwise, including any Seller
Required Consents in the case of the Seller and (e) use commercially reasonable
efforts to take, or cause to be taken, all other actions and to do, or cause to
be done, all other things reasonably necessary, proper or advisable to
consummate and make effective as promptly as practicable the Transactions.
8.2. Employees.
(a) At least 10 Business Days prior to the Closing Date, the Seller
shall provide the Buyer a list of all employees of the Seller who have been
engaged in the Business at any time during the past 12 months ("Eligible
Employees") identified by name, US social security number (if applicable, and,
if not, a valid I-9 Form for such employee), hire date and then current base
salary or hourly wage. The Seller shall not take any actions to prevent or
inhibit its employees from accepting employment with the Buyer or VERT. The
Seller shall remain solely responsible for all Liabilities arising out of or
related to the employment of any employee of the Business (including without
limitation, in connection with the consummation of the Transactions) who does
not accept employment from the Buyer.
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(b) The Buyer shall offer or cause to be offered employment to all
employees of the Seller upon such terms as the Buyer deems appropriate, except
that said offers of employment shall be at the same rate of cash compensation at
which each such employee is being paid by the Seller immediately prior to the
later of the Closing Date or January 1, 2000 (including changes in compensation
which occur in the ordinary course of business) and with employee benefits which
are substantially comparable, in the aggregate, to those provided to such
employees immediately prior to the later of the Closing Date or January 1, 2000,
with such employment being effective as of the later of the Closing Date or
January 1, 2000 or, in the case of any employee on workers' compensation,
disability, or authorized leave of absence, the date the employee is able to
return to work or their leave otherwise expires. Effective as of the later of
the Closing Date or January 1, 2000, or such later date as specified above, all
employees of the Seller who accept Buyer's offer of employment will become
employees of the Buyer ("Hired Employees").
(c) As of the later of the Closing Date or January 1, 2000 and without
any waiting period, the Buyer will provide all Hired Employees (and their
dependents) who are covered under the Seller's medical, dental, life insurance,
disability, and accidental death and dismemberment plans immediately prior to
the Closing Date with coverage under the group health plans maintained by the
Buyer in accordance with the terms of the Buyer's group health plans and will
waive any pre-existing condition exclusions.
(d) For purposes of any employee benefit plan, program, or arrangement
maintained by the Buyer for its employees on and after the later of the Closing
Date or January 1, 2000, any years of eligibility service or vesting service
credited to the Hired Employees under the Seller's employee benefit plans,
programs, or arrangements as of the Closing Date shall be treated as eligibility
or vesting service under Buyer's plans, programs, and arrangements.
(e) The Buyer shall have the sole responsibility and liability for the
notice, compensation, benefits, and other requirements of the federal Workers'
Adjustment and Retaining Notification Act and all applicable state facility
closing or lay-offs with respect to the Hired Employees.
(f) The Buyer shall assume the COBRA obligations of all the Hired
Employees and their qualified beneficiaries from and after the Closing Date. The
Seller shall retain the COBRA obligations for all other employees of Seller and
their qualified beneficiaries
(g) Within five (5) calendar days of the date of this Agreement,
Seller will provide to Buyer a summary of any unused vacation for all of the
Seller's employees as of November 1, 1999. This summary of unused vacation for
all Hired Employees will be updated as of the later of the Closing Date or
January 1, 2000. Buyer will assume liability for all Hired Employees' unused
vacation (that has not lapsed) as of the later of the Closing Date or January 1,
2000.
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(h) (i) On and after the later of the Closing Date or January 1, 2000,
Buyer shall establish a plan ("Buyer's 401(k) Plan") qualified under Sections
401(a) and 401(k) of the Code for the benefit of the Hired Employees which
mirrors the NECX 401(k) Savings Plan (the "NECX Plan"). The Parent has recently
amended and restated the NECX Plan, and has applied for a determination letter
regarding its qualified status under the Code. Seller agrees to make any
reasonable changes to the NECX Plan that the IRS requires for the Plan to
receive a favorable determination letter. Within a period of time mutually
agreed upon by the Seller and the Buyer after the receipt of a favorable
determination letter with respect to the NECX Plan, or such sooner period that
the Buyer elects, there will be a plan-to-plan transfer of assets and
liabilities with respect to the individual account balance of the Hired
Employees from the NECX Plan to Buyer's 401(k) Plan.
8.3. Disclosure of Certain Matters. The Seller Parties on the one hand,
and Buyer on the other hand, shall give the Seller Parties and the Buyer,
respectively, prompt notice of any event or development that occurs that (a) had
it existed or been known on the date hereof would have been required to be
disclosed by such Party under this Agreement, (b) would cause any of the
representations and warranties of such Party contained herein to be inaccurate
or otherwise misleading, except as contemplated by the terms hereof or (c) gives
any such Party any reason to believe that any of the conditions set forth in
SECTION 9 or 10 will not be satisfied prior to the Termination Date (defined
below).
8.4. Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Transactions will be issued, if at all, at
such time and in such manner as VERT and the Seller shall determine jointly;
provided, however, that the Seller (a) shall not unreasonably withhold its
consent to any such communication that VERT proposes to issue and (b)
acknowledges and recognizes that time is the essence with regard to any proposed
communication and will use its best efforts to respond promptly. Unless
consented to by the Buyer in advance or required by Law, prior to the Closing,
the Seller Parties shall keep this Agreement strictly confidential and may not
make any disclosure of this Agreement to any Person other than the Seller's
Representatives. The Seller Parties and VERT will consult with each other
concerning the means by which the Seller's employees, customers, and suppliers
and others having dealings with the Seller will be informed of the Transactions,
and VERT will have the right to be present for any such communication.
8.5. Transfer Taxes. The Seller and the Buyer shall each pay at the
Closing one-half of all state and local sales, documentary and other transfer
taxes (including any stamp duty or other transfer tax assessable by a foreign
government), due as a result of the purchase, sale or transfer of the Purchased
Assets hereunder.
8.6. Confidentiality. If the Transactions are not consummated, each
Party shall treat all information obtained in its investigation of another Party
or any Affiliate thereof, and not otherwise known to them or already in the
public domain, as confidential and shall return to such other Party or Affiliate
all copies made by it or its representatives of confidential information
provided by such other Party or Affiliate.
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8.7. Expenses. Except as otherwise provided herein, the Parties shall each
pay all of their respective legal, accounting and other expenses incurred by
such Party in connection with the Transactions.
8.8. Accounts Receivable Insurance. The Seller shall obtain prior to the
Closing Date credit insurance covering all of the Seller's accounts receivable
as of the effective date of the policy that shall be a date prior to the Closing
(the "A/R Insurance Coverage") to cover uncollectible accounts receivable for a
period of not less than one year. The A/R Coverage is subject to a $1 million
deductible, coinsurance (90% payable by the insurer) and specific maximum
coverage amounts on certain accounts. The Seller agrees to pay one-half of the
premium of such insurance for the five month period immediately following the
Closing Date and the balance of such premium shall be payable by Buyer. At the
Closing, the Seller shall assign the policy to the Buyer or VERT.
8.9. Representation and Warranty Insurance. The Seller shall obtain prior to
the Closing representation and warranty insurance in the face amount of
$15,000,000 (the "R&W Insurance"). The Buyer will pay one-half of all premiums
due on the R&W Insurance until the earlier of (a) the Buyer's receipt of its
audited consolidated financial statements for the year ended December 31, 2000
or (b) March 31, 2001.
8.10. Lease. The parties shall negotiate in good faith and enter into a
lease for the premises located at 4 Technology Drive, Peabody, Massachusetts,
such lease to become effective as of the Closing Date (the "New Lease"). The
New Lease shall contain the terms set forth on Exhibit H to this Agreement
9. Conditions Precedent to Obligations of the Seller Parties.
All obligations of the Seller Parties to consummate the Transactions are
subject to the satisfaction (or waiver by all the Seller Parties) prior thereto
of each of the following conditions:
9.1. Representations and Warranties. The representations and warranties of
the Buyer contained in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak as of
an earlier date) shall also be true and correct on and as of the Closing Date
with the same force and effect as if made on and as of the Closing Date;
provided, however, that for purposes of this SECTION 9.1 only, such
representations and warranties shall be deemed to be true and correct unless the
failure or failures of such representations and warranties to be so true and
correct, individually or in the aggregate, result or would reasonably be
expected to result in a Material Adverse Effect.
9.2. Agreements, Conditions and Covenants. The Buyer shall have performed or
complied with all agreements, conditions and covenants required by this
Agreement to be performed or complied with by it on or before the Closing Date;
provided, however, that for purposes of this SECTION 9.2 only, the Buyer shall
have deemed to have complied with such agreements, conditions
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and covenants unless the failure or failures to do so, individually or in the
aggregate, result or would reasonably be expected to result in a material
reduction in the benefits to be received by the Seller hereunder.
9.3. Legality. No Law or Court Order shall have been enacted, entered,
promulgated or enforced by any court or governmental authority that is in effect
and has the effect of making the Transactions illegal or otherwise prohibiting
the consummation of the Transactions. The Seller shall have received any
clearance that may be required under the HSR Act.
10. Conditions Precedent to Obligations of the Buyer.
All obligations of the Buyer to consummate the Transactions are subject to
the satisfaction (or waiver by all such Parties) prior thereto of each of the
following conditions:
10.1. Representations and Warranties. The representations and
warranties of the Seller Parties contained in this Agreement shall be true and
correct on the date hereof and (except to the extent such representations and
warranties speak as of an earlier date) shall also be true and correct on and as
of the Closing Date, except for changes contemplated by this Agreement, with the
same force and effect as if made on and as of the Closing Date; provided,
however, that for purposes of this SECTION 10.1 only, such representations and
warranties shall be deemed to be true and correct unless the failure or failures
of such representations and warranties to be so true and correct, individually
or in the aggregate, result or would reasonably be expected to result in a
Material Adverse Effect.
10.2. Agreements, Conditions and Covenants. The Seller Parties shall
have performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or complied
with or by them on or before the Closing Date; provided, however, that for
purposes of this SECTION 10.2 only, the Seller Parties shall have deemed to have
complied with such agreements, conditions and covenants unless the failure or
failures to do so, individually or in the aggregate, results or would reasonably
be expected to result in a Material Adverse Effect.
10.3. Legality. No Law or Court Order shall have been enacted, entered,
promulgated or enforced by any court or governmental authority that is in effect
and (a) has the effect of making the Transactions illegal or otherwise
prohibiting the consummation of the Transactions or (b) has a reasonable
likelihood of causing a Material Adverse Effect.
10.4. Disclosure Schedules. The Buyer, in its sole discretion, shall be
satisfied with the form and substance of any material updates to the Disclosure
Schedules.
10.5. Seller Required Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any governmental or regulatory
authority (including any clearance that may be required under the HSR Act)
necessary to permit the Buyer and the Seller Parties to perform
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their obligations under this Agreement, to enable the Buyer to operate the
Business as it was operated on the date hereof by the Seller and to consummate
the Transactions (i) shall have been duly obtained, made or given, (ii) shall be
in form and substance reasonably satisfactory to the Buyer, (iii) shall not be
subject to the satisfaction of any condition that has not been satisfied or
waived and (iv) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any governmental or regulatory
authority necessary for the consummation of the transactions contemplated by
this Agreement and the Transaction Documents shall have occurred.
10.6 Third Party Consents. All consents (or in lieu thereof waivers) to
the performance by the Buyer and the Seller of their obligations under this
Agreement or to the consummation of the transaction contemplated hereby as are
required under any Contract listed on Schedule 10.6 (i) shall have been
obtained, (ii) shall be in form and substance reasonably satisfactory to the
Buyer, (iii) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (iv) shall be in full force and effect, except
where the failure to obtain any such consent (or in lieu thereof waiver) could
not reasonably be expected, individually or in the aggregate with other such
failures, to have a Material Adverse Effect or otherwise result in a material
diminution of the benefits of the Transactions to the Buyer.
10.7 Consent of Sumitomo Corporation. Notwithstanding the foregoing, if
prior to Closing, the Seller is unable to obtain the consent of Sumitomo
Corporation ("Sumitomo") and Sumitronics Asia Holding Pte. Ltd. ("Sumitronics")
with regard to the transfer to the Buyer of the Seller's equity interest in
Electronic Commodity Exchange Asia Pte. Ltd. ("ECXA"), the failure to obtain
consent shall not be a breach of SECTION 10.5 or 10.6 hereof, all written
agreements existing as of the date hereof between the Seller and Sumitomo or
Sumitronics and relating to ECXA shall be deemed an Excluded Asset and the
principal amount of each of the Fixed Note and the Floating Note shall be
reduced by an amount equal to one-half of the book value of the Seller's equity
interest in ECXA as of November 30, 1999, and the $1.5 million letter of credit
from BankBoston, N.A. (Singapore Branch) to fulfill the obligations of EXCA
shall be deemed an Unassumed Liability as of the Closing Date. If thereafter
within sixty (60) days thereafter such consent is obtained, all such agreements
shall be included as Purchased Assets, the Fixed and Floating Notes shall be
restored, and the letter of credit will become an Assumed Liability.
11. Indemnification.
11.1. By the Seller Parties. From and after the Closing Date, the
Seller Parties, jointly and severally, shall indemnify and hold harmless each of
VERT and the Buyer and (if any) their respective successors and assigns, and
their respective officers, directors, employees, stockholders, agents,
Affiliates and any Person who controls any of such Persons within the meaning of
the Securities Act or the Exchange Act (each, an "Indemnified Buyer Party") from
and against any liabilities, claims, demands, judgments, losses, costs, damages
or expenses whatsoever (including reasonable "attorneys", "consultants" and
other professional fees and disbursements of every kind,
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nature and description incurred by such Indemnified Buyer Party in connection
therewith, including consequential and punitive damages) net of any insurance
proceeds received by the Buyer (provided that the Buyer shall have no obligation
to claim the right to coverage under any insurance policy to which the Buyer is
not listed as an insured) (collectively, "Damages") that such Indemnified Buyer
Party may sustain, suffer or incur and that result from, arise out of or relate
to (a) any breach of any of the representations, warranties, covenants or
agreements of a Seller Party contained in this Agreement, (b) any Unassumed
Liability, (c) any Liability arising out of employment-related claims relating
to, or arising out of, the continued employment of employees by the Seller
(i.e., those who have not accepted employment with the Buyer by the Closing
Date) and (d) any Liability of the Seller involving any Excluded Asset, and (e)
any liability arising out of or related to the NECX 401(k) Savings Plan
including, without limitation, the items disclosed in Disclosure Schedule
4.21(b).
11.2. By VERT and the Buyer. From and after the Closing Date, VERT and
the Buyer, jointly and severally, shall indemnify and hold harmless the Seller
Parties and their respective successors and assigns, and (if any) their
respective officers, directors, employees, stockholders, agents, Affiliates and
any Person who controls any of such Persons within the meaning of the Securities
Act or the Exchange Act (each, an "Indemnified Seller Party") from and against
any Damages that such Indemnified Seller Party may sustain, suffer or incur and
that result from, arise out of or relate to any breach of any of the respective
representations, warranties, covenants or agreements of the Buyer contained in
this Agreement.
11.3. Procedure for Claims.
(a) Any Person who desires to seek indemnification under any part of
this SECTION 11 (each, an "Indemnified Party") shall give written notice in
reasonable detail (a "Claim Notice") to each Party responsible or alleged to be
responsible for indemnification hereunder (an "Indemnitor") and the Escrow Agent
prior to any applicable Expiration Date (as defined in SECTION 11.4). Such
notice shall briefly explain the nature of the claim and the parties known to be
invoked, and shall specify the amount thereof. If the matter to which a claim
relates shall not have been resolved as of the date of the Claim Notice, the
Indemnified Party shall estimate the amount of the claim in the Claim Notice,
but also specify therein that the claim has not yet been liquidated (an
"Unliquidated Claim"). If an Indemnified Party gives a Claim Notice for an
Unliquidated Claim, the Indemnified Party shall also give a second Claim Notice
(the "Liquidated Claim Notice") within 60 days after the matter giving rise to
the claim becomes finally resolved, and the Second Claim Notice shall specify
the amount of the claim. Each Indemnitor to which a Claim Notice is given shall
respond to any Indemnified Party that has given a Claim Notice (a "Claim
Response") within 30 days (the "Response Period") after the later of (i) the
date that the Claim Notice is given or (ii) if a Claim Notice is first given
with respect to an Unliquidated Claim, the date on which the Liquidated Claim
Notice is given. Any Claim Response shall specify whether or not the Indemnitor
giving the Claim Response disputes the claim described in the Claim Notice. If
any Indemnitor fails to give a Claim Response within the Response Period, such
Indemnitor shall be deemed not to dispute the claim described in the related
Claim Notice. If any Indemnitor elects not to dispute a
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claim described in a Claim Notice, whether by failing to give a timely Claim
Response in accordance with the terms hereof or otherwise, then the amount of
such claim shall be conclusively deemed to be an obligation of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an Indemnified
Party pursuant to this SECTION 11, such Indemnitor shall pay to such Indemnified
Party the amount to which such Indemnified Party shall be entitled within 15
Business Days after the day on which such Indemnitor became so obligated to the
Indemnified Party. If the Indemnified Party shall be an Indemnified Buyer
Party, it shall first seek payment of the Damages to which it is entitled under
this SECTION 11 from the Escrow Funds, but only to the extent that Escrow Funds
are then being held by the Escrow Agent and are not subject to other claims for
indemnification; thereafter, if the amount of the Escrow Funds available for
payment of Damages is less than the amount of Damages to which such Indemnified
Buyer Party is entitled, such Indemnified Buyer Party shall seek indemnification
directly from the Seller Parties. If any Indemnitor fails to pay all or part of
any indemnification obligation when due, then such Indemnitor shall also be
obligated to pay to the applicable Indemnified Party interest on the unpaid
amount for each day during which the obligation remains unpaid at an annual rate
equal to the Prime Rate plus 5%.
(c) Notwithstanding anything in this Section 11 to the contrary
(subject only to the first sentence of SECTION 11.3(G)), if an Indemnified Buyer
Party seeks indemnification for Damages arising out of a breach by the Seller of
SECTION 4.10, the Seller Parties shall be obligated to indemnify the Indemnified
Buyer Party only after the Damages to the Indemnified Buyer Party exceed
reserves for accounts receivable in an amount not to exceed $1,300,000.
(d) The claims period for the Escrow Funds shall commence on the date
hereof and shall continue for until the earlier to occur of (i) receipt by the
Buyer of the audited consolidated financial statements of the Buyer for the
period ending December 31, 2000 and (ii) March 31, 2000 (the "Claims Period").
Any Claim Notice shall be considered timely made for the purposes of this
SECTION 11 if given prior to the termination of the Claims Period and in
accordance with the notice requirements of SECTION 15. Any Claim Response shall
be considered timely made for the purposes of this SECTION 11 if given prior to
the termination of the Response Period and in accordance with the notice
requirements of SECTION 15.
(e) If, during the Response Period, an Indemnified Party receives a
Claim Response from the Indemnitor, then for a period of 45 days (the
"Resolution Period") after the Indemnified Party's receipt of such Claim
Response, the Indemnified Party and the Indemnitor shall endeavor to resolve any
dispute arising therefrom. If such dispute is resolved by the parties during
the Resolution Period, the amount that the parties have specified as the amount
to be paid by the Indemnitor, if any, as settlement for such dispute shall be
conclusively deemed to be an obligation of such Indemnitor. If the parties are
unable agree upon a resolution to such dispute prior to the expiration of the
Resolution Period (or any extension thereto to which the Indemnitor and
Indemnified Party agree in writing), the issue shall be presented to the
American Arbitration
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Association in Philadelphia, Pennsylvania (the "AAA") for determination. The
written determination of the AAA shall be binding upon the Parties.
(f) If the Indemnified Party is an Indemnified Buyer Party and,
pursuant to SECTION 11(B), such Indemnified Buyer Party is obligated to seek any
portion of the funds to which such Indemnified Buyer Party is entitled from the
Escrow Funds, then, within two Business Days from the date on which such
Indemnified Buyer Party became entitled to such funds, the Indemnified Party and
the Indemnitor shall provide joint written instructions to the Escrow Agent as
to (i) the amount of funds, if any, to be dispersed from the Escrow Funds and
(ii) instructions as to the manner in which such funds shall be dispersed by the
Escrow Agent.
(g) Notwithstanding any other provision of this SECTION 11, except as
provided below in this SECTION 11.3(G), the Indemnified Buyer on the one hand,
and the Indemnified Seller Parties on the other hand, shall be entitled to
indemnification hereunder with respect to the breach of a representation or
warranty by the Seller Parties or by the Buyer, respectively, only when the
aggregate of all Damages to such Indemnified Parties from all such breach of
representations or warranties exceeds $500,000 (the "Deductible Amount") and
then only to the extent of such excess amount. The foregoing limitation with
respect to the Deductible Amount shall not apply, however, to (a) any breach of
the Seller Parties' representations or warranties under SECTIONS 4.1, 4.2, 4.6
(other than the third sentence of SECTION 4.6) or 4.13 and (b) a breach of any
representations or warranties of a Party to this Agreement that were made with
an intent to mislead or defraud or with a reckless disregard of the accuracy
thereof. In addition, in the case of the Claim that may be made based on a
breach of a representation or warranty as well as on any other item described in
clauses (a) through (f) of the first sentence of SECTION 11.1, such limitations
regarding the Deductible Amount shall not apply to the extent that such Claim is
not based solely on an asserted breach of a representation or warranty.
Notwithstanding the foregoing, the maximum limitation for claims arising out of
or related to any matters set forth in clause (a) shall be $25,000,000.
11.4 Claims Period. Any claim for indemnification under this SECTION 11
shall be made by giving a Claim Notice under SECTION 11.3 on or before the
applicable "Expiration Date" specified below in this SECTION 11.4, or the claim
under this SECTION 11 shall be invalid. The following claims shall have the
following respective "Expiration Dates": (a) the earlier to occur of (i) the
receipt by the Buyer of the audited consolidated financial statements of the
Buyer for the period ended December 31, 2000 and (ii) March 31, 2001 -- any
claims that are not specified in any of the succeeding clauses; (b) the date on
which the applicable statute of limitations expires -- any claim for Damages
related to (i) a breach of any representations or warranties of a Party to this
Agreement that were made with an intent to mislead or defraud or with a reckless
disregard of the accuracy thereof, (ii) a breach of SECTION 4.13, or (iii) any
Liability under Section 11.1(e) of this Agreement (except for those claims or
losses not subject to a statute of limitations including, without
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limitation, claims or losses incurred in connection with corrections under a
correction program established by the Internal Revenue Service, the Department
of Labor, or similar governmental entity for retirement plans) and (c) in
perpetuity - (i) any Unassumed Liability or (ii) those claims or losses relating
to any Liability under Section 11.1(e) not subject to a statute of limitations
including, without limitation, claims or losses incurred in connection with
corrections under a correction program established by the Internal Revenue
Service, the Department of Labor, or similar governmental entity for retirement
plans. If more than one of such Expiration Dates applies to a particular claim,
the latest of such Expiration Dates shall be the controlling Expiration Date for
such claim. So long as an Indemnified Party gives a Claim Notice for an
Unliquidated Claim on or before the applicable Expiration Date, such Indemnified
Party shall be entitled to pursue its rights to indemnification regardless of
the date on which such Indemnified Party gives the related Liquidated Claim
Notice.
11.5. Third Party Claims. An Indemnified Party that desires to seek
indemnification under any part of this SECTION 11 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor
may, or if so requested by such Indemnified Party, any Indemnitor shall,
participate in such Action or assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnified Party shall not consent
to the entry of any judgment or enter into any settlement, except with the
written consent of the Indemnitor (which consent shall not be unreasonably
withheld). Any failure to give prompt notice under this SECTION 11.5 shall not
bar an Indemnified Party's right to claim indemnification under this SECTION 11,
except to the extent that an Indemnitor shall have been harmed by such failure.
11.6. Effect of Investigation or Knowledge. Any claim by the Buyer for
indemnification shall not be adversely affected by any investigation by or
opportunity to investigate afforded to the Buyer, nor shall such a claim be
adversely affected by the Buyer's knowledge on or before the Closing Date of any
breach of the type specified in the first sentence of SECTION 11.1 or of any
state of facts that may give rise to such a breach. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not adversely affect the
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants or obligations.
11.7. Indemnification Remedy. Except for (a) claims of fraud, (b) any
injunctive relief to which a Party may be entitled, and (iii) the right to
collect a judgment after it is rendered, the indemnification remedies provided
by this Section 11 shall constitute the exclusive remedies of the Parties after
Closing for any claim in connection with breaches of representations and
warranties hereunder. Notwithstanding anything herein to the contrary, VERT
and the Buyer hereby agree and acknowledge that they have no recourse to the
assets of NECX Direct, LLC, an indirect subsidiary of the Parent Company.
12. Termination.
12.1 Grounds for Termination. The Parties may terminate this Agreement
at any time before the Effective Time as provided below:
52
<PAGE>
(a) by mutual written consent of each of the Seller Parties and the
Buyer;
(b) by any Party, if the Closing shall not have been consummated on or
before the Termination Date; provided, however, that the right to terminate this
Agreement under this SECTION 12.1(B) shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before the Termination
Date;
(c) by any Party, if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a Court Order (which Court Order the parties shall use commercially
reasonable efforts to lift) that permanently restrains, enjoins or otherwise
prohibits the Transactions, and such Court Order shall have become final and
nonappealable;
(d) by the Buyer, if a Seller Party shall have breached any of its
covenants hereunder in any material respect or if the representations and
warranties of the Seller Parties contained in this Agreement or in any
certificate or other writing delivered by a Seller Party pursuant hereto shall
not be true and correct in any material respect, and, if such breach is subject
to cure, the Seller Parties, have not cured such breach within 10 Business Days
of the Buyer's notice of an intent to terminate; or
(e) by a Seller Party, if the Buyer shall have breached any of its
covenants hereunder or if the representations and warranties of the Buyer
contained in this Agreement or in any certificate or other writing delivered by
the Buyer pursuant hereto shall not be true and correct in any material respect,
and, if such breach is subject to cure, the Buyer has not cured such breach
within 10 Business Days of notice of an intent to terminate.
12.2. Effect of Termination. If this Agreement is terminated pursuant
to SECTION 12.1, any Party may pursue any legal or equitable remedies that may
be available if such termination is based on a breach of another Party.
13. General Matters.
13.1 Contents of Agreement. This Agreement, together with the other
Transaction Documents, sets forth the entire understanding of the Parties with
respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters.
13.2. Amendment, Parties in Interest, Assignment, Etc. This Agreement
may be amended, modified or supplemented only by a written instrument duly
executed by each of the Parties. If any provision of this Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall be
binding upon and inure to the benefit
53
<PAGE>
of and be enforceable by the respective heirs, legal representatives, successors
and permitted assigns of the Parties. Nothing in this Agreement shall confer any
rights upon any Person other than the Parties and their respective heirs, legal
representatives, successors and permitted assigns, except as provided in SECTION
11. No Party shall assign this Agreement or any right, benefit or obligation
hereunder. Any term or provision of this Agreement may be waived at any time by
the Party entitled to the benefit thereof by a written instrument duly executed
by such Party.
13.3. Further Assurances. At and after the Closing, the Parties shall
execute and deliver any and all documents and take any and all other actions
that may be deemed reasonably necessary by their respective counsel to complete
the Transactions.
13.4. Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, and the part the whole, (b) references to any gender
include all genders (c) or has the inclusive meaning frequently identified with
the phrase and/or, (d) including has the inclusive meaning frequently identified
with the phrase but not limited to, (e) references to hereunder or herein relate
to this Agreement and (f) all currencies refer to United States dollars. The
section and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of this Agreement
or the interpretation thereof in any respect. Section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. Each
accounting term used herein that is not specifically defined herein shall have
the meaning given to it under GAAP.
13.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
13.6. Disclosure Schedules. Any items listed or described on the
Disclosure Schedules shall be listed or described under a caption that
specifically identifies the Section(s) of this Agreement to which the item
relates (which, in each case, shall constitute the only valid disclosure with
respect to such Section(s)).
14. Remedies. Prior to the Closing, the Parties hereto may pursue whatever
legal remedies may be available under applicable law or in equity or otherwise,
including the right to seek specific performance, rescission or restitution,
none of which rights or remedies shall be affected or diminished by Section 11;
provided that SECTION 11 shall be the sole and exclusive remedy for a breach of
a representation and warranty contained herein.
15. Notices.
All notices that are required or permitted hereunder shall be in writing
and shall be sufficient if personally delivered or sent by registered or
certified mail, facsimile message or Federal Express or other nationally
recognized overnight delivery service. Any notices shall be deemed given upon
54
<PAGE>
the earlier of the date when received at, or the third day after the date when
sent by registered or certified mail or the day after the date when sent by
Federal Express or facsimile to, the address or facsimile number set forth
below, unless such address or facsimile number is changed by notice to the other
Parties:
If to Seller Parties:
4 Technology Drive
Peabody, MA 01960
Attn: Henry J. Bertolon, Jr.
FAX:
with a required copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: James R. Westra, Esq.
FAX: 617-951-1295
If to VERT or the Buyer:
VerticalNet, Inc.
700 Dresher Road
Horsham, PA 19044
Attn: Gene S. Godick
FAX: 215-784-1962
with a required copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-6993
Attn: James W. McKenzie, Jr., Esq.
FAX: 215-963-5299
16. Governing Law.
This Agreement shall be construed and interpreted in accordance with the
laws of the Commonwealth of Pennsylvania without regard to its provisions
concerning choice of laws or choice of forum. The Parties hereby irrevocably
submit themselves to the non-exclusive jurisdiction of the state and federal
courts sitting in the Commonwealth of Pennsylvania and agree and consent that
55
<PAGE>
services of process may be made upon it in any legal proceedings relating hereto
by any means allowed under state or federal law.
56
<PAGE>
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first written above.
NECX EXCHANGE TRUST
By:______________________________
Name: Henry J. Bertolon, Jr.
Title: Trustee
NECX EXCHANGE, LLC
By:______________________________
Name: Lauriston B. Marshall
Title: President
NEW ENGLAND CIRCUIT SALES, INC.
By:______________________________
Name: Lauriston B. Marshall
Title: President
_________________________________
HENRY J. BERTOLON, JR.
57
<PAGE>
VERTICALNET, INC.
By:______________________________
Name: Gene S. Godick
Title: Vice President and Chief Financial Officer
NECX ACQUISITION LLC
By:______________________________
Name: Gene S. Godick
Title: Vice President
58
<PAGE>
ESCROW NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH NOTE UNDER THE 1933 ACT, UNLESS,
IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE MAKER)
OF COUNSEL SATISFACTORY TO THE MAKER, SUCH REGISTRATION IS NOT REQUIRED.
VERTICALNET, INC.
PROMISSORY NOTE
PHILADELPHIA, PENNSYLVANIA
DECEMBER 16, 1999
FOR VALUE RECEIVED, VerticalNet, Inc., a Pennsylvania corporation
("Maker"), hereby promises to pay to the order of NECX Exchange Trust
("Holder"), at 4 Technology Drive, Peabody, MA or such other place as Holder may
from time to time designate in writing, the number of shares of Maker Stock (as
defined) determined in accordance with Section 2 of this Convertible Promissory
Note.
Capitalized terms used herein but not defined shall have the meanings
ascribed to them in the Asset Purchase Agreement dated as of November 16, 1999
(the "Asset Purchase Agreement," as amended, supplemented or otherwise modified
from time to time) by and among VerticalNet, Inc., NECX Acquisition LLC, New
England Circuit Sales, Inc., NECX Exchange, LLC, the Holder and Henry J.
Bertolon, Jr.
1. Definitions
As used in this Promissory Note, the following terms shall have the
following meanings:
"Payment Date Average Price" means the average closing price of Maker
Stock on the Nasdaq National Market during the twenty trading days immediately
preceding the date on which this Promissory Note becomes due and payable under
Section 2 hereof.
"Maker Stock" means the common stock, par value $.01 per share, of the
Maker.
"Principal Amount" means $10,500,000.
<PAGE>
2. Payment
(a) Time of Payment; Calculation. This Note will become due and payable (the
"Payment Date") upon the declaration of effectiveness by the Securities and
Exchange Commission of a Registration Statement (the "Registration
Statement") filed by Maker pursuant to Section 7.3 of the Asset Purchase
Agreement covering all of the shares of Maker Stock issuable upon the
maturity of the Note. Subject to the terms and conditions set forth in
this Section 2, all of the outstanding principal amount of this Promissory
Note shall be payable in such number of full shares of Maker Stock as
determined under the following formula:
Principal Amount divided by X
where X = the Payment Date Average Price (the "Shares"); provided, however, that
in no event shall X be greater than $59.83 or less than $44.87, so that if the
Payment Date Average Price is equal to or greater than $59.83, X shall be
$59.83, and if the Payment Date Average Price is equal to or less than $44.87, X
shall be $44.87. For purposes of clarification only, the following table
illustrates the results that would occur under various Payment Date Average
Prices:
PRE-CONVERSION AVERAGE PRICE X
- -------------------------------------------------------
$75.00 $59.83
- -------------------------------------------------------
$50.00 $50.00
- -------------------------------------------------------
$25.00 $44.87
- -------------------------------------------------------
(b) Delivery of Certificates. Upon the Payment Date, the Holder of this
Note shall surrender the original copy of this Note to Maker for cancellation or
to an agent of Maker designated by it for that purpose. Maker will, as soon as
practicable after surrender of this Note (but in no event later than 4 business
days after the Payment Date) and compliance by the Holder with the other
conditions herein contained, cause to be issued and delivered to the Holder
certificates for the number of full shares of Maker Stock to which the Holder
shall be entitled pursuant to clause (a) above or, if so requested by Holder,
cause to be held in Holder's name with Depository Trust Company such number of
full shares of Maker Stock. The person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
the Payment Date shall be deemed to have become on said date the holder or
holders of record of the shares represented thereby.
(c) No Shareholder Rights; Representations and Agreements. This Note shall
not entitle the Holder to any voting rights or other rights as a stockholder of
the Maker (or to any other rights whatsoever except the rights herein expressed
and such as are set forth) and no dividends shall be payable or accrue in
respect of this Note or the Maker Stock issuable pursuant to this Note until the
Payment Date. In the event Maker fails to timely file or cause to become
effective a Registration Statement covering shares of Maker Stock issuable upon
the Payment Date, Holder shall be entitled to the benefits provided in Section
7.3 of the Asset Purchase Agreement.
2
<PAGE>
(d) Dilution Protection. The number of shares of Maker Stock calculated
pursuant to Section 2(a) hereof shall be appropriately adjusted to reflect any
stock split, combination, reclassification or similar transaction involving the
Maker Stock, including a stock dividend or distribution in the form of shares of
Maker Stock, that occurs between the date of this Promissory Note and the date
on which this Promissory Note is paid.
3. Default and Remedies.
The following shall be an "Event of Default" for the purposes of this Note:
(i) there shall have been filed against the Maker, without its consent, any
petition or other request for relief seeking an arrangement, receivership,
reorganization, liquidation, or similar relief under bankruptcy or other laws
for the relief of debtors and such request for relief (A) remains in effect for
60 or more days, whether or not consecutive, or (B) is approved by a final
nonappealable order, or (ii) the Maker consents to or files any petition or
other request for relief of the type described in clause (i) above seeking
relief from creditors, makes any assignment for the benefit of creditors or
other arrangement with creditors, or admits in writing its inability to pay its
debts as they become due.
Upon the occurrence of any Event of Default, the Holder may notify the
Maker that the Principal Amount of this Note shall be immediately due and
payable, without regard to the conditions precedent to conversion set forth in
Paragraph 2(a), by issuance of the full shares of Maker Stock to which the
Holder shall be entitled pursuant to Paragraph 2(a). Failure to exercise said
option shall not constitute a waiver on the part of the Holder of the right to
exercise the same at any other time.
4. Miscellaneous.
(a) Choice of Law. This Note shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania, without regard to
its principles of conflicts of laws.
(b) Collection Costs. The Maker will pay to the Holder the amount of all
costs and expenses, inclusive of reasonable attorneys fees and court costs,
directly and reasonably incurred by the Holder in enforcing the payment of this
Note as a result of any Event of Default.
(c) Integration Clause. THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
3
<PAGE>
(d) Notices. All notices that are required or permitted hereunder shall be
in writing and shall be sufficient if personally delivered or sent by registered
or certified mail, return receipt requested, facsimile message (provided that a
confirmation sheet is emitted from the machine making the transmission), or
Federal Express, or other nationally recognized, overnight delivery service.
Any notices shall be deemed given upon the earlier of the date when received at,
or the third day after the date when sent by registered or certified mail or the
day after the date when sent by Federal Express, or other nationally recognized,
overnight delivery service to, the address or fax number set forth below, unless
such address or fax number is changed by notice to the other party hereto given
in accordance with the foregoing notice procedures:
If to the Maker:
VerticalNet, Inc.
700 Dresher Road
Horsham, PA 19044
FAX: 215-443-3336
Attention: Gene S. Godick
with required copies to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
FAX: 215-963-5299
Attention: James W. McKenzie, Jr., Esq.
If to the Holder:
4 Technology Drive
Peabody, MA 01960
FAX: 978-538-8204
Attention: Henry J. Bertolon, Jr.
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
FAX: 617-951-1295
Attention: James R. Westra, Esq.
(e) Assignment. This Note may not be assigned by the Holder without the
prior written consent of the Maker; provided that the Holder may, without such
consent, assign its rights hereunder, in whole or in part, to one or more of its
affiliates, including without limitation,
4
<PAGE>
NECX Exchange, LLC, New England Circuit Sales, Inc. and Henry J. Bertolon, Jr.
and to one or more employees of NECX Exchange, LLC or New England Circuit Sales,
Inc., provided, further, that the Maker receives an opinion of counsel,
reasonably satisfactory to the Maker, that such transfer complies with state and
federal securities laws. The Holder may collaterally assign or grant a security
interest in all of its rights and remedies with respect to this Note.
(f) Information Required from Holder. Each Holder wishing to sell the
shares of Maker Stock pursuant to a Registration Statement and related
Prospectus (as defined below) agrees to deliver a notice and questionnaire that
confirms such Holder's agreement to be bound by the terms of this Section 4(f)
and includes such information regarding it and the distribution of its Shares as
is required by law to be disclosed by the Holder in the applicable Registration
Statement (the "Requisite Information") to the Maker prior to any intended
distribution of the Shares under the Registration Statement. The Maker shall not
be required to include in any Registration Statement the Shares of any Holder
that does not provide the Company with a Notice and questionnaire in accordance
with this Section 4(f). Notwithstanding the preceding sentence, the Maker shall
file, as soon as practicable, but in all events within seven Business Days after
the receipt of notice from any Holder which includes the Requisite Information
with respect to such Holder, a Prospectus supplement pursuant to Rule 424 or
otherwise amend or supplement such Registration Statement to include in the
Prospectus the Requisite Information as to such Holder (and the Shares held by
such Holder), and the Maker shall provide such Holder as soon as practicable,
but in all events within seven Business Days after receipt of such notice with a
copy of such Prospectus as so amended or supplemented containing the Requisite
Information in order to permit such Holder to comply with the Prospectus
delivery requirements of the Securities Act in a timely manner with respect to
any proposed disposition of such Holder's Shares; provided, however, the Maker
shall not be required to provide any Holder with a copy of such Prospectus as so
amended or supplemented solely to contain the Requisite Information in advance
of filing the same with the Securities and Exchange Commission. Each Holder
shall promptly notify the Maker of any material changes to the Requisite
Information contained in the notice and questionnaire provided to the Maker by
such Holder.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Maker, then such Holder shall
have the right to require, in the event that such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in such
Registration Statement at any time subsequent to the time that such reference
ceases to be required.
For purposes of this Section 4(f), "Prospectus" shall mean the prospectus
included in any Registration Statement (including, without limitation, a
prospectus that discloses information previously omitted from a prospectus filed
in reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the resale of any of the Shares covered by such
Registration Statement, and all other amendments and supplements to any such
prospectus, including post-effective amendments, and all materials incorporated
by reference or deemed to be incorporated by reference, if any, in such
prospectus.
[SIGNATURE PAGE TO FOLLOW]
5
<PAGE>
EXECUTED as of the date first above written.
VERTICALNET, INC.
---------------------------------------
By: Michael J. Hagan
Title: Executive Vice President
<PAGE>
FIXED NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH NOTE UNDER THE 1933 ACT, UNLESS,
IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE MAKER)
OF COUNSEL SATISFACTORY TO THE MAKER, SUCH REGISTRATION IS NOT REQUIRED.
VERTICALNET, INC.
PROMISSORY NOTE
PHILADELPHIA, PENNSYLVANIA
DECEMBER 16, 1999
FOR VALUE RECEIVED, VerticalNet, Inc., a Pennsylvania corporation
("Maker"), hereby promises to pay to the order of NECX Exchange Trust
("Holder"), at 4 Technology Drive, Peabody, MA or such other place as Holder may
from time to time designate in writing, the number of shares of Maker Stock (as
defined) determined in accordance with Section 2 of this Convertible Promissory
Note.
Capitalized terms used herein but not defined shall have the meanings
ascribed to them in the Asset Purchase Agreement dated as of November 16, 1999
(the "Asset Purchase Agreement," as amended, supplemented or otherwise modified
from time to time) by and among VerticalNet, Inc., NECX Acquisition LLC, New
England Circuit Sales, Inc., NECX Exchange, LLC, the Holder and Henry J.
Bertolon, Jr.
1. Definitions
As used in this Promissory Note, the following terms shall have the
following meanings:
"Payment Date Average Price" means the average closing price of Maker
Stock on the Nasdaq National Market during the twenty trading days immediately
preceding the date on which this Promissory Note becomes due and payable under
Section 2 hereof.
"Maker Stock" means the common stock, par value $.01 per share, of the
Maker.
"Principal Amount" means $34,500,000.
-1-
<PAGE>
2. Payment
(a) Time of Payment; Payment Calculation. This Note will become due and
payable (the "Payment Date") upon the declaration of effectiveness by the
Securities and Exchange Commission of a Registration Statement filed by Maker
pursuant to Section 7.3 of the Asset Purchase Agreement covering all of the
shares of Maker Stock issuable upon the maturity of the Note. Subject to the
terms and conditions set forth in this Section 2, all of the outstanding
principal amount of this Promissory Note shall be payable in such number of full
shares of Maker Stock as determined under the following formula:
Principal Amount divided by X
where X = the Payment Date Average Price (the "Shares"); provided, however, that
in no event shall X be greater than $59.83 or less than $44.87, so that if the
Payment Date Average Price is equal to or greater than $59.83, X shall be
$59.83, and if the Payment Date Average Price is equal to or less than $44.87, X
shall be $44.87. For purposes of clarification only, the following table
illustrates the results that would occur under various Payment Date Average
Prices:
PRE-CONVERSION AVERAGE PRICE X
- -------------------------------------------------------
$75.00 $59.83
- -------------------------------------------------------
$50.00 $50.00
- -------------------------------------------------------
$25.00 $44.87
- -------------------------------------------------------
(b) Delivery of Certificates. Upon the Payment Date, the Holder of this
Note shall surrender the original copy of this Note to Maker for cancellation or
to an agent of Maker designated by it for that purpose. Maker will, as soon as
practicable after surrender of this Note (but in no event later than 4 business
days after the Payment Date) and compliance by the Holder with the other
conditions herein contained, cause to be issued and delivered to the Holder
certificates for the number of full shares of Maker Stock to which the Holder
shall be entitled pursuant to clause (a) above or, if so requested by Holder,
cause to be held in Holder's name with Depository Trust Company such number of
full shares of Maker Stock. The person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
the Payment Date shall be deemed to have become on said date the holder or
holders of record of the shares represented thereby.
(c) No Shareholder Rights; Representations and Agreements. This Note shall
not entitle the Holder to any voting rights or other rights as a stockholder of
the Maker (or to any other rights whatsoever except the rights herein expressed
and such as are set forth) and no dividends shall be payable or accrue in
respect of this Note or the Maker Stock issuable pursuant to this Note until the
Payment Date. In the event Maker fails to timely file or cause to become
effective a Registration Statement covering shares of Maker Stock issuable upon
the Payment
-2-
<PAGE>
Date, Holder shall be entitled to the benefits provided in Section 7.3 of the
Asset Purchase Agreement.
(d) Dilution Protection. The number of shares of Maker Stock calculated
pursuant to Section 2(a) hereof shall be appropriately adjusted to reflect any
stock split, combination, reclassification or similar transaction involving the
Maker Stock, including a stock dividend or distribution in the form of shares of
Maker Stock, that occurs between the date of this Promissory Note and the date
on which this Promissory Note is paid.
3. Default and Remedies.
The following shall be an "Event of Default" for the purposes of this Note:
(i) there shall have been filed against the Maker, without its consent, any
petition or other request for relief seeking an arrangement, receivership,
reorganization, liquidation, or similar relief under bankruptcy or other laws
for the relief of debtors and such request for relief (A) remains in effect for
60 or more days, whether or not consecutive, or (B) is approved by a final
nonappealable order, or (ii) the Maker consents to or files any petition or
other request for relief of the type described in clause (i) above seeking
relief from creditors, makes any assignment for the benefit of creditors or
other arrangement with creditors, or admits in writing its inability to pay its
debts as they become due.
Upon the occurrence of any Event of Default, the Holder may notify the
Maker that the Principal Amount of this Note shall be immediately due and
payable, without regard to the conditions precedent to conversion set forth in
Paragraph 2(a), by issuance of the full shares of Maker Stock to which the
Holder shall be entitled pursuant to Paragraph 2(a). Failure to exercise said
option shall not constitute a waiver on the part of the Holder of the right to
exercise the same at any other time.
4. Miscellaneous.
(a) Choice of Law. This Note shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania, without regard to
its principles of conflicts of laws.
(b) Collection Costs. The Maker will pay to the Holder the amount of all
costs and expenses, inclusive of reasonable attorneys fees and court costs,
directly and reasonably incurred by the Holder in enforcing the payment of this
Note as a result of any Event of Default.
(c) Integration Clause. THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
-3-
<PAGE>
PARTIES, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(d) Notices. All notices that are required or permitted hereunder shall be
in writing and shall be sufficient if personally delivered or sent by registered
or certified mail, return receipt requested, facsimile message (provided that a
confirmation sheet is emitted from the machine making the transmission), or
Federal Express, or other nationally recognized, overnight delivery service.
Any notices shall be deemed given upon the earlier of the date when received at,
or the third day after the date when sent by registered or certified mail or the
day after the date when sent by Federal Express, or other nationally recognized,
overnight delivery service to, the address or fax number set forth below, unless
such address or fax number is changed by notice to the other party hereto given
in accordance with the foregoing notice procedures:
If to the Maker:
VerticalNet, Inc.
700 Dresher Road
Horsham, PA 19044
FAX: 215-443-3336
Attention: Gene S. Godick
with required copies to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
FAX: 215-963-5299
Attention: James W. McKenzie, Jr., Esq.
If to the Holder:
4 Technology Drive
Peabody, MA 01960
FAX: 978-538-8204
Attention: Henry J. Bertolon, Jr.
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
FAX: 617-951-1295
-4-
<PAGE>
Attention: James R. Westra, Esq.
(e) Assignment. This Note may not be assigned by the Holder without the
prior written consent of the Maker; provided that the Holder may, without such
consent, assign its rights hereunder, in whole or in part, to one or more of its
affiliates, including without limitation, NECX Exchange, LLC, New England
Circuit Sales, Inc. and Henry J. Bertolon, Jr. and to one or more employees of
NECX Exchange, LLC or New England Circuit Sales, Inc., provided, further, that
the Maker receives an opinion of counsel, reasonably satisfactory to the Maker,
that such transfer complies with state and federal securities laws. The Holder
may collaterally assign or grant a security interest in all of its rights and
remedies with respect to this Note.
(f) Information Required from Holder. Each Holder wishing to sell the
shares of Maker Stock pursuant to a Registration Statement and related
Prospectus (as defined below) agrees to deliver a notice and questionnaire that
confirms such Holder's agreement to be bound by the terms of this Section 4(f)
and includes such information regarding it and the distribution of its Shares as
is required by law to be disclosed by the Holder in the applicable Registration
Statement (the "Requisite Information") to the Maker prior to any intended
distribution of the Shares under the Registration Statement. The Maker shall not
be required to include in any Registration Statement the Shares of any Holder
that does not provide the Company with a notice and questionnaire in accordance
with this Section 4(f). Notwithstanding the preceding sentence, the Maker shall
file, as soon as practicable, but in all events within seven Business Days after
the receipt of notice from any Holder which includes the Requisite Information
with respect to such Holder, a Prospectus supplement pursuant to Rule 424 or
otherwise amend or supplement such Registration Statement to include in the
Prospectus the Requisite Information as to such Holder (and the Shares held by
such Holder), and the Maker shall provide such Holder as soon as practicable,
but in all events within seven Business Days after receipt of such notice with a
copy of such Prospectus as so amended or supplemented containing the Requisite
Information in order to permit such Holder to comply with the Prospectus
delivery requirements of the Securities Act in a timely manner with respect to
any proposed disposition of such Holder's Shares; provided, however, the Maker
shall not be required to provide any Holder with a copy of such Prospectus as so
amended or supplemented solely to contain the Requisite Information in advance
of filing the same with the Securities and Exchange Commission. Each Holder
shall promptly notify the Maker of any material changes to the Requisite
Information contained in the notice and questionnaire provided to the Maker by
such Holder.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Maker, then such Holder shall
have the right to require, in the event that such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in such
Registration Statement at any time subsequent to the time that such reference
ceases to be required.
For purposes of this Section 4(f), "Prospectus" shall mean the prospectus
included in any Registration Statement (including, without limitation, a
prospectus that discloses information
-5-
<PAGE>
previously omitted from a prospectus filed in reliance upon Rule 430A), as
amended or supplemented by any prospectus supplement, with respect to the resale
of any of the Shares covered by such Registration Statement, and all other
amendments and supplements to any such prospectus, including post-effective
amendments, and all materials incorporated by reference or deemed to be
incorporated by reference, if any, in such prospectus.
[SIGNATURE PAGE TO FOLLOW]
-6-
<PAGE>
EXECUTED as of the date first above written.
VERTICALNET, INC.
------------------------------------------
By: Michael J. Hagan
Title: Executive Vice President
-7-
<PAGE>
FLOATING NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH NOTE UNDER THE 1933 ACT, UNLESS,
IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE MAKER)
OF COUNSEL SATISFACTORY TO THE MAKER, SUCH REGISTRATION IS NOT REQUIRED.
VERTICALNET, INC.
PROMISSORY NOTE
PHILADELPHIA, PENNSYLVANIA
DECEMBER 16, 1999
FOR VALUE RECEIVED, VerticalNet, Inc., a Pennsylvania corporation
("Maker"), hereby promises to pay to the order of NECX Exchange Trust
("Holder"), at 4 Technology Drive, Peabody, MA or such other place as Holder may
from time to time designate in writing, such number of shares of Maker Stock (as
defined) as determined herein or, at Maker's option, cash in lieu of the
conversion of the shares.
Capitalized terms used herein but not defined shall have the meanings
ascribed to them in the Asset Purchase Agreement dated as of November 16, 1999
(the "Asset Purchase Agreement," as amended, supplemented or otherwise modified
from time to time) by and among VerticalNet, Inc., NECX Acquisition LLC, New
England Circuit Sales, Inc., NECX Exchange, LLC, the Holder and Henry J.
Bertolon, Jr.
1. Definitions
As used in this Promissory Note, the following terms shall have the
following meanings:
"Payment Date Average Price" means the average closing price of Maker
Stock on the Nasdaq National Market during the twenty trading days immediately
preceding the date on which this Promissory Note becomes due and payable under
Section 2 hereof.
"Maker Stock" means the common stock, par value $.01 per share, of the
Maker.
"Principal Amount" means $25,000,000.
<PAGE>
2. Payment
(a) Calculation of Payment.
(i) Subject to the terms and conditions set forth in this Section 2, all of the
Principal Amount of this Promissory Note shall become due and payable upon
the declaration of effectiveness by the Securities and Exchange Commission
of a Registration Statement (the "Registration Statement") filed by Maker
pursuant to Section 7.3 of the Asset Purchase Agreement (the "Payment
Date"). The principal amount of this Promissory Note shall be payable in
such number of full shares of Maker Stock as determined under the following
formula (the "Shares"):
Y = Principal Amount divided by X
where Y = the number of full shares of Maker Stock; and
where X = the Payment Average Price; provided, however, that in
no event shall X be less than $29.92, so that if the Payment
Average Price is equal to or less than $29.92, X shall equal
$29.92.
(ii) If X is greater than $59.83, the Maker may, at its option and in lieu of
issuing shares of Maker Stock, pay to the Holder, in complete satisfaction
of this Promissory Note, the Principal Amount in cash.
(b) Delivery of Certificates or Cash. Upon the Payment Date, the Holder of
this Note shall surrender the original copy of this Note to Maker for
cancellation or to an agent of Maker designated by it for that purpose. Maker
will, as soon as practicable after surrender of this Note (but in no event later
than 4 business days after the Payment Date) and compliance by the Holder with
the other conditions herein contained, cause to be issued and delivered to the
Holder a certificate for the number of full shares of Maker Stock to which the
Holder shall be entitled pursuant to clause (a) above or, if so requested by
Holder, cause to be held in Holder's name with Depository Trust Company such
number of full shares of Maker Stock; provided, however, that if the conditions
set forth in Section 2(a)(ii) are satisfied, the Maker may, in lieu of
delivering shares to the Holder, pay the Holder the Principal Amount in cash in
complete satisfaction of this Promissory Note.
(c) No Shareholder Rights; Representations and Agreements. This Note shall
not entitle the Holder to any voting rights or other rights as a stockholder of
the Maker (or to any other rights whatsoever except the rights herein expressed
and such as are set forth) and no dividends shall be payable or accrue in
respect of this Note or the Maker Stock issuable pursuant to this Note until the
Payment Date. In the event the Maker fails to timely file, or cause to become
effective, a Registration Statement covering shares of Maker Stock issuable upon
the
<PAGE>
Payment Date, Holder shall be entitled to the benefits provided in Section 7.3
of the Asset Purchase Agreement.
(d) Dilution Protection. The number shares of Maker Stock calculated
pursuant to Section 2(a) hereof shall be appropriately adjusted to reflected any
stock split, combination, reclassification or similar transaction involving the
Maker Stock, including a stock dividend or distribution in the form of shares of
Maker Stock, that occurs between the date of this Promissory Note and the date
on which this Promissory Note is paid.
3. Default and Remedies.
Each of the following shall be an "Event of Default" for the purposes of
this Note: (a) the Maker fails to pay when due any amount due under this Note
upon exercise of its option under paragraph 2(a)(ii) and such failure is not
cured within 15 days following written notice thereof to the Maker from the
Holder and such failure to pay has not arisen as a result of the Maker
exercising its right to set off any such amount against any amount owed to the
Maker or any of its subsidiaries or affiliates or (b) (i) there shall have been
filed against the Maker, without its consent, any petition or other request for
relief seeking an arrangement, receivership, reorganization, liquidation, or
similar relief under bankruptcy or other laws for the relief of debtors and such
request for relief (A) remains in effect for 60 or more days, whether or not
consecutive, or (B) is approved by a final nonappealable order, or (ii) the
Maker consents to or files any petition or other request for relief of the type
described in clause (i) above seeking relief from creditors, makes any
assignment for the benefit of creditors or other arrangement with creditors, or
admits in writing its inability to pay its debts as they become due.
Upon the occurrence of any Event of Default, the Holder may notify the
Maker that the Principal Amount of this Note shall be immediately due and
payable, without regard to the conditions precedent to conversion set forth in
Paragraph 2(b), by issuance of the full shares of Maker Stock to which the
Holder shall be entitled to pursuant to Paragraph 2(a); provided, however, that
Maker may in lieu of delivering shares to the Holder, pay the Holder the
Principal Amount in complete satisfaction of this Convertible Promissory Note.
Failure to exercise said option shall not constitute a waiver on the part of the
Holder of the right to exercise the same at any other time.
4. Miscellaneous.
(a) Choice of Law. This Note shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania, without regard to
its principles of conflicts of laws.
(b) Collection Costs. The Maker will pay to the Holder the amount of all
costs and expenses, inclusive of reasonable attorneys' fees and court costs,
directly and reasonably incurred by the Holder in enforcing the payment of this
Note as a result of any Event of Default.
<PAGE>
(c) Integration Clause. THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(d) Notices. All notices that are required or permitted hereunder shall be
in writing and shall be sufficient if personally delivered or sent by registered
or certified mail, return receipt requested, facsimile message (provided that a
confirmation sheet is emitted from the machine making the transmission), or
Federal Express, or other nationally recognized, overnight delivery service.
Any notices shall be deemed given upon the earlier of the date when received at,
or the third day after the date when sent by registered or certified mail or the
day after the date when sent by Federal Express, or other nationally recognized,
overnight delivery service to, the address or fax number set forth below, unless
such address or fax number is changed by notice to the other party hereto given
in accordance with the foregoing notice procedures:
If to the Maker:
VerticalNet, Inc.
700 Dresher Road
Horsham, PA 19044
FAX: 215-443-3336
Attention: Gene S. Godick
with required copies to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
FAX: 215-963-5299
Attention: James W. McKenzie, Jr., Esq.
If to the Holder:
4 Technology Drive
Peabody, MA 01960
FAX: 978-538-8204
Attention: Henry J. Bertolon, Jr.
<PAGE>
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
FAX: 617-951-1295
Attention: James R. Westra, Esq.
(e) Assignment. This Note may not be assigned by the Holder without the
prior written consent of the Maker; provided that the Holder may, without such
consent, assign its rights hereunder, in whole or in part, to one or more of its
affiliates, including without limitation, NECX Exchange, LLC, New England
Circuit Sales, Inc. and Henry J. Bertolon, Jr. and to one or more employees of
NECX Exchange, LLC or New England Circuit Sales, Inc., provided, further, that
the Maker receives an opinion of counsel, reasonably satisfactory to the Maker,
that such transfer complies with state and federal securities laws. The Holder
may collaterally assign or grant a security interest in all of its rights and
remedies with respect to this Note.
(f) Information Required from Holder. Each Holder wishing to sell the
shares of Maker Stock pursuant to a Registration Statement and related
Prospectus (as defined below) agrees to deliver a Notice and questionnaire that
confirms such Holder's agreement to be bound by the terms of this Section 4(f)
and includes such information regarding it and the distribution of its Shares as
is required by law to be disclosed by the Holder in the applicable Registration
Statement (the "Requisite Information") to the Maker prior to any intended
distribution of the Shares under the Registration Statement. The Maker shall not
be required to include in any Registration Statement the Shares of any Holder
that does not provide the Company with a Notice and questionnaire in accordance
with this Section 4(f). Notwithstanding the preceding sentence, the Maker shall
file, as soon as practicable, but in all events within seven Business Days after
the receipt of notice from any Holder which includes the Requisite Information
with respect to such Holder, a Prospectus supplement pursuant to Rule 424 or
otherwise amend or supplement such Registration Statement to include in the
Prospectus the Requisite Information as to such Holder (and the Shares held by
such Holder), and the Maker shall provide such Holder within seven Business Days
after receipt of such notice with a copy of such Prospectus as so amended or
supplemented containing the Requisite Information in order to permit such Holder
to comply with the Prospectus delivery requirements of the Securities Act in a
timely manner with respect to any proposed disposition of such Holder's Shares;
provided, however, the Maker shall not be required to provide any Holder with a
copy of such Prospectus as so amended or supplemented solely to contain the
Requisite Information in advance of filing the same with the Securities and
Exchange Commission. Each Holder shall promptly notify the Maker of any
material changes to the Requisite Information contained in the Notice and
questionnaire provided to the Maker by such Holder.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Maker, then such Holder shall
have the right to require, in the event that such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in such
Registration
<PAGE>
Statement at any time subsequent to the time that such reference ceases to be
required.
For purposes of this Section 4(f), "Prospectus" shall mean the prospectus
included in any Registration Statement (including, without limitation, a
prospectus that discloses information previously omitted from a prospectus filed
in reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the resale of any of the Shares covered by such
Registration Statement, and all other amendments and supplements to any such
prospectus, including post-effective amendments, and all materials incorporated
by reference or deemed to be incorporated by reference, if any, in such
prospectus.
[SIGNATURE PAGE TO FOLLOW]
<PAGE>
EXECUTED as of the date first above written.
VERTICALNET, INC.
----------------------------------------
By: Michael J. Hagan
Title: Executive Vice President
<PAGE>
EXHIBIT 99.1
VerticalNet Completes Acquisition Of NECX Exchange, The World's Leading
Electronics Exchange
HORSHAM, Pa.--(BUSINESS WIRE)--Dec. 17, 1999--VerticalNet, Inc. (Nasdaq:VERT),
the Internet's leading portfolio of business-to-business vertical trading
communities, has completed its previously announced acquisition of NECX(R)
Exchange, the world's leading business-to-business marketplace for the
electronics industry.
The combination creates the Internet's first large-scale trading community for
engineers and purchasing professionals in the electronics and high tech markets,
with 18,000 trading partners globally and access to an online inventory of more
than three million products (SKUs).
NECX Exchange (www.necx.com), which will be linked to communities in
VerticalNet's Advanced Technology and Communications sectors, will be key to the
Company's build-out of its real-time global trading platform.
VerticalNet(R) President and CEO Mark Walsh said, "This acquisition delivers on
our commitment to grow our e-commerce markets and transaction capabilities, and
to continue to expand our position in global markets."
ABOUT VERTICALNET
VerticalNet, Inc. (www.verticalnet.com), owns and operates 53 industry-specific
Web sites designed as online business-to-business communities, known as vertical
trade communities. These vertical trade communities provide users with
comprehensive sources of information, interaction and e-commerce.
They are grouped into 10 sectors: ADVANCED TECHNOLOGIES: Aerospace Online, Auto
Central.com, Computer OEM Online, Embedded Technology.com, Plant Automation.com,
Semiconductor Online, Test and Measurement.com; COMMUNICATIONS: Digital
Broadcasting.com, EC Online, Fiber Optics Online, Photonics Online, Premises
Networks.com, RF Globalnet, Wireless Design Online, Wireless Networks Online;
ENVIRONMENTAL: ElectricNet, Pollution Online, Power Online, PublicWorks.com,
Pulp and Paper Online, Solid Waste.com, Water Online; FOOD AND PACKAGING: Bakery
Online, Beverage Online, Dairy Network.com, Food Ingredients Online, Food
Online, Meat and Poultry Online, Packaging Network.com; FOODSERVICE AND
HOSPITALITY: E-Hospitality.com, Foodservice Central.com; HEALTHCARE/SCIENCE:
Bioresearch Online, Drug Discovery Online, E-Dental.com, Home Health
Provider.com, Hospital Network.com, Laboratory Network.com, Long Term Care
Provider.com, Medical Design Online, Nurses.com; MANUFACTURING AND METALS:
Machine Tools Online, Metrology World.com, Safety Online, Surface Finishing.com,
Tooling Online; PROCESS: Adhesives and Sealants.com, Chemical Online,
Hydrocarbon Online, Oil and Gas Online, Paint and Coatings.com, Pharmaceutical
Online; SERVICE: HR Hub.com, Property and Casualty.com, Purchasing Network.com;
OTHER: Oil Link.com, LabX.com, Industry Deals.com, IT CareerHub.com,
Professional Store.com
This announcement contains forward-looking statements that involve risks and
uncertainties, including those relating to the Company's (i) ability to
integrate a global exchange with the Company's vertical trade communities; (ii)
ability to enhance capabilities of electronic communities; (iii) expectation
that the NECX acquisition will positively impact online purchasing in the
electronics segment; (iv) expectation of greater liquidity and lower
distribution and procurement costs for electronic trading community members; (v)
belief that it can transfer market making expertise, service and infrastructure
to its existing communities; and (vi) information contained elsewhere in this
document where statements are preceded by, followed by or include the words
"believes," "plans," "intends," "expects," "anticipates" or similar expressions.
For such statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Actual results may differ materially from the results predicted,
and reported results should not be considered as an indication of future
performance.
The potential risks and uncertainties that could cause actual results to differ
from those included in the forward-looking statements include, among others, the
difficulty in assimilating the NECX operations and workforce, the Company's lack
of experience in global market making, the Company's limited operating history,
the increasingly competitive and constantly changing environment for advertising
sales and for VerticalNet, the early stage of the
<PAGE>
Web as an advertising and commerce medium, and the Company's dependence on third
parties for technology, content and distribution.
Additional factors that could cause actual results to differ from those
contained in the forward-looking statements include those set forth in the
Company's Annual Report on Form 10-K for the period ending December 31, 1998 and
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1999, both of which have been filed with the SEC.
