VERTICALNET INC
S-3, 2000-02-11
ADVERTISING
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<PAGE>

   As filed with the Securities and Exchange Commission on February 11, 2000
                                                   Registration No. 333-________
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                _______________

                                   FORM S-3
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                                _______________

                               VERTICALNET, INC.
            (Exact name of Registrant as specified in its charter)

     Pennsylvania                          7319                  23-2815834
(State or other jurisdiction         (Primary Standard        (I.R.S. Employer
of incorporation or organization) Industrial Classification  Identification No.)
                                         Code No.)


                          700 Dresher Road, Suite 100
                         Horsham, Pennsylvania 19044
                                (215) 328-6100
              (Address, including zip code, and telephone number,
       including area code, of registrant's principal executive offices)
                              __________________

                            James W. McKenzie, Jr.
                   Senior Vice President and General Counsel
                          700 Dresher Road, Suite 100
                         Horsham, Pennsylvania 19044
                                (215) 328-6100

             (Name and address, including zip code, and telephone
              number, including area code, of agent for service)

                                  Copies to:
                           Michael L. Pillion, Esq.
                           Rachel A. Gonzalez, Esq.
                          Morgan, Lewis & Bockius LLP
                              1701 Market Street
                         Philadelphia, PA 19103-2921
                                (215) 963-5000

  Approximate date of commencement of proposed sale to the public:  As soon as
practicable after the Registration Statement becomes effective.

  If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [X]

  If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.   [_]

  If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.   [_]


  If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.   [_]

  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.   [_]

================================================================================

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
               Title Of Each Class                                      Proposed Maximum     Proposed Maximum       Amount Of
                  Of Securities                       Amount To Be     Offering Price Per   Aggregate Offering   Registration
                 To Be Registered                      Registered           Security             Price (1)            Fee
             -----------------------                ----------------   -------------------  -------------------  --------------
     <S>                                            <C>                <C>                  <C>                  <C>
     5 1/4% Convertible Subordinated
     Debentures due 2004...................         $115,000,000                100%           $115,000,000            $30,360

     Common Stock, $.01
     par value per share(2)................            2,875,000 shares         ----                   ----               ----
</TABLE>

(1)  Equals the aggregate principal amount of the securities being registered.
(2)  Such number represents the number of shares of common stock that are
     currently issuable upon conversion of the debentures. Pursuant to Rule 416
     under the Securities Act, the registrant is also registering such
     indeterminate number of shares of common stock as may be issued from time
     to time upon conversion of the debentures as a result of the antidilution
     protection of the debentures. Pursuant to Rule 457(i), no registration fee
     is required for these shares.

          THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

================================================================================
<PAGE>

                SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2000

                                 $115,000,000

The information in this prospectus is not complete and may be changed.  The
selling holders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective.  This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.

                               VERTICALNET, INC.

              5 1/4% Convertible Subordinated Debentures due 2004

     Holders of our 5 1/4% Convertible Subordinated Debentures due 2004 may
offer for resale through this prospectus the debentures and the shares of common
stock issuable upon conversion of the debentures at various times at market
prices prevailing at the time of sale or at privately negotiated prices.  The
selling holders may resell the debentures or the common stock to or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions.  We will pay interest on the
debentures on March 27 and September 27 of each year, beginning March 27, 2000.
We will not receive any of the proceeds from the resale of the debentures and
the common stock issuable upon conversion of the debentures offered through this
prospectus.  All expenses of registration of the debentures and the shares of
common stock issuable upon conversion of the debentures which may be offered
through this prospectus under the Securities Act will be paid by us (other than
underwriting discounts and selling commissions, and fees and expenses of
advisors to the selling holders).

     Holders of the debentures may convert, subject to specified conditions, the
debentures into shares of our common stock at a conversion price of $40.00 per
share, subject to adjustment as set forth in this prospectus.

     The debentures will mature on September 27, 2004 unless earlier converted
or redeemed.  Prior to September 27, 2002, we may redeem all or part of the
debentures, at the redemption price specified in this prospectus under
"Description of the Debentures--Optional Redemption--Provisional Redemption"
if we have an effective shelf registration statement and the market price of our
common stock exceeds specified thresholds.  We intend to redeem all or part of
the debentures upon, or shortly after, the effectiveness of this registration
statement, as long as the market price of our common stock exceeds the
thresholds specified in this prospectus.  Upon a Change of Control (as defined)
of VerticalNet, holders of the debentures may be entitled to cause us to redeem
all or part of their debentures.  After September 27, 2002, we may redeem all or
part of the debentures at the redemption prices specified in this prospectus
under "Description of the Debentures--Optional Redemption--Subsequent Optional
Redemption."

     Shares of our common stock are quoted on the Nasdaq National Market under
the symbol "VERT."  The last reported sale price of the shares on February 9,
2000 was $226.94 per share.

     VerticalNet has not applied for listing of the debentures on any securities
exchange or for the quotation through any automated quotation system.  The
debentures are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market.

     The debentures are unsecured general obligations of VerticalNet and rank
subordinate in right of payment to all of our existing and future Senior Debt
(as defined). As of September 30, 1999, we had no Senior Debt. NECX, which we
acquired on December 16, 1999 had outstanding balance sheet liabilities of
approximately $49.0 million as of September 30, 1999.

                Investing in the debentures and the common stock
   issuable upon conversion of the debentures involves a high degree of risk.
                         Risk Factors begin on page 7.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus.  Any representation to the contrary is
a criminal offense.

February     , 2000
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
SUMMARY.....................................................................   3
RISK FACTORS................................................................   7
FORWARD-LOOKING STATEMENTS..................................................  22
USE OF PROCEEDS.............................................................  22
RATIO OF EARNINGS TO FIXED CHARGES..........................................  22
DESCRIPTION OF THE DEBENTURES...............................................  23
DESCRIPTION OF CAPITAL STOCK................................................  36
SELLING HOLDERS.............................................................  40
CERTAIN FEDERAL TAX CONSEQUENCES............................................  42
PLAN OF DISTRIBUTION........................................................  46
LEGAL MATTERS...............................................................  47
EXPERTS.....................................................................  47
ADDITIONAL INFORMATION......................................................  47
</TABLE>
<PAGE>

                                    SUMMARY


     The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this prospectus or incorporated by reference
in this prospectus and may not contain all the information that is important to
you.  All information in this offering prospectus reflects a two-for-one split
of our common stock effected on August 20, 1999.  The information in this
prospectus does not reflect the two-for-one split of our common stock that our
board of directors has declared to holders of common stock on March 17, 2000
payable on March 31, 2000.

                                  Our Company

     VerticalNet, Inc. (www.verticalnet.com) owns and operates 55 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 the following industry sectors:


     ADVANCED TECHNOLOGIES              MANUFACTURING AND METALS
     COMMUNICATIONS                     PROCESS
     ENVIRONMENTAL                      PUBLIC SECTOR
     FOOD AND PACKAGING                 SERVICE
     FOODSERVICE AND HOSPITALITY        TEXTILES AND APPAREL
     HEALTHCARE/SCIENCE


     Additionally, VerticalNet provides auctions, catalogs, bookstores, career
services and other e-commerce capabilities horizontally across its communities
with technologies from acquired and organic sites like Industry Deals.com, IT
CareerHub.com, LabX.com and Professional Store.com.  Through its acquisition of
NECX.com, VerticalNet intends to provide an online exchange for the electronic
components industry.


                                   About VerticalNet

 Principal Executive Offices:      Internet Address:

 VerticalNet, Inc.                 www.verticalnet.com (Information contained on
 700 Dresher Road, Suite 100       our Web site is not a part of this
 Horsham, Pennsylvania 19044       prospectus)
 Phone: (215) 328-6100

                                       3
<PAGE>

                                 The Offering


Securities Offered by Holders      $115,000,000 aggregate principal amount of 5
                                   1/4% Convertible Subordinated Debentures due
                                   2004, and shares of common stock issuable
                                   upon conversion of the debentures.

Maturity                           September 27, 2004.

Interest Payment Dates             March 27 and September 27, beginning on March
                                   27, 2000. The initial interest payment will
                                   include accrued interest from September 27,
                                   1999.

Interest Rate                      5 1/4% per year.

Optional Conversion by Holders     Holders may convert the debentures at any
                                   time through maturity, unless previously
                                   redeemed or repurchased, into shares of
                                   common stock initially at a conversion price
                                   of $40.00 per share (equal to a conversion
                                   rate of 25 shares per $1,000 principal amount
                                   of the debentures), subject to adjustment
                                   under certain circumstances. See
                                   "Description of the Debentures--Conversion
                                   Rights."

Provisional Redemption
by VerticalNet                     We intend to redeem some or all of the
                                   debentures upon, or shortly after, the
                                   effectiveness of this shelf registration
                                   statement. We may redeem (the "Provisional
                                   Redemption") some or all of the debentures,
                                   at any time prior to September 27, 2002 (the
                                   "Provisional Redemption Date"), at a
                                   redemption price equal to 101.3125% of the
                                   principal amount of the debentures, plus any
                                   accrued and unpaid interest to, but
                                   excluding, the Provisional Redemption Date,
                                   if (i) this shelf registration covering
                                   resales of the debentures and the common
                                   stock issuable upon conversion of the
                                   debentures is effective and available for use
                                   and is expected to remain effective and
                                   available for use for the 30 days following
                                   the Provisional Redemption Date and (ii) the
                                   Current Market Value (as defined) of our
                                   common stock equals or exceeds the following
                                   triggering percentages of the conversion
                                   price then in effect for at least 20 trading
                                   days in any consecutive 30-day trading period
                                   ending on the trading day prior to the date
                                   of mailing of the notice of the Provisional
                                   Redemption (the "Notice Date"), if redeemed
                                   in the 12-month period ending on September 26
                                   of the following years:

                                                          Trigger
                                        Year             Percentage
                                        ----             ----------
                                        2000                170%
                                        2001                160%
                                        2002                150%

                                   Upon any Provisional Redemption, we will make
                                   an additional payment (the "Interest Make-
                                   Whole Payment") with respect to the
                                   debentures called for redemption, including
                                   those debentures converted into common stock
                                   between the Notice Date and the Provisional
                                   Redemption Date, in an amount equal to the
                                   sum of (i) the present value of the aggregate
                                   amount of the interest that would otherwise
                                   have accrued from the Provisional Redemption
                                   Date through September 26, 2002 (the
                                   "Interest Make-Whole Period") and (ii) any
                                   liquidated damages to, but excluding, the
                                   Provisional Redemption Date. Such present
                                   value shall be calculated using the bond
                                   equivalent yield on U.S. Treasury notes or
                                   bills having a term nearest in length to that
                                   of the Interest Make-Whole Period as of the
                                   Notice Date. We are obligated to make the
                                   Interest Make-Whole Payment on all debentures
                                   called for Provisional Redemption, regardless
                                   of whether those debentures are converted
                                   prior to the Provisional Redemption Date.

Subsequent Optional Redemption     We may redeem some or all of the debentures,
                                   on or after September 27, 2002, at the
                                   redemption prices, plus any accrued and
                                   unpaid interest to, but excluding, the

                                       4
<PAGE>

                                   redemption date, as more fully described
                                   herein. We will therefore be required to make
                                   six interest payments before being able to
                                   redeem any debentures. See "Description of
                                   the Debentures--Optional Redemption--
                                   Subsequent Optional Redemption."

Repurchase Right                   Holders of the debentures may require us to
                                   repurchase all of the holder's debentures at
                                   100% of their principal amount plus any
                                   accrued and unpaid interest in certain
                                   circumstances involving a Change of Control
                                   (as defined). The repurchase price is payable
                                   in cash or, at our option, subject to the
                                   satisfaction of certain conditions, in common
                                   stock (valued at 95% of the average closing
                                   sales prices for the five consecutive trading
                                   days ending on and including the third day
                                   prior to the repurchase date). See
                                   "Description of the Debentures--Repurchase
                                   at Option of Holders Upon a Change of
                                   Control."

Subordination                      The debentures are our unsecured general
                                   obligations. They are subordinated in right
                                   of payment to all of our existing and future
                                   Senior Debt (as defined). The debentures will
                                   be, in effect, subordinated to all existing
                                   and future obligations (including trade
                                   payables) of our subsidiaries. We had no
                                   Senior Debt outstanding as of September 30,
                                   1999. NECX, which we acquired on December 16,
                                   1999 had outstanding balance sheet
                                   liabilities of approximately $49.0 million as
                                   of September 30, 1999. See "Description of
                                   the Debentures--Subordination."

Form and Denomination              The debentures were issued in fully
                                   registered form. The debentures initially
                                   were issued in minimum denominations of
                                   $1,000. The debentures offered to
                                   "accredited investors" were issued only in
                                   certificated form and in multiples of $1,000
                                   in excess of such amount. The debentures sold
                                   by the initial purchasers to "Qualified
                                   Institutional Buyers," as defined in Rule
                                   144A under the Securities Act, were
                                   represented by one or more global debentures,
                                   deposited with a trustee as custodian for The
                                   Depository Trust Company ("DTC") and
                                   registered in the name of DTC or Cede & Co.,
                                   as DTC's nominee. Beneficial interests in the
                                   global debenture were shown on, and any
                                   transfers will be effected only through,
                                   records maintained by DTC and its
                                   participants. See "Description of the
                                   Debentures--Form, Denomination and
                                   Registration."

Use of Proceeds                    We will not receive any proceeds from the
                                   sale of the debentures and the common stock
                                   into which the debentures are convertible by
                                   the selling holders.

Trading                            The debentures are eligible for trading in
                                   the PORTAL market. Our common stock is traded
                                   on the Nasdaq National Market under the
                                   symbol "VERT."

                                       5
<PAGE>

                Summary Historical and Pro Forma Financial Data

     The following table summarizes historical and pro forma financial and other
data for our business. The pro forma statement of operations data and other data
give effect to our acquisitions of NECX Exchange, LLC, Isadra, Inc.,
CertiSource, Inc., LabX Technologies, Inc. and Techspex, Inc., as if they had
occurred on January 1, 1998.

<TABLE>
<CAPTION>
                                                  Year Ended December 31,                    Nine Months Ended September 30,
                                                  -----------------------                    -------------------------------
                                                                             1998                                         1999
                                   1996          1997          1998        Pro Forma       1998           1999         Pro Forma
                                -----------  ------------  ------------  ------------  ------------  --------------  --------------
                                                    (in thousands, except share and per share data and ratios)
<S>                             <C>          <C>           <C>           <C>           <C>           <C>             <C>
Statement of
 Operations Data:
Exchange transactions.........  $       --   $        --   $        --   $   349,098   $        --     $        --     $   270,895
Cost of exchange transactions.          --            --            --       311,545            --              --         242,857
Net exchange revenues.........          --            --            --        37,553            --              --          28,038
Advertising and e-commerce
 revenues.....................         285           792         3,135         5,073         1,862          10,667          11,738

Combined net revenues.........         285           792         3,135        42,626         1,862          10,667          39,776
Amortization expense..........          --            --           283        38,581           104           2,703          29,148
Operating loss................        (702)       (4,664)      (13,509)      (47,128)       (8,349)        (39,528)        (67,024)
Net loss......................        (709)       (4,779)      (13,594)      (47,005)       (8,334)        (38,196)        (67,096)
Basic and diluted net
   loss per share.............  $    (0.14)  $     (0.95)  $     (2.64)  $     (6.30)  $     (1.63)    $     (1.29)    $     (2.12)
Shares used in basic
  and diluted net loss per
  share calculation...........   5,167,296     5,053,730     5,141,100     7,461,409     5,101,238      29,596,145      31,641,892
Pro forma basic and diluted
  net loss per share(1).......  $    (0.11)  $     (0.39)  $     (0.64)  $     (1.99)  $     (0.41)    $     (1.18)    $     (1.95)
Shares used in pro forma basic
  and diluted net loss per
  common share calculation....   6,652,568    12,368,652    21,270,978    23,591,287    20,104,360      32,448,845      34,494,592
Other Data:
Deficiency of earnings to
  cover fixed charges(2)......  $      709   $     4,779   $    13,594   $    47,005   $     8,334     $    38,196     $    67,096
</TABLE>

     (1) Pro forma net loss per share is computed using the weighted average
     number of shares of common stock outstanding, including common equivalent
     shares from the convertible preferred stock as if converted at the original
     issuance date. All convertible preferred stock was converted into common
     stock at the IPO date.
     (2) For the periods indicated, earnings were inadequate to cover fixed
     charges. For purposes of determining the deficiency of earnings to fixed
     charges, loss is defined as losses from continuing operations.

     The following table indicates a summary of our balance sheet as of
September 30, 1999. The pro forma column reflects our acquisition of NECX and
the net proceeds from the October 12, 1999, $15 million exercise of the over-
allotment provision of the debentures, as if they had occurred on September 30,
1999.

<TABLE>
<CAPTION>
                                                                               As of September 30, 1999
                                                                               ------------------------

                                                                               Actual         Pro Forma
                                                                               ------         ---------
                                                                                  (in thousands)
<S>                                                                            <C>            <C>
Balance Sheet Data:
Cash and cash equivalents................................................     $ 91,710        $ 67,894
Working capital..........................................................      107,350         102,635
Total assets.............................................................      194,091         332,387
Long-term debt, less current portion.....................................      101,739         116,739
Total shareholders' equity...............................................       75,226         174,772
</TABLE>

                                       6
<PAGE>

                                  RISK FACTORS

     You should carefully consider the following factors and other information
in this prospectus before deciding to purchase the debentures or shares of
common stock issuable upon conversion of the debentures.


                         Risks Related to Our Business

We have limited operating history upon which you may evaluate us

     We launched our first vertical trade community in October 1995 and have a
limited operating history.  In addition, our revenue model is evolving, making
an evaluation of our future prospects very difficult.  Currently, our Internet
based revenues are primarily generated from the sale of advertising on our
vertical trade communities.  In the future, we expect to generate revenue from
multiple sources, including e-commerce and business services.  We may not be
able to sustain our current revenues or successfully generate e-commerce or
business services revenue. If we do not generate such revenue, our business,
financial condition and operating results will suffer.   We expect that a
significant percentage of our overall revenues will come from NECX Exchange
which we acquired December 16, 1999.  We may not be able to successfully
integrate the revenue stream of NECX into an e-commerce platform.  If we do not
generate revenue from NECX'S e-commerce applications, our business,
financial condition and operating results will suffer.

We anticipate we will incur continued losses for the foreseeable future

     To date, we have not been profitable. We may never be profitable or, if we
become profitable, we may be unable to sustain profitability. We have incurred
significant losses since inception. We reported a net loss of $38.2 million for
the nine months ended September 30, 1999 actual and $67.1 million on a pro forma
basis, giving effect to the acquisitions of NECX, Isadra, CertiSource, LabX and
Techspex. We expect to continue to incur significant losses in the foreseeable
future.  As of September 30, 1999, our accumulated deficit was $57.5 million.
As a result of our acquisitions, we expect our amortization expense to increase
significantly in the future. Our limited operating history makes predicting our
future operating results, including operating expenses, difficult. Our revenues
may not grow or may not even continue at their current level.

We expect our operating expenses to increase

     Some of our expenses are fixed, including non-cancelable agreements,
equipment leases and real estate leases. If our revenues do not increase, we may
not be able to compensate by reducing expenses in a timely manner. In addition,
we plan to significantly increase our operating expenses to:

     . launch additional vertical trade communities;

     . increase our internal sales and marketing operations;

     . enhance our technologies;

     . develop and deploy our e-commerce initiatives;

     . enter into additional sponsorship agreements;

     . broaden our customer support capabilities; and

     . pursue marketing and distribution alliances.

     Expenses will also increase due to the potential impact of goodwill
amortization and other charges resulting from completed and future acquisitions.

                                       7
<PAGE>

     Leading Web sites, browser providers and other Internet distribution
channels may also begin to charge us for providing access to our products and
services. If any of these expenses are not accompanied by increased revenues,
our business, financial condition and operating results would be harmed.


Fluctuations in our quarterly results may cause our stock price to decline

     We expect that our quarterly operating results will fluctuate significantly
due to many factors, including:

     . the seasonality of our revenues;

     . the uncertain adoption of the Internet as an e-commerce and advertising
       medium;

     . dependence on development and adoption of the e-commerce market;

     . the level of demand for our products and services;

     . intense and increased competition;

     . our ability to develop, introduce and market new products and
       enhancements to our existing products on a timely basis;

     . our dependence on content providers;

     . license fees payable to content providers;

     . uncertain acceptance of our Internet content;

     . management of our growth; and

     . risks associated with recent and future acquisitions.

     Many of these factors are beyond our control.

     Due to the limited history of businesses relying on the Internet as an
advertising and commercial medium, we believe that period-to-period comparisons
of our operating results are not meaningful, and that such comparisons may not
be accurate indicators of future performance.  Additionally, if our operating
results in one or more quarters do not meet the securities analysts' or our
shareholders' expectations, the price of our common stock may fall.

     In addition, after our acquisition of NECX on December 16, 1999, quarterly
fluctuations in NECX's revenues may disproportionately affect our revenues, due
to NECX's substantial contribution to our overall revenues.


Marketing and distribution alliances may not generate the expected number of new
customers or may be terminated

     We use marketing and distribution alliances with other Internet companies
to create traffic on our vertical trade communities and consequently, to
generate revenues. These marketing and distribution alliances allow us to link
our vertical trade communities to search engines such as those offered by Lycos.
The success of these relationships depends on the amount of increased traffic we
receive from the alliance partners' Web sites. These arrangements may not
generate the expected number of new customers. We also may be unable to renew
these marketing and distribution alliance agreements. If any of these agreements
are terminated, the traffic on our vertical trade communities could decrease or
our advertising revenues derived from the sales of advertising on co-branded
pages could decrease. In June 1999, as part of our overall reconsideration of
our portal alliances, we terminated a three year Sponsorship Agreement with
Excite, Inc. entered into on September 30, 1998. Additionally, in October 1999,
we terminated our Sponsorship Agreement with Alta Vista.

                                       8
<PAGE>

     We are interested in entering into additional partnerships with search
engine providers to increase traffic to our vertical trade communities, but we
cannot assure you that we will be able to enter into any new partnerships. If we
are unable to enter into new arrangements, the traffic on our vertical trade
communities may not increase. Additionally, even if we are able to enter into
additional partnerships with search engines, these partnerships may not
necessarily increase the traffic on our vertical trade communities.

     There is intense competition for the Internet products and services,
advertising and sales of goods and services that we offer.

     The market for Internet products and services, advertising and e-commerce
is intensely competitive, evolving and subject to rapid technological change. We
expect competition to intensify as current competitors expand their product
offerings and new competitors enter the market. Barriers to entry are minimal,
and competitors can launch new Web sites at a relatively low cost. We compete
for a share of a customer's advertising budget with online services and
traditional off-line media, such as print publications and trade associations.
Although to date we believe there are no companies with a larger portfolio of
vertical trade communities than ours, several companies offer competitive
vertical trade communities. We expect that additional companies will offer
competing vertical trade communities on a standalone or portfolio basis.

     Many of our competitors have greater brand recognition and greater
financial, marketing and other resources than ours, and may have well-
established relationships with our existing and prospective customers. This may
place us at a disadvantage in responding to our competitors' pricing strategies,
technological advances, advertising campaigns, strategic partnerships and other
initiatives. Our competitors may also develop Internet products or services that
are superior to, or have greater market acceptance than, our solutions. If we
are unable to compete successfully against our competitors, our business,
financial condition and operating results may be negatively impacted.


Acquisitions may disrupt or otherwise have a negative impact on our business

     We have made, and plan to continue to make, significant investments in
complementary Internet and non-Internet traditional companies, technologies and
assets. Acquisitions are subject to the following risks:

     . acquisitions may cause a disruption in our ongoing business, distract our
       management and other resources and make it difficult to maintain our
       standards, controls and procedures;

     . we may acquire companies in markets in which we have little experience;

     . we may not be able to retain key employees from acquired companies;

     . we may not be able to successfully integrate the services, products and
       personnel of any acquisition into our operations;

     . we may be required to incur debt or issue equity securities, which may be
       dilutive to existing shareholders, to pay for acquisitions;

     . our acquisitions may not result in any return on our investment and we
       may lose our entire investment and incur significant additional losses;

     . our share price could decline following the market's reaction to our
       acquisitions;

     . our amortization expense will increase as a result of acquisitions; and

     . our interest deductions may be disallowed for federal income tax
       purposes.

                                       9
<PAGE>

The integration of NECX into our operations will substantially affect our
revenue model and may be expensive and time-consuming

          We recently acquired NECX, a marketplace for the electronics industry.
For the nine months ended September 30, 1999, NECX generated net revenues of
approximately $28.0 million, all of which was attributable to its off-line
market-making business. For the same period, VerticalNet generated net revenue
of approximately $10.7 million, all of which was derived from our on-line
advertising and e-commerce arrangements. We believe our acquisition of NECX will
result in substantially higher revenues to VerticalNet; however, we plan to
migrate NECX's off-line business to an on-line business. The effect of this
migration on NECX's revenue stream is uncertain. There can be no assurance that
we will be successful in this migration, nor that NECX customers will continue
to use NECX upon its integration.

          In order to operationally integrate NECX into our vertical trade
communities, we have retained Computer Sciences Corporation to design and build
a new online exchange for NECX. The cost of designing and building a new online
exchange will be significant and this project may take a substantial period of
time to complete. There can be no assurance that this project will be completed
at the cost and on the timeline that we currently contemplate. The failure of
Computer Sciences or VerticalNet to effectively design, build and integrate the
operations of NECX into VerticalNet's on-line trade communities could adversely
affect our business, financial condition and operating results.

Future acquisitions may have a substantial dilutive effect on our stockholders.

          Our growth strategy depends upon the use of acquisitions to expand our
business.  The implementation of this strategy may require us to finance these
acquisitions with shares of our common stock.  Accordingly, our stockholders
may experience substantial dilution because of our acquisition growth strategy.

We currently rely heavily on advertising revenues and if our advertising
revenues decline, our business would suffer

     We currently rely on revenues generated from the sale of advertising on our
vertical trade communities for a significant majority of our revenues. If we do
not continue to develop advertising and other sources of revenues, our business
may suffer. Our ability to increase our advertising revenues depends, among
other things, on many factors, including:

     . advertisers' acceptance of the Internet as a legitimate advertising
       medium;

     . the development of a large base of users on our vertical trade
       communities who possess demographic characteristics attractive to
       advertisers; and

     . the expansion of our sales force.

     Additionally, to some of our advertising customers, we provide extended
payment terms over the customer's advertising contract. To the extent that these
amounts are not collected, our advertising revenues, bad debt expense and cash
flows may be negatively impacted.

     We also have barter arrangements where we provide banner advertisements and
storefronts to some of our customers in exchange for advertising on their Web
sites or in their publications. If our barter arrangements do not continue, our
advertising revenues may decline.  For the nine months ended September 30, 1999,
approximately $2.4 million, or 22.9%, of our reported revenue was generated by
barter advertising arrangements.

     Other factors could also affect our revenues. For example, widespread use
of "filter" software programs that limit access to storefront advertising from
the Internet user's browser could reduce advertising on the Internet, which
would impair our business, financial condition and operating results.

                                       10
<PAGE>

The seasonality of our advertising revenues and usage causes our overall
revenues to fluctuate

     Some of our revenue is seasonal, which causes our revenues to be lower in
the second and third quarters of each calendar year. As a result, after the
announcement of our results for the second and third quarters of each calendar
year, our stock price may be lower than at other times of the year. We
experience seasonality in our advertising revenue because advertising and media
buying tends to be highest in the first and fourth quarters of each calendar
year. We also experience seasonality in our traffic. User traffic on our
vertical trade communities and the Web sites of our partners is lower during the
summer and year-end vacation and holiday periods, when business usage of the Web
and our services typically declines.


Changes in industry advertising rates could negatively impact our revenues

     Changes in industry pricing practices for advertising rates could
negatively impact our revenues in the future. Currently, we base our storefront
advertising rates on a variety of factors including the maturity of the
particular vertical trade community, the number of storefronts, the amount of
other advertising purchased and the length of the advertising contract. In the
future, advertising rates may be based on different criteria matrices such as
the number of sales inquiries generated or visitors sent from our vertical trade
communities to advertisers' Web sites. These changes could negatively impact our
revenues.


Our Internet content may not attract users with demographic characteristics
valuable to our advertisers

     Our future success depends upon our ability to deliver compelling Internet
content about various industries that will attract users with demographic
characteristics valuable to our advertising customers. If we are unable to
develop Internet content that attracts a loyal user base possessing demographic
characteristics attractive to advertisers, it could impair our business,
financial condition and operating results. In addition, we may be unable to
anticipate or respond to rapidly changing buyer preferences to attract enough
users to our vertical trade communities. Internet users can freely navigate and
instantly switch among a large number of Web sites. Many of these Internet sites
offer original content. It may therefore be difficult for us to distinguish our
content and attract users.

     We rely on third parties, such as trade publications and news wires, to
provide some of the content for our vertical trade communities. It is critical
to our business that we maintain and build our existing relationships with
content providers. We may not be able to maintain relationships with the third
parties we depend upon to provide the content for our vertical trade
communities, which could result in decreased traffic on our vertical trade
communities and decreased advertising revenue. Many of our agreements with
content providers are for initial terms of one to two years. The content
providers may choose not to renew the agreements or may terminate the agreements
early if we do not fulfill our contractual obligations, including our payment
obligations. If a significant number of content providers terminate our
agreements with them, it could result in decreased traffic on our vertical trade
communities and decreased advertising revenue. Because our agreements with
certain of our content providers are nonexclusive, a competitor could offer
content similar to or the same as ours.


The license fees we pay to content providers may increase

     If licensing fees to content providers increase, our business, financial
condition and operating results may be negatively impacted. These license fees
may increase as competition for such content increases. Our content providers
may not enter into new agreements with us on similar terms as our current
agreements.

                                       11
<PAGE>

If we do not develop the "VerticalNet" brand and our vertical trade community
brands, our advertising revenues could decrease

     To be successful, we must establish and strengthen the brand awareness of
the "VerticalNet" brand as well as the brands associated with each individual
vertical trade community (e.g. wateronline.com). If our brand awareness is
weakened, it could decrease the attractiveness of our audiences to advertisers,
which could result in decreasing advertising revenues. We believe that brand
recognition will become more important in the future with the growing number of
Internet sites. Our brand awareness could be diluted, which could impair our
business, financial condition and operating results if users do not perceive our
products and services to be of high quality.


We may not develop significant revenues from e-commerce, which could adversely
affect our future growth

     For the nine months ended September 30, 1999, approximately 7% of our
revenues were generated from e-commerce. If we do not generate increased revenue
from e-commerce, our business, financial condition and operating results could
be impaired. To generate significant e-commerce revenues, we will have to
continue to build and acquire significant e-commerce capabilities.

     Recent acquisitions to enhance our e-commerce capabilities include NECX,
Isadra, LabX and CertiSource. These acquisitions may not meet our expectations.


Our e-commerce capability depends on real-time accurate product information

  Currently, we are responsible for loading supplier product information into
our database and categorizing the information for search purposes. This process
entails a number of risks, including dependence on our suppliers to provide us
in a timely manner with accurate, complete and current information about their
products, and to promptly update this information when it changes. We will not
derive revenue from these products until this data is loaded in our system.
Timely loading of these products in our database depends upon a number of
factors, including the file formats of the data provided to us by suppliers and
our ability to further automate and expand our operations to accurately load
this data in our product database, any of which could delay the actual loading
of these products.

     In addition, we are generally obligated under our supplier agreements to
load updated product data onto our database within a specified period of time
following its delivery from the supplier. While we intend to further automate
the loading and updating of supplier data on our system, we may not be able to
do so in a timely manner, in part because achieving the highest level of this
automation is dependent upon our suppliers' automating their delivery of product
data to us. If our suppliers do not provide us in a timely manner with accurate,
complete and current information about the products we offer, our database may
be less useful to our customers and users and may expose us to liability.
Although we screen our suppliers' information before we make it available to our
customers and users, we cannot guarantee that the product information available
in our database will always be accurate, complete and current, or comply with
governmental regulations. This could expose us to liability or result in
decreased adoption and use of our vertical trade communities, which could reduce
our revenues and therefore have a negative effect on our results of operations
and financial condition.


If our suppliers do not provide timely and professional delivery of products to
our customers, our business will be harmed

      We rely on our suppliers and manufacturers to deliver products to our
customers in a professional, safe and timely manner. If our suppliers do not
deliver the products to our customers in a professional, safe and timely manner,
then our service will not meet customer expectations and our reputation and
brand will be damaged. In addition, deliveries that are nonconforming, late or
are not accompanied by information required by applicable law or regulations,
could expose us to liability or result in decreased adoption and use of our
vertical trade communities, which could have a negative effect on our business,
results of operations and financial condition. In some instances, we bear the
responsibility for product refunds and returns and the risk of non-
collectibility of accounts receivable from our customers.

                                       12
<PAGE>

We may not be able to effect our growth strategy if we are not able to
consummate future acquisitions

     We have been growing, and plan to continue to grow, our business by
acquisitions. We may not be able to identify additional suitable acquisition
candidates available for sale at reasonable prices or on reasonable terms. Even
if we are able to identify an appropriate acquisition candidate, we may not be
able to negotiate the terms of the acquisition successfully, finance the
acquisition or integrate the acquired business, products or technologies into
our existing business operation. If we are unable to consummate future
acquisitions, our business, financial condition and operating results could be
negatively impacted.

We are growing rapidly and effectively managing our growth may be difficult

     We have rapidly and significantly expanded our operations and expect to
continue to do so both by adding new products, hiring new employees and
acquiring new businesses. This growth has placed, and is expected to continue to
place, a significant strain on our resources and systems.  To manage our growth,
we must implement systems and train and manage our employees. If we fail to
successfully integrate our recent and future acquisitions, our business,
financial condition and operating results could be negatively impacted.

Our international expansion may make it more difficult to manage our business

     In February 2000, we announced the formation of VerticalNet Europe, a joint
venture with British Telecommunications, plc and Internet Capital Group and the
formation of VerticalNet Japan, a joint venture with Softbank Commerce Corp.  We
intend to establish and promote European and Japanese business to business
trade communities through these new joint ventures.  In June 1999, we entered
into a co-branding agreement with Metropolis Transactive (Proprietary) Limited,
a South African company creating online marketplaces focused on the African
market. We expect to further expand in international markets. To do so, we plan
to establish international operations, hire additional personnel and establish
relationships with additional suppliers and strategic partners. This expansion
will require significant management attention and financial resources and could
have a negative effect on our business, revenues, financial condition and
results of operations. We may not be able to create or sustain international
demand for our Internet-based, e-commerce business model and services. Even if
we are able to identify an appropriate international joint venture partner, we
may not be able to negotiate the terms of the venture successfully, finance the
venture or integrate the venture partner's business, products or technology into
our existing business operation, or we may become dependent on our joint venture
partners.  In addition, our international business may be subject to a variety
of risks, including government regulation, difficulties in collecting
international accounts receivable, longer payment cycles, increased costs
associated with maintaining international marketing efforts, the introduction of
non-tariff barriers, possible currency risks and higher duty rates and
difficulties in enforcement of contractual obligations and intellectual property
rights, including licensing rights. These factors may have a negative effect on
any future international sales and, consequently, on our business, results of
operations and financial condition.

Risk of failure of our computer and communications hardware systems increases
without back-up facilities

  The performance of our computer and communications hardware systems is
critical to our business and reputation and our ability to process transactions,
provide high quality customer service and attract and retain customers,
suppliers, users and strategic partners. Any system interruptions that cause our
vertical trade communities to be unavailable to users may reduce the
attractiveness of our vertical trade communities to advertisers and could impair
our business, financial condition and operating results. We maintain most of our
computer systems in two Web-hosting facilities in New Jersey.  We do not
currently have back-up or redundant facilities for our computer systems.
Interruptions could result from natural disasters as well as power loss,
telecommunications failure and similar events.

                                       13
<PAGE>

Capacity limits on our technology, transaction processing system and network
hardware and software may be difficult to project and we may not be able to
expand and upgrade our systems to meet increased use

     As traffic in our vertical trade communities continues to increase, we must
expand and upgrade our technology, transaction processing systems and network
hardware and software. We may not be able to accurately project the rate of
increase in our vertical trade communities. In addition, we may not be able to
expand and upgrade our systems and network hardware and software capabilities to
accommodate increased use of our vertical trade communities. If we do not
appropriately upgrade our systems and network hardware and software, our
business, financial condition and operating results will suffer.

     Our acquisition of Isadra, including its agent-communication and agent-
brokering architecture, may not be successfully integrated into our existing
technology.

Our market is characterized by rapid technological change, which we may not be
able to keep up with in a cost-effective way

     Our market is characterized by rapid technological change and frequent new
product announcements. Significant technological changes could render our
existing vertical trade community technology obsolete. If we are unable to
successfully respond to these developments or do not respond in a cost-effective
way, our business, financial condition and operating results will suffer. To be
successful, we must adapt to our rapidly changing market by continually
improving the responsiveness, services and features of our vertical trade
communities, by developing new features to meet customer needs and by
successfully developing and introducing new versions of our Internet-based, e-
commerce business model on a timely basis. Our success will depend, in part, on
our ability to acquire or license leading technologies useful in our business,
enhance our existing services and develop new services and technology that
address the needs of our customers. We will also need to respond to
technological advances and emerging industry standards in a cost-effective and
timely basis.

We may not be able to acquire or maintain easily identifiable Web addresses or
prevent third parties from acquiring Web addresses similar to ours

     We currently hold various Internet Web addresses relating to our brand.
These Web addresses include wateronline.com, wirelessdesignonline.com,
pollutiononline.com and other Web addresses. We may not be able to prevent third
parties from acquiring Web addresses that are similar to our addresses, which
could impair our business, financial condition and operating results. The
acquisition and maintenance of Web addresses generally is regulated by
governmental agencies and their designees. For example, in the United States,
the National Science Foundation has appointed Network Solutions, Inc. as the
exclusive registrar for the ".com," ".net" and ".org" generic top-level
addresses. The regulation of Web addresses in the United States and in foreign
countries is subject to change. We may not be able to acquire or maintain
relevant Web addresses in all countries where we conduct business. Furthermore,
the relationship between regulations governing such addresses and laws
protecting trademarks is unclear.

We may compete with Internet Capital Group, our largest shareholder

     As a result of its stock ownership and board representation, Internet
Capital Group, LLC is in a position to significantly affect our business
strategy and operations, including corporate actions such as mergers or takeover
attempts in a manner that could conflict with the interests of our public
shareholders. At December 31, 1999, Internet Capital Group owned 12,295,010
shares, or 34.1%, of our common stock. Internet Capital Group also owns warrants
to purchase an additional 239,312 shares of common stock. Two representatives of
Internet Capital Group remain on our board of directors. We may compete with
Internet Capital Group for Internet-related opportunities. Internet Capital
Group seeks to expand, in part through acquisitions and investments, its number
of business-to-business assets. Internet Capital Group, therefore, may seek to
acquire companies that we would find attractive. While we may partner with
Internet Capital Group on future acquisitions, we have no current contractual
obligations to do so. We do not have any contracts or other

                                       14
<PAGE>

understandings that would govern resolution of this potential conflict. This
competition, and the potential conflict posed by the designated directors, may
deter companies from partnering with us and may limit our business
opportunities.


Our success is dependent on our key personnel who we may not be able to retain
and we may not be able to hire enough additional personnel to meet our hiring
needs

     We believe that our success depends on continued employment of our senior
management team and key technical personnel. If one or more members of our
senior management team were unable or unwilling to continue in their present
positions, our business, financial condition and operating results could be
materially adversely affected. Only one member of our senior management has an
employment agreement. We carry key person life insurance on certain, but not on
all, of our senior management personnel.

     Our success also depends on having a highly trained sales force and
telesales group. Our telesales group was formed recently. We will need to
continue to hire additional personnel as our business grows. A shortage in the
number of trained salespeople could limit our ability to increase sales in our
existing vertical trade communities and to sell as we launch new vertical trade
communities.

     We plan to expand our employee base to manage our anticipated growth.
Competition for personnel, particularly for employees with technical expertise,
is intense. Our business, financial condition and operating results will be
impaired if we cannot hire and retain suitable personnel.


Our systems may not be Year 2000 compliant, which could cause our vertical trade
communities to be unavailable for a period of time after January 1, 2000, which
could in turn have a negative impact on our business, operating results and
financial position

     We may realize exposure and risk if the systems on which we are dependent
to conduct our operations are not Year 2000 compliant. Our potential areas of
exposure include products purchased from third parties, computers, software and
other equipment used internally. If our present efforts to address the Year 2000
compliance issues are not successful, or if distributors, suppliers and other
third parties with which we conduct business do not successfully address such
issues, our business, operating results and financial position could be harmed.

     In the event that our Web-hosting facilities are not Year 2000 compliant,
our production Web sites would be unavailable and we would not be able to
deliver services to our users. In the event that our production and operational
facilities that support our Web sites are not Year 2000 compliant, small
portions of our Web sites may become unavailable.


                     Risks Related to the Internet Industry

Our success depends on the development of the e-commerce market, which is
uncertain

     Business-to-business e-commerce is a new and emerging business practice
that remains largely untested in the marketplace. If e-commerce does not grow or
grows slower than expected, our business will suffer. Our long-term success
depends on widespread market-acceptance of e-commerce.

     A number of factors could prevent such acceptance, including the following:

     . e-commerce is at an early stage and buyers may be unwilling to shift
       their purchasing from traditional vendors to online vendors;

     . the necessary network infrastructure for substantial growth in usage of
       the Internet may not be adequately developed;

                                       15
<PAGE>

     . security and confidentiality concerns of customers and suppliers;

     . increased government regulation or taxation may adversely affect the
       viability of e-commerce;

     . insufficient availability of telecommunication services or changes in
       telecommunication services could result in slower response times; and

     . adverse publicity and consumer concern about the security of e-commerce
       transactions could discourage its acceptance and growth.


Adoption of the Internet as an advertising medium is uncertain

     The growth of Internet advertising requires validation of the Internet as
an effective advertising medium. This validation has yet to fully occur.
Acceptance of the Internet among advertisers will also depend on growth in the
commercial use of the Internet. If widespread commercial use of the Internet
does not develop, or if the Internet does not develop as an effective and
measurable medium for advertising, our business, financial condition and
operating results could suffer.

     No standards have been widely accepted to measure the effectiveness of
Internet advertising. If such standards do not develop, existing advertisers may
not continue their current levels of Internet advertising and advertisers who
are not currently advertising on the Internet may be reluctant to do so. Our
business, financial condition and operating results would suffer if the market
for Internet advertising fails to develop or develops slower than expected.


Adoption of the Internet as an e-commerce medium is uncertain

     Our market is new and rapidly evolving, and depends on the increased
acceptance and use of the Internet as a medium of commerce. Our business would
suffer if Internet usage does not continue to grow and if the Internet is not
adopted as an e-commerce medium. Internet usage may be inhibited by a number of
reasons, such as:

     . inadequate development of the necessary infrastructure;

     . security and confidentiality concerns of customers and suppliers;

     . inconsistent quality of service;

     . lack of human contact that current traditional suppliers provide; and

     . lack of availability of cost-effective, high-speed service.


Security risks and concerns may deter the use of the Internet for conducting e-
commerce

     The secure transmission of confidential information over the Internet is
essential to maintaining customer and supplier confidence. Concerns regarding
security of transactions and transmitting confidential information over the
Internet may negatively impact our e-commerce business.

     We believe that concern regarding the security of confidential information
transmitted over the Internet, such as credit card numbers, prevents many
potential customers from engaging in online transactions. If we do not add
sufficient security features to future product releases, our products may not
gain market acceptance or we may incur additional legal exposure. We have
included basic security features in some of our products to protect the privacy
and integrity of customer data, such as password requirements for access to
portions of our vertical trade communities. We do not currently use
authentication technology, which requires passwords and other information to
prevent unauthorized persons from accessing a customer's information, or
encryption, which transforms information

                                       16
<PAGE>

into a "code" designed to be unreadable by third parties, to protect
confidential information such as credit card numbers. However, we intend to
license encryption technology to protect confidential transaction data.


     Despite the measures we have taken, our infrastructure is potentially
vulnerable to physical or electronic break-ins, viruses or similar problems. If
a person circumvents our security measures, he or she could misappropriate
proprietary information or cause interruptions in our operations. Security
breaches that result in access to confidential information could damage our
reputation and expose us to a risk of loss or liability. We may be required to
make significant investments and efforts to protect against or remedy security
breaches. Additionally, as e-commerce becomes more prevalent (and consequently
becomes the focus of our development of direct marketing products), our
customers will become more concerned about security. If we do not adequately
address these concerns, this could impair our business, financial condition and
operating results.


Limited Internet infrastructure may affect service

     The accelerated growth and increasing volume of Internet traffic may cause
performance problems, slowing the adoption of our Internet-based purchasing
solution. The growth of Internet traffic due to very high volumes of use over a
relatively short period of time has caused frequent periods of decreased
Internet performance, delays and, in some cases, system outages. This decreased
performance is caused by limitations inherent in the technology infrastructure
supporting the Internet and the internal networks of Internet users. If Internet
usage continues to grow rapidly, the infrastructure of the Internet and its
users may be unable to support the demands of growing e-commerce usage, and the
Internet's performance and reliability may decline. If our existing or potential
customers experience frequent outages or delays on the Internet, the adoption or
use of our Internet-based, e-commerce business model may grow more slowly than
we expect or even decline. Our ability to increase the speed and reliability of
our Internet-based business model is limited by and depends upon the reliability
of both the Internet and the internal networks of our existing and potential
customers. As a result, if improvements in the infrastructure supporting both
the Internet and the internal networks of our customers and suppliers are not
made in a timely fashion, we may have difficulty obtaining new customers, or
maintaining our existing customers, either of which could reduce our potential
revenues and have a negative impact on our business, results of operations and
financial condition.


                    Proprietary, Regulatory and Legal Risks

We may not be able to protect our proprietary rights and we may infringe the
proprietary rights of others

     Proprietary rights are important to our success and our competitive
position. We have filed applications with the U.S. Patent and Trademark Office
to obtain registrations for ten of our marks. To date, five registrations have
been issued. Although we seek to protect our proprietary rights, our actions may
be inadequate to protect any trademarks and other proprietary rights or to
prevent others from claiming violations of their trademarks and other
proprietary rights. Generally, our domain names for our vertical trade
communities are not protectable as trademarks because they are too generic. In
addition, effective copyright and trademark protection may be unenforceable or
limited in certain countries, and the global nature of the Internet makes it
impossible to control the ultimate destination of our work. We also license
content from third parties and it is possible that we could become subject to
infringement actions based upon the content licensed from those third parties.
We generally obtain representations as to the origin and ownership of such
licensed content; however, this may not adequately protect us. Any of these
claims, with or without merit, could subject us to costly litigation and the
diversion of our technical and management personnel.


We may be subject to legal liability for publishing or distributing content over
the Internet

     We may be subject to legal claims relating to the content in our vertical
trade communities, or the downloading and distribution of such content. For
example, persons may bring claims against us if material that is inappropriate
for viewing by young children can be accessed from our vertical trade
communities. Claims could also involve matters such as defamation, invasion of
privacy and copyright infringement. Providers of Internet products and services
have been sued in the past, sometimes successfully, based on the content of
material. In addition, some of

                                       17
<PAGE>

the content provided on our vertical trade communities is drawn from data
compiled by other parties, including governmental and commercial sources, and we
re-key the data. This data may have errors. If our content is improperly used or
if we supply incorrect information, it could result in unexpected liability. Our
insurance may not cover claims of this type, or may not provide sufficient
coverage. Our business, financial condition and operating results could suffer a
material adverse effect if costs resulting from these claims are not covered by
our insurance or exceed our coverage.


We may be exposed to product liability claims

     We face potential liability for claims based on the nature of the products
that we sell and distribute utilizing the Internet, including claims for breach
of warranty, product liability, misrepresentation, violation of governmental
regulations and other commercial claims.  Most of the manufacturers whose
products we distribute have warranties on those products.  We pass that warranty
through to our customers whenever possible.  However, in some instances we bear
the risk of loss of revenue from the product sale if a purchaser does not pay
for a defective product. Although we maintain general liability insurance, our
insurance may not cover some claims or penalties, is subject to policy limits
and exclusions and may not adequately indemnify us or our employees from any
civil, governmental or criminal liability. Furthermore, this insurance may not
be available at commercially reasonable rates in the future. Any liability not
covered by our insurance or in excess of our insurance coverage could have a
negative effect on our business, financial condition and operating results.


We are subject to government regulation that exposes us to potential liability
and negative publicity

     We currently rely upon our suppliers to meet all packaging, distribution,
labeling, hazard and health information notices to purchasers, record keeping
and licensing requirements applicable to our business during the entire
transaction. Our reliance on suppliers' regulatory due diligence assessment of
purchasers and the compliance by suppliers and purchasers with applicable
governmental regulations may not be sufficient if we are required to have our
own licenses. For example, if we are held to be a seller or a distributor of
regulated products because we took legal title, we may have inadvertently
violated some governmental regulations by not having the appropriate license or
permit and may be subject to potentially severe civil or criminal penalties and
fines for each offense. We are unable to verify that our suppliers have in the
past complied, or will in the future comply, with the applicable governmental
regulatory requirements, or that their actions are adequate or sufficient to
satisfy all governmental or other legal requirements that may be applicable to
our sales. We could be fined or exposed to civil or criminal liability,
including monetary fines and injunctions, and we could receive potential
negative publicity, if the applicable governmental regulatory requirements have
not been, or are not being, fully met by our suppliers or by us directly.
Negative publicity, fines and liabilities could also occur if an unqualified
person, or even a qualified customer, lacks the appropriate license or permits
to sell, use or ship, or improperly receives a dangerous or unlicensed product
through us. We do not maintain any reserve for potential liabilities resulting
from government regulation.

     It is also possible that a number of laws and regulations may be adopted or
interpreted in the United States and abroad with particular applicability to the
Internet. These laws and regulations may, for example, cover issues such as user
privacy, freedom of expression, pricing, content and quality of products and
services, taxation, advertising, intellectual property rights, access charges
and information security.  The enactment of such laws could have a negative
effect on our business, financial condition and operating results.

                                       18
<PAGE>

                         Risks Related to this Offering

The debentures are subordinated to any existing and future Senior Debt

     The debentures are contractually subordinated in right of payment to our
existing and future Senior Debt. We currently have no Senior Debt. The indenture
does not limit the creation of additional Senior Debt (or any other
indebtedness) of ours or our subsidiaries.  Any significant additional
indebtedness incurred may materially adversely impact our ability to service our
then existing debt, including the debentures.  Due to the subordination
provisions, in the event of our insolvency, funds which we would otherwise use
to pay the holders of the debentures will be used to pay the holders of Senior
Debt to the extent necessary to pay the Senior Debt in full. As a result of
these payments, our general creditors may recover less, ratably, than the
holders of our Senior Debt and such general creditors may recover more, ratably,
than the holders of our debentures or our other subordinated indebtedness. In
addition, the holders of our Senior Debt may, under certain circumstances,
restrict or prohibit us from making payments on the debentures.  See
"Description of the Debentures--Subordination."

There is a limit on the right to require repurchase of the debentures

     If our common stock is no longer publicly traded or in certain
circumstances involving a Change of Control, the holders of the debentures may
require us to repurchase some or all of the holder's debentures. We cannot
assure you that we will have sufficient financial resources at such time or
would be able to arrange financing to pay the repurchase price of the
debentures. Our ability to repurchase the debentures in such event may be
limited by law, the indenture, by the terms of other agreements relating to our
Senior Debt and as such indebtedness and agreements may be entered into,
replaced, supplemented or amended from time to time. We may be required to
refinance our Senior Debt in order to make such payments. We may not have the
financial ability to repurchase the debentures if payment for our Senior Debt is
accelerated. See "Description of the Debentures--Repurchase at Option of
Holders Upon a Change of Control."


We may not have sufficient cash flow to service our debt

     As of September 30, 1999, we had approximately $101,738,866 in long term
debt. An additional $15 million in debt resulted from the exercise of the over-
allotment provision of the debentures subsequent to September 30, 1999.
Currently, we are not generating sufficient cash flow to satisfy the annual debt
service payments required as a result of our September 1999 offering of
convertible subordinated debentures. If we are unable to satisfy our debt
service requirements, substantial liquidity problems could result, which would
negatively impact our future prospects.


An active trading market for the debentures has not developed

     Our debentures are a new issue of securities for which there is currently
an insignificant trading market. Although the debentures are traded in the
PORTAL market, we cannot predict whether an active trading market for the
debentures will develop or be sustained. If an active trading market were to
develop, the debentures could trade at prices that may be lower than the initial
offering price and the resale price. Whether or not the debentures could trade
at lower prices depends on many factors, including:

     . prevailing interest rates and the markets for similar securities;

     . general economic conditions; and

     . our financial condition, historic financial performance and future
       prospects.

     If an active market for the debentures fails to develop further or be
sustained, the trading price of the debentures could fall.

                                       19
<PAGE>

We may require additional capital for our operations that could have a negative
effect on your investment

     We currently anticipate that the net proceeds of our offering of
debentures, together with our existing borrowing arrangements and available
funds, will be sufficient to meet our anticipated needs for working capital and
capital expenditures for at least the next 12 months. We may need to raise
additional funds in the future in order to fund rapid expansion, to pursue
customer sales and implementation, to develop new or enhanced solutions and
services, to respond to competitive pressures or to acquire complementary
businesses, technologies or services.

     If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
stockholders may experience additional dilution and these securities may have
powers, preferences and rights that are senior to those of the rights of the
debentures or our common stock.  We cannot be certain that additional financing
will be available on terms favorable to us if at all. If adequate funds are not
available or not available on acceptable terms, we may be unable to fund our
expansion, promote our brand identity, take advantage of acquisition
opportunities, develop or enhance services or respond to competitive pressures.
Any inability to do so could have a negative effect on our business, revenues,
financial condition and results of operations.


Shares eligible for future sale by our current shareholders may cause our stock
price to decline

     If our shareholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market, then the market price of our common stock and of the debentures
could fall. Restrictions under the securities laws limit the number of shares of
common stock available for sale in the public market.

     As of January 1, 2000, the holders of up to 24,321,679 shares of common
stock and warrants to purchase 395,208 shares of common stock have demand and
piggy-back registration rights. The exercise of such rights could adversely
affect the market price of our common stock. We have also filed a registration
statement to register shares of common stock under our stock option and employee
stock purchase plans. Shares issued upon exercise of stock options and employee
stock purchase plans will be eligible for resale in the public market without
restriction.


Anti-takeover provisions and our right to issue preferred stock could make a
third-party acquisition of us difficult

     VerticalNet is a Pennsylvania corporation. Anti-takeover provisions of
Pennsylvania law could make it more difficult for a third party to acquire
control of us, even if such change in control would be beneficial to our
shareholders. Our articles of incorporation provide that our board of directors
may issue preferred stock without shareholder approval. In addition, our bylaws
provide for a classified board, with each board member serving a staggered
three-year term. The issuance of preferred stock and the existence of a
classified board could make it more difficult for a third-party to acquire us.


Our common stock price is likely to remain highly volatile

     The market price of our common stock has been and will likely continue to
be highly volatile as the stock market in general, and the market for Internet-
related and technology companies in particular, has been highly volatile.
Investors may not be able to resell their shares of our common stock following
periods of volatility because of the market's adverse reaction to such
volatility. The trading prices of many technology and Internet-related
companies' stocks have reached historical highs within the last 52 weeks and
have reflected relative valuations substantially above historical levels. During
the same period, such companies' stocks have also been highly volatile and have
recorded lows well below such historical highs. Our stock may not trade at the
same levels as other Internet stocks, and Internet stocks in general may not
sustain their current market prices.

                                       20
<PAGE>

     Factors that could cause such volatility may include, among other things:

     .    actual or anticipated variations in quarterly operating results;

     .    announcements of technological innovations;

     .    new sales model or new products or services;

     .    changes in financial estimates by securities analysts;

     .    conditions or trends in the Internet industry;

     .    changes in the market valuations of other Internet companies;

     .    failure to meet analysts' expectations;

     .    announcements by us or our competitors of significant acquisitions,
          strategic partnerships or joint ventures;

     .    capital commitments;

     .    additions or departures of key personnel;

     .    sales of common stock; and

     .    stock market price and volume fluctuations, which are particularly
          common among highly volatile securities of Internet companies.

     Many of these factors are beyond our control. These factors may cause the
market price of our common stock to fall, regardless of our operating
performance.

                                       21
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     Our disclosure and analysis in this prospectus contain some forward-looking
statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. Such statements may
include words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe" and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. In particular,
these include among other things, statements relating to e-commerce strategy,
acquisition and expansion strategy, development of services, use of proceeds,
projected capital expenditures, liquidity, development of additional revenue
sources, development and maintenance of profitable marketing and distribution
alliances, market acceptance of the Internet, acquisition and/or development of
profitable new vertical trade communities, technological advancement, ability to
develop "brand" identification and global expansion.

     Any or all of our forward-looking statements in this prospectus may turn
out to be wrong. They can be affected by inaccurate assumptions we might make or
by known or unknown risks and uncertainties. Many factors mentioned in our
discussion in this prospectus will be important in determining future results.
Consequently, no forward-looking statement can be generated. Actual future
results may vary materially.

     We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any additional disclosures we make in our
reports to the SEC on Forms 10-K, 10-Q and 8-K. Also note that we provide a
cautionary discussion of risks and uncertainties under "Risk Factors" on page
7 of this prospectus. These are factors that we think could cause our actual
results to differ materially from expected results. Other factors besides those
listed here could also adversely affect us. This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.


                                USE OF PROCEEDS

     We will not receive any proceeds from the resale of the debentures and the
common stock issuable upon conversion of the debentures offered through this
prospectus.


                       RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
                                   Year Ended December 31,           Nine Months Ended September 30,
                          --------------------------------------     -------------------------------
                                                        1998                                1999
                          1996      1997     1998      Pro Forma     1998      1999        Pro Forma
                          -----    ------   -------    ---------     ------   -------      ---------
                                                      (in thousands)
<S>                       <C>      <C>      <C>        <C>           <C>      <C>          <C>
Deficiency of
 earnings to cover
   fixed charges(1)....   $ 709    $4,779  $13,594     $47,005       $8,334   $38,196      $67,096
</TABLE>

________________

(1)  For the periods indicated, earnings were inadequate to cover fixed charges.
For purposes of determining the deficiency of earnings to fixed charges, loss is
defined as losses from continuing operations.

                                      22
<PAGE>

                         DESCRIPTION OF THE DEBENTURES

     The debentures were issued under an indenture between us and the Trustee,
Bankers Trust Company. The terms of the debentures include those provided in the
indenture and those provided in the registration rights agreement that we
executed with the initial purchasers.

     The following description of provisions of the debentures is not complete
and is subject to, and qualified in its entirety, by reference to the
debentures, the indenture and the registration rights agreement.

General

     The debentures are general unsecured obligations of VerticalNet and are
subordinated to all of our existing and future Senior Debt and convertible into
our common stock as described below under "--Conversion Rights." As of September
30, 1999, we had no Senior Debt. However, NECX, which we acquired on December
16, 1999, had outstanding balance sheet liabilities of approximately $49.0
million as of September 30, 1999. The debentures have an aggregate principal
amount of $115,000,000, and will mature on September 27, 2004, unless redeemed
earlier by us or repurchased by us at the option of the holder upon the
occurrence of a Change of Control (as defined below).

     The interest on the debentures accrues from September 27, 1999 at a rate of
5 1/4% per year, subject to adjustments upon a Reset Transaction. Interest is
payable semi-annually on March 27 and September 27 of each year to holders of
record at the close of business on the preceding March 13 and September 13,
respectively, commencing on March 27, 2000. We pay interest on the debentures by
check mailed to the holders. However, a holder of the debentures with an
aggregate principal amount in excess of $5,000,000 may be paid by wire transfer
in immediately available funds at the election of the holder. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months.

     The principal may be paid, and the debentures may be converted or
registered for transfer and exchange, without charge, at our office or agency in
New York City, which will initially be an office or agency of the Trustee in New
York City. See "--Form, Denomination and Registration" for information as to any
debentures held by Qualified Institutional Buyers.

     The Indenture does not contain any financial covenants or restrictions on
the payment of dividends, the repurchase of our securities or the incurrence of
any other indebtedness by us. The Indenture does not contain any protection to
holders of the debentures in the event of a highly leveraged transaction or a
Change of Control of VerticalNet except to the extent described under "--
Repurchase at Option of Holders upon Change of Control" below.

     The debentures and the common stock issuable upon conversion of the
debentures may not be sold or otherwise transferred except in compliance with
the provisions set forth below under Transfer Restrictions.


Interest Rate Adjustments

     If a Reset Transaction occurs, the interest rate will be adjusted to the
Adjusted Interest Rate (as defined below) beginning the date of such Reset
Transaction to the day before any subsequent Reset Transaction.

     A "Reset Transaction" means:

     .    a merger, consolidation or statutory share exchange involving our
          shares of common stock into which the debentures are convertible at
          the time;

     .    a sale of all or substantially all of our assets; or

     .    a recapitalization of our common stock or a distribution in which the
          debentures would be convertible into (1) shares of an entity whose
          common shares had a Dividend Yield for the four fiscal quarters before
          the public announcement of such transaction that was more than 2.5%
          higher than the Dividend Yield on our common stock (or other common
          stock issuable upon conversion of the debentures) for the same period,

                                       23
<PAGE>

          or (2) shares of an entity announcing a dividend policy prior to the
          effective date of a transaction which, if implemented, would result in
          at least a 2.5% increase in the Dividend Yield of such entity's common
          stock for the next four fiscal quarters.

     The "Adjusted Interest Rate" for any Reset Transaction will be the annual
rate that is the average between the rates quoted by two dealers engaged in the
trading of convertible securities selected by us or our successor as the rate at
which the interest rate should accrue so that the fair market value, expressed
in dollars, of a debenture immediately following (1) the public announcement of
such Reset Transaction or (2) the public announcement of a change in dividend
policy in connection with such Reset Transaction, whichever is later, will equal
the average Trading Price (as defined below) of a debenture for the 20 trading
days preceding the public announcement of such Reset Transaction.  Such Adjusted
Interest Rate will not be less than 5 1/4% per year.

     The "Dividend Yield" of a security will be the dividends paid or proposed
to be paid pursuant to an announced dividend policy divided by, if with respect
to dividends paid on such security, the average Closing Price (as defined in the
debenture) of such security during such period and, if with respect to dividends
proposed to be paid on such security, the Closing Price of such security on the
date of the related Reset Transaction.

     The "Trading Price" of a security is:

     .    the closing sale price (or, if none are reported, the last reported
          sale price) of a security (regular way) on the New York Stock Exchange
          on such date;

     .    if the security is not listed on the New York Stock Exchange, the
          closing sale price as reported in the composite transactions for the
          principal United States securities exchange on which that security is
          listed;

     .    if the security is not listed on a United States national or regional
          securities exchange, the closing sale price as reported by the Nasdaq
          Stock Market, Inc.;

     .    if the security is not so reported, the price quoted by Interactive
          Data Corporation or, if Interactive Data Corporation is not quoting
          such price, a similar quotation service selected by us;

     .    if the security is not so quoted, the average of the mid-point of the
          last bid and ask prices for that security from at least two dealers
          recognized as market-makers for that security; or

     .    if that security is not so quoted, the average of the last bid and ask
          prices for that security from a dealer engaged in the trading of
          convertible securities.


Conversion Rights

     The holders of the debentures may, at any time prior to the final maturity
date of the debentures, convert any remaining debentures or any portion (in
multiples of $1,000) into our common stock, initially at a conversion price of
$40, subject to adjustments as described below. Except as described below, no
adjustment will be made on the conversion of any debenture for any accrued
interest or dividends paid on any common stock.

     If the debentures are converted after a record date for an interest payment
but before the next interest payment date, the debentures, other than those
called for redemption, must be accompanied by a payment equal to the interest
payable on the next interest payment date on the principal amount of the
debentures. No such payment will be required if we exercise our right to redeem
such debentures on a redemption date that is an interest payment date. We are
not required to issue fractional shares of common stock upon conversion of the
debentures and instead will pay a cash adjustment based upon the market price of
our common stock on the last business day before the date of such conversion. In
the case of the debentures called for redemption, the conversion rights will
expire at the close of business on the second business day preceding the
redemption date, unless we default in the payment of the redemption price.

                                       24
<PAGE>

     A holder may exercise the right of conversion of any debenture by
delivering the debenture to the specified office of a conversion agent, with a
completed notice of conversion, together with any funds that may be required.
The conversion date will be the date on which the debentures, the notice of
conversion and any required funds have been so delivered. A holder delivering a
debenture for conversion will not be required to pay any taxes or duties
relating to the issuance or delivery of the common stock for such conversion,
but will be required to pay any tax or duty which may be payable relating to any
transfer involved in the issuance or delivery of the common stock in a name
other than the holder of the debenture. Certificates representing shares of
common stock will be issued or delivered only after all applicable taxes and
duties payable by the holder have been paid. If any debenture is converted
within two years after its original issuance, the common stock will not be
issued or delivered in a name other than that of the holder of such debenture
unless the applicable restrictions on transfer have been satisfied. See
"Transfer Restrictions."

     The initial conversion price will be adjusted for events, including:

     .    the issuance of common stock as a dividend or distribution on our
          common stock;

     .    certain subdivisions and combinations of our common stock;

     .    the issuance to all holders of our common stock, certain rights or
          warrants to purchase our common stock below the current market price;

     .    the dividend or other distribution to all holders of our common stock
          or shares of our capital stock (other than common stock) or evidences
          of our indebtedness or our assets (including securities, but excluding
          those rights, warrants, dividends and distributions referred to above
          and dividends and distributions in connection with a reclassification,
          change, consolidation, merger, combination, sale or conveyance
          resulting in a change in the conversion consideration or dividends or
          distributions paid exclusively in cash);

     .    dividends or other distributions consisting exclusively of cash to all
          holders of our common stock to the extent that such distributions,
          combined together with (1) all other such all-cash distributions made
          within the preceding 12 months for which no adjustment has been made
          plus (2) any cash and the fair market value of other consideration
          paid for any tender offers by us or any of our subsidiaries for our
          common stock completed within the preceding 12 months for which no
          adjustment has been made, exceeds 10% of our market capitalization
          (being the product of the then current market price of our common
          stock times the number of shares of our common stock then outstanding)
          on the record date for such distribution; and

     .    the purchase of our common stock pursuant to a tender offer made by us
          or any of our subsidiaries to the extent that it involves an aggregate
          consideration that, together with (1) any cash and the fair market
          value of any other consideration paid in any other tender offer by us
          or any of our subsidiaries for our common stock expiring within the 12
          months preceding such tender offer for which no adjustment has been
          made plus (2) the aggregate amount of any such all-cash distributions
          referred to in the clause above to all holders of our common stock
          within 12 months preceding the expiration of such tender offer in
          respect of which no adjustments have been made, exceeds 10% of our
          market capitalization on the expiration of the tender offer.

     No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price in
effect at such time. Any adjustment that would otherwise be required will be
carried forward and taken into account in any subsequent adjustment. Except as
stated above, the conversion price will not be adjusted for the issuance of our
common stock or any securities convertible into or exchangeable for our common
stock or carrying the right to purchase any of the foregoing.

     In the case of (1) a dividend or other distribution to all holders of our
common stock, of shares of our capital stock (other than common stock),
evidences of our indebtedness, cash or other assets; or (2) dividends or other
distributions consisting exclusively of cash to all holders of our common stock,
we do not have to adjust the conversion price. Instead, we can reserve cash for
distribution upon conversion. The holder will receive the full

                                       25
<PAGE>

amount of cash it would have received if the holder had, immediately prior to
the record date for the cash distribution, converted the debentures into common
stock.

     In the case of (1) any reclassification or change of our common stock
(other than changes resulting from a subdivision or combination) or (2) a
consolidation, merger or combination involving us or a sale or conveyance to
another corporation of all or substantially all of our property and assets, in
each case as a result of which holders of our common stock shall be entitled to
receive stock, other securities, other property or assets (including cash or any
combination of the foregoing) in exchange for such common stock, the holders of
the outstanding debentures will be entitled to convert such debentures into the
kind and amount of shares of stock, other securities, other property or assets
(including cash or any combination of the foregoing) which they would have owned
or been entitled to receive upon such reclassification, change, consolidation,
merger, combination, sale or conveyance had such debentures been converted into
common stock immediately before such reclassification, change, consolidation,
merger, combination, sale or conveyance. We may not become a party to any such
transaction unless the terms thereof are consistent with the above.

     In the event of a taxable distribution to holders of our common stock (or
other transaction) resulting in any adjustment of the conversion price, the
holders of the debentures may, in certain circumstances, be deemed to have
received a distribution subject to United States income tax as a dividend; and
in certain other circumstances, the absence of such an adjustment may result in
a taxable dividend to the holders of common stock. See "Certain United States
Federal Income Tax Considerations."

     We may from time to time reduce the conversion price of the debentures by
any amount for any period of at least 20 days, as permitted by law, in which
case we will give at least 15 days' notice of such decrease. We may make such
reductions in the conversion price, in addition to those set forth above, as our
board of directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income tax
purposes.


Optional Redemption

     Provisional Redemption.  We may redeem (the "Provisional Redemption") some
or all of the debentures, at any time prior to September 27, 2002 (the
"Provisional Redemption Date"), at a redemption price equal to 101.3125% of
the principal amount of debentures, plus any accrued and unpaid interest
(including liquidated damages) to, but excluding, the Provisional Redemption
Date, if (1) the shelf registration covering resales of the debentures and the
common stock issuable upon conversion of the debentures is effective and
available for use and is expected to remain effective and available for use for
the 30 days following the Provisional Redemption Date and (2) the Current Market
Value (as defined) of our common stock equals or exceeds the following
triggering percentages of the conversion price then in effect for at least 20
trading days in any consecutive 30-day trading period ending on the trading day
prior to the date of mailing of the notice of the Provisional Redemption (the
"Notice Date"), if redeemed in the 12-month period ending on September 26 of
the following years:


                             Trigger
                             -------
          Year              Percentage
          ----              ----------

          2000...........         170%
          2001...........         160%
          2002...........         150%


     We intend to redeem all or part of the debentures upon, or shortly after,
the effectiveness of this registration statement as long as the market price of
our common stock exceeds the above thresholds. Upon any Provisional Redemption,
we will make an additional payment (the "Interest Make-Whole Payment") with
respect to the debentures called for redemption, including those debentures
converted into common stock between the Notice Date and the Provisional
Redemption Date, in an amount equal to the sum of (1) the present value of the
aggregate amount of the interest that would otherwise have accrued from the
Provisional Redemption Date through September 26, 2002 (the "Interest Make-
Whole Period") and (2) liquidated damages, if any, to the Provisional
Redemption Date. Such present value shall be calculated using the bond
equivalent yield on U.S. Treasury notes or bills having a term nearest in length
to that of the Interest Make-Whole Period as of the Notice Date. We are
obligated to make the

                                       26
<PAGE>

Interest Make-Whole Payment on all debentures called for Provisional Redemption,
regardless of whether those debentures are converted prior to the Provisional
Redemption Date.

     The "Current Market Value" means the average of the high and low sale
prices of our common stock, as reported on the Nasdaq National Market or any
national securities exchange on which our common stock is then listed, on such
trading day.

     Subsequent Optional Redemption. At any time on or after September 27, 2002,
we may redeem some or all of the debentures on at least 20 but not more than 60
days' notice, at the following prices, together with accrued and unpaid interest
to, but excluding, the date fixed for redemption. If a redemption date is an
interest payment date, the semi-annual payment of interest becoming due on such
date will be payable to the holder of record as of the applicable record date
and the redemption price will not include such interest payment.

     If redeemed during the period beginning on September 27 and ending on
September 26 of the following year:



               Year                   Redemption Price
               ----                   ----------------
      2002..........................      101.3125%
      2003 and thereafter...........         100.0%


     If we do not redeem all of the debentures at one time, the Trustee will
select the debentures to be redeemed in principal amounts of $1,000, or its
integral multiples, by lot or on a pro rata basis. If any debentures are to be
redeemed in part only, a new debenture or debentures in principal amount equal
to the unredeemed principal portion will be issued. If a portion of a holder's
debentures is selected for partial redemption and such holder converts a portion
of such debentures, such converted portion shall be deemed to be taken from the
portion selected for redemption.

     No sinking fund is provided for the debentures.

Repurchase at Option of Holders Upon a Change of Control

     If a Change of Control occurs, each holder of the debentures shall have the
right to require us to repurchase all of such holder's debentures not yet called
for redemption or any portion of the remaining principal amount that is equal to
$1,000, or its integral multiple, not less than 30 nor more than 45 days after
the date of the company notice, at a repurchase price equal to 100% of the
principal amount of the debentures to be repurchased, together with interest
accrued and unpaid to but excluding the date of such repurchase.

     We may, instead of paying the repurchase price in cash, pay the repurchase
price in common stock if we satisfy the following conditions: (1) our common
stock has a fair market value greater than or equal to the repurchase price; (2)
a registration statement covering the common stock is effective; (3) blue sky or
state securities laws are satisfied; (4) the common stock is listed for trading
on a U.S. national securities exchange or approved for trading on an established
automated over-the-counter trading market in the United States immediately prior
to such repurchase date; and (5) the shares of common stock are issued out of
our authorized but unissued common stock and are free of any preemptive rights.
The fair market value shall be determined by us and be equal to 95% of the
average of the closing prices of our common stock for the five consecutive
trading days ending on and including the third trading day immediately preceding
the repurchase dates.

     Within 30 days after the occurrence of a Change of Control, we must give
notice to all holders of the debentures, as provided in the indenture, of the
occurrence of such Change of Control and of the repurchase right arising as a
result. We must also deliver a copy of the notice sent to the holders of the
debentures to the Trustee and cause such notice, or a summary of the information
in the notice, to be published in a newspaper of general circulation in the City
of New York. To exercise the repurchase right, a holder of the debentures must
deliver on or before the 30th day after the date of the company notice a written
notice to the Trustee of the exercise of such right, together with the
debentures with respect to which the right is being exercised.

     A Change of Control will be deemed to have occurred when the following has
occurred:

                                       27
<PAGE>

     .    the direct or indirect acquisition by any person, including any
          syndicate or group deemed to be a "person" under Section 13(d)(3) of
          the Exchange Act, of beneficial ownership through a purchase, merger
          or other acquisition transaction or series of transactions of shares
          of our capital stock entitling the person to exercise 50% or more of
          the combined voting power of all of the then outstanding shares of our
          capital stock entitled to vote generally in elections of directors,
          other than any acquisition by us, any of our subsidiaries or any of
          our employee benefit plans; or

     .    any consolidation or merger of us with or into any other person, any
          merger of another person into us or any conveyance, transfer, sale,
          lease or other disposition of all or substantially all of our
          properties and assets to another person, other than (a) any such
          transaction (x) that does not result in any reclassification,
          conversion, exchange or cancellation of outstanding shares of our
          capital stock and (y) pursuant to which holders of our capital stock
          immediately prior to such transaction have the right to exercise,
          directly or indirectly, 50% or more of the total voting power of all
          shares of the capital stock entitled to vote generally in the election
          of directors of the continuing or surviving entity immediately after
          such transaction and (b) any merger solely for the purpose of changing
          our jurisdiction of incorporation and results in a reclassification,
          conversion or exchange of outstanding shares of our common stock
          solely into shares of common stock of the surviving entity.

     However, a Change of Control will not be deemed to have occurred if the
closing sales price per share of our common stock for any five trading days
within the period of ten consecutive trading days ending immediately after the
later of the Change of Control or the public announcement of the Change of
Control, in the case of a Change of Control under the first clause above, or the
period of ten consecutive trading days ending immediately before the Change of
Control, in the case of a Change of Control under the second clause above,
equals or exceeds 110% of the conversion price of the debentures in effect on
each such trading day. The beneficial owner will be determined in accordance
with Rule 13d-3 of the Exchange Act. The term person includes any syndicate or
group which would be deemed to be a person under Section 13(d)(3) of the
Exchange Act.

     Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to holders of
the debentures. We will comply with this rule to the extent applicable at that
time.

     We may, to the extent permitted by applicable law, purchase the debentures
in the open market or by tender at any price or by private agreement. Any
debenture so purchased may, to the extent permitted by applicable law, be
reissued or resold, or be surrendered to the Trustee for cancellation. Any
debentures surrendered to the Trustee may not be reissued or resold and will be
canceled promptly.

     The foregoing provisions do not necessarily afford holders of the
debentures protection in the event of highly leveraged or other transactions
involving us that may adversely affect such holders.

     Our ability to repurchase the debentures upon the occurrence of a Change of
Control is subject to important limitations. We cannot assure you that we will
have the financial resources, or would be able to arrange financing, to pay the
repurchase price for all the debentures that might be delivered by holders of
the debentures seeking to exercise the repurchase right. Our failure to
repurchase the debentures when required following a Change of Control would
result in an event of default under the indenture whether or not such repurchase
is permitted by the subordination provisions of the indenture. Any such default
may, in turn, cause a default under our Senior Debt. See "--Subordination."


Subordination

     The debentures are subordinated in right of payment, as set forth in the
indenture, to the prior payment in full of all our existing and future Senior
Debt. The indenture provides that in the event of any distribution of our assets
upon our dissolution, winding up, liquidation or reorganization, the holders of
Senior Debt shall first be paid in respect of all such Senior Debt in full in
cash or other payment satisfactory to the holders of Senior Debt before we make
any payments of principal, or any premium, and interest (including liquidated
damages) on the debentures In

                                       28
<PAGE>

addition, in the event the debentures are accelerated because of an event of
default, the holders of our Senior Debt then outstanding would be entitled to
payment in full in cash or other payment satisfactory to the holders of Senior
Debt of all obligations in respect of such Senior Debt before the holders of the
debentures are entitled to receive any payment or distribution. The indenture
requires that we promptly notify holders of Senior Debt if payment of the
debentures is accelerated because of an event of default.

     Thus, in the event of our insolvency, funds which we would otherwise use to
pay the holders of the debentures will be used to pay the holders of Senior Debt
to the extent necessary to pay Senior Debt in full in cash or other payment
satisfactory to the holders of the Senior Debt. As a result of these payments,
our general creditors may recover less, ratably, than holders of Senior Debt and
such general creditors may recover more, ratably, than holders of the
debentures.

     The term "Senior Debt" means the principal of, premium, if any, interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
termination payment with respect to, and all fees, costs, expenses and other
amounts accrued or due on or in connection with, our Indebtedness (as defined
below), whether outstanding on the date of the indenture or subsequently
created, incurred, assumed, guaranteed or in effect guaranteed by us (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing), unless in the case of any
particular Indebtedness, the instrument creating or evidencing such Indebtedness
or its assumption or guarantee expressly provides that such Indebtedness shall
not be senior in right of payment to the debentures or expressly provides that
such Indebtedness is pari passu or junior to the debentures. Notwithstanding the
foregoing, the term Senior Debt shall not include our Indebtedness to any of our
subsidiaries for which we own, directly or indirectly, a majority of its voting
stock.

 The term "Indebtedness" means, with respect to any person:

     .    all indebtedness, obligations and other liabilities (contingent or
          not) of such person for borrowed money (including our obligations in
          respect of overdrafts, and any loans or advances from banks, whether
          or not evidenced by notes or similar instruments) or evidenced by
          bonds, debentures, notes or other instruments for the payment of
          money, or incurred in connection with the acquisition of any property,
          services or assets (whether or not the recourse of the lender is to
          the whole of the assets of such person or to only a portion), other
          than any account payable or other accrued current liability or
          obligation to trade creditors incurred in the ordinary course of
          business in connection with the obtaining of materials or services;

     .    all reimbursement obligations and other liabilities (contingent or
          not) of such person with respect to letters of credit, bank
          guarantees, bankers' acceptances, surety bonds, performance bonds or
          other guaranty of contractual performance;

     .    all obligations and liabilities (contingent or not) in respect of (y)
          leases of such person required, in conformity with generally accepted
          accounting principles, to be accounted for as capitalized lease
          obligations on the balance sheet of such person, and (z) any lease or
          related documents (including a purchase agreement) in connection with
          the lease of real property which provides that such person is
          contractually obligated to purchase or cause a third party to purchase
          the leased property and thereby guarantee a minimum residual value of
          the leased property to the landlord and the obligations of such person
          under such lease or related document to purchase or to cause a third
          party to purchase the leased property;

     .    all obligations of such person (contingent or not) with respect to an
          interest rate or other swap, cap or collar agreement or other similar
          instrument or agreement or foreign currency hedge, exchange, purchase
          or similar instrument or agreement (including any foreign exchange
          contract, currency exchange agreements and interest rate protection
          agreements);

     .    all direct or indirect guaranties or similar agreements by such person
          in respect of, and obligations or liabilities (contingent or not) of
          such person to purchase, acquire or assure a creditor against loss in

                                       29
<PAGE>

          respect of, indebtedness, obligations or liabilities of another person
          of the kind described in the above clauses;

     .    any indebtedness or other obligations described in the first four
          clauses above secured by any mortgage, pledge, lien or other
          encumbrance existing on property which is owned or held by such
          person, regardless of whether the indebtedness or other obligation
          secured thereby shall have been assumed by such person; and

     .    any and all deferrals, renewals, extensions and refundings of, or
          amendments, modifications or supplements to, any indebtedness,
          obligation or liability of the kind described in the above clauses.

     The debentures are our obligations exclusively and are subordinated to all
future and existing Indebtedness (including trade payables) of our subsidiaries.
The indenture does not limit the amount of Indebtedness or other liabilities our
subsidiaries may incur. Our ability to make required interest, principal,
repurchase, cash conversion or redemption payments on the debentures may be
impaired as a result of the obligations of our subsidiaries. Our subsidiaries
are separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the debentures or to make any
funds available for such payments, whether by dividends, loans or other
payments. Any right of ours to receive assets of any of our subsidiaries upon
the latter's liquidation or reorganization (and the consequent right of the
holders of the debentures to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors, except to the extent
that we are ourselves recognized as a creditor of the subsidiary, in which case
our claims would still be subordinate to any security interests in the assets of
the subsidiary and any indebtedness of such subsidiary senior to that held by
us. At September 30, 1999, we had no Senior Debt and NECX, which we acquired on
December 16, 1999, had liabilities of approximately $49.0 million.

     We are obligated to pay reasonable compensation to the Trustee and to
indemnify the Trustee against any losses, liabilities or expenses incurred by it
in connection with its duties relating to the debentures. The Trustee's claims
for such payments are senior to those of holders of the debentures in respect of
all funds collected or held by the Trustee.


Events of Default

     Each of the following constitutes an event of default:

     .    if we fail to pay when due the principal of or premium, if any, on any
          of the debentures at maturity, upon redemption or exercise of a
          redemption at the option of a holder of debentures upon a Change of
          Control or otherwise, whether or not such payment is prohibited by the
          subordination provisions of the indenture;

     .    if we fail to pay an installment of interest (including any liquidated
          damages, if any) on any of the debentures for 30 days after the date
          when such interest is due, whether or not such payment is prohibited
          by the subordination provisions of the indenture;

     .    if we fail to perform or observe any other term, covenant or agreement
          contained in the debentures or the indenture for a period of 60 days
          after written notice of such failure, requiring us to remedy such
          failure, and such notice has been given to us by the Trustee or to us
          and the Trustee by the holders of 25% in aggregate principal amount of
          the debentures then outstanding;

     .    (1) if we fail to make any payment by the end of any applicable grace
          period, after the maturity of any Indebtedness for borrowed money in
          an amount in excess of $1,000,000, or (2) if any Indebtedness for
          borrowed money in an amount in excess of $1,000,000 is accelerated
          because of a default with respect to the Indebtedness without such
          Indebtedness having been discharged or such acceleration having been
          cured, waived, rescinded or annulled, in both cases for a period of 30
          days after written notice to us by the Trustee or to us and the
          Trustee by holders of not less than 25% in aggregate principal amount
          of the debentures then outstanding; and

     .    if certain events of bankruptcy, insolvency or reorganization with
          respect to us have occurred.

                                      30
<PAGE>

     The indenture provides that the Trustee will, within 90 days of the
occurrence of a default, give to the registered holders of the debentures notice
of all uncured defaults known to it, but the Trustee will be protected in
withholding such notice if it, in good faith, determines that the withholding of
such notice is in the best interest of such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the debentures when due or in the payment of any redemption
or repurchase obligation.

     If an event of default has occurred and is continuing, the Trustee or the
holders of 25% in aggregate principal amount of the debentures then outstanding
may declare the debentures due and payable at their principal amount together
with accrued interest, and thereupon the Trustee may, at its discretion, proceed
to protect and enforce the rights of the holders of the debentures by
appropriate judicial proceedings. Such declaration may be rescinded or annulled
either with the written consent of the holders of a majority in aggregate
principal amount of the debentures then outstanding or a majority in aggregate
principal amount of the debentures represented at a meeting at which a quorum
(as specified under "--Meetings, Modifications and Waiver") is present, in each
case upon the conditions provided in the indenture.

     The indenture entitles the Trustee, subject to the duty of the Trustee
during the default to act with the required standard of care, to be indemnified
by the holders of the debentures before proceeding to exercise any right or
power under the indenture at the request of such holders. The indenture provides
that the holders of a majority in aggregate principal amount of the debentures
then outstanding through their written consent, or the holders of a majority in
aggregate principal amount of the debentures represented at a meeting at which a
quorum is present by a written resolution, may direct the time, method and place
of conduct any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred upon the Trustee.

     We are required to furnish annually to the Trustee a statement as to the
fulfillment of our obligations under the indenture.

Consolidation, Merger or Assumption

     We may, without the consent of the holders of the debentures, consolidate
with, merge into or transfer all or substantially all of our assets to any other
corporation organized under the laws of the United States or any of its
political subdivisions, provided that (1) the surviving corporation assumes all
of our obligations under the indenture and the debentures, (2) at the time of
such transaction, no event of default, and no event which, after notice or lapse
of time, would become an event of default, has happened and is continuing and
(3) certain other conditions are met.

Meetings, Modifications and Waiver

     The indenture contains provisions for convening meetings of the holders of
the debentures to consider matters affecting their interests.

     The indenture (including the terms and conditions of the debentures) may be
modified or amended by us and the Trustee, without the consent of the holder of
any debenture, for the purposes of, among other things:

     .    adding to our covenants for the benefit of the holders of debentures;

     .    surrendering any right or power conferred upon us;

     .    providing for conversion rights of holders of the debentures in the
          event of any reclassification or change of our common stock or any
          consolidation, merger or sale of all or substantially all of our
          assets;

     .    evidencing the succession of another corporation to VerticalNet and
          the assumption by such successor of our covenants and obligations
          under the indenture and in the debentures;

                                       31
<PAGE>

     .    reducing the conversion price, provided that the reduction does not
          adversely affect the interests of holders of the debentures in any
          material respect;

     .    complying with the requirements of the Securities and Exchange
          Commission in order to effect or maintain the qualification of the
          indenture under the Trust Indenture Act of 1939, as amended;

     .    curing any ambiguity or correcting or supplementing any defective
          provision contained in the indenture, provided that such modification
          or amendment does not, in the good faith opinion of our Board of
          Directors and the Trustee, adversely affect the interests of the
          holders of the debentures in any material respect; or

     .    making any other provisions which we and the Trustee may deem
          necessary or desirable and which will not adversely affect the
          interests of the holders of the debentures in any material respect.

     Modifications and amendments to the indenture or to the terms and
conditions of the debentures may also be made, and any past default by us may be
waived, either (1) with the written consent of the holders of at least a
majority in aggregate principal amount of the debentures at the time outstanding
or (2) by the adoption of a resolution at a meeting by at least a majority in
aggregate principal amount of the debentures represented at such meeting.
However, no such modification, amendment or waiver may, without the written
consent or the affirmative vote of the holder of each debenture so affected:

     .    change the maturity of the principal of or any installment of interest
          on any such debenture (including any payment of liquidated damages);

     .    reduce the principal amount of, or any premium or interest on
          (including any payment of liquidated damages) any such debenture;

     .    change the currency of payment of such debenture or its interest;

     .    impair the right to sue for the enforcement of any payment on or with
          respect to any such debenture;

     .    modify our obligations to maintain an office or agency in New York
          City;

     .    except as otherwise permitted or contemplated by provisions concerning
          corporate reorganizations, adversely affect the repurchase option of
          holders upon a Change of Control or the conversion rights of holders
          of the debentures;

     .    modify the subordination provisions of the debentures in a manner
          adverse to the holders of debentures;

     .    reduce the percentage in aggregate principal amount of debentures
          outstanding necessary to modify or amend the indenture or to waive any
          past default; or

     .    reduce the percentage in aggregate principal amount of debentures
          outstanding required for the adoption of a resolution or the quorum
          required at any meeting of holders of debentures at which a resolution
          is adopted.

     The quorum at any meeting called to adopt a resolution will be persons
holding or representing a majority in aggregate principal amount of the
debentures at the time outstanding and, at any reconvened meeting adjourned for
lack of a quorum, 25% of such aggregate principal amount.

Satisfaction and Discharge

     We may discharge our obligations under the indenture while the debentures
remain outstanding if (1) all outstanding debentures will become due and payable
at their scheduled maturity within one year or (2) all outstanding debentures
are scheduled for redemption within one year, and, in either case, we have
deposited with the

                                       32
<PAGE>

Trustee an amount sufficient to pay and discharge all outstanding debentures on
the date of their scheduled maturity or the scheduled date of redemption.

Form, Denomination and Registration

     The debentures were issued in fully registered form, without coupons, in
multiples of $1,000 of principal.

     Global Debentures; Book-Entry Form. Except as provided below, the
debentures sold to Qualified Institutional Buyers, as defined in Rule 144A under
the Securities Act ("QIBs"), were evidenced by one or more global debentures
which were deposited with the Trustee as custodian for The Depository Trust
Company in New York City ("DTC") and registered in the name of DTC or Cede &
Co. ("Cede"), as DTC's nominee. The global debentures (and any debentures
issued in exchange for them) are subject to certain transfer restrictions and
bear a legend regarding such restrictions as described below in "Transfer
Restrictions." Record ownership of the global debentures may only be
transferred, in whole or in part, to another nominee of DTC or to a successor of
DTC or its nominee, except as set forth below.

     A QIB may hold its interests in the global debentures directly through DTC
if such QIB is a participant in DTC, or indirectly through organizations which
are participants in DTC. Transfers between participants are made according to
DTC rules and are settled in same-day funds. Since the laws of some states
require physical delivery of securities, the ability to transfer a beneficial
interest in the global debentures may be limited.

     Any beneficial interest in a global debenture that is transferred in the
form of an interest in other global debentures, upon transfer, ceases to be an
interest in such global debenture and becomes an interest in such other global
debenture. It is then subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other global debenture while it
remains such an interest. All interests in the global debentures are subject to
the procedures and requirements of DTC.

     QIBs may beneficially own interests in the global debentures held by DTC
only through participants, or banks, brokers, dealers, trust companies and other
parties that directly or indirectly clear through or maintain a custodial
relationship with a participant. As long as Cede remains the registered owner of
the global debentures, Cede will be considered the sole holder of the global
debentures. Except as provided below, owners of beneficial interests in the
global debentures are not entitled to have certificates registered in their
names, have not received physical delivery of certificates and are not
considered holders of such global debentures.

     We wire principal and interest payments on the debentures to Cede. We and
the Trustee treat Cede as the owner of the global debentures for all purposes.
Accordingly, we, the Trustee and any paying agent have no direct responsibility
or liability to pay amounts due on the global debentures to owners of beneficial
interests in the global debentures.

     It is DTC's current practice, upon receipt of any payment of principal and
interest, to credit the participants' accounts on the payment date in amounts
proportionate to their respective beneficial interests in the debentures
represented by the global debentures, as shown on the records of DTC, unless DTC
believes it will not receive payment. Payments by participants to owners of
beneficial interests in the debentures represented by the global debentures held
through such participants is the responsibility of such participants, as is now
the case with securities held for the accounts of customers registered in street
name.

     If you would like to convert your debentures into common stock pursuant to
the terms of the debentures, you should contact your broker or other participant
or indirect participant to obtain information on procedures, including proper
forms and cut-off times, for submitting such requests.

     Because DTC can only act on behalf of the participants, who in turn act on
behalf of indirect participants and other banks, your ability to pledge your
interest in the debentures represented by global debentures to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such interest, may be limited by the lack of a physical certificate.

                                       33
<PAGE>

     Neither we nor the Trustee (nor any registrar, paying agent or conversion
agent under the indenture) has any responsibility for the performance by DTC or
its participants or indirect participants of their respective obligations under
the rules and procedures governing their operations. DTC has advised us that it
will take any action permitted by a holder of the debentures (including, the
presentation of the debentures for conversion as described below) only at the
direction of a participant to whose account the interests in the global
debentures are credited and only for the principal amount of such debentures.

     DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities for its participants and to facilitate the clearance
and settlement of securities transactions between the participants through
electronic book-entry charges to their participants' accounts, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations such as the initial purchasers.
Certain participants (or their representatives) may own interests in DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that directly or indirectly clear through, or
maintain a custodial relationship with, a participant.

     Although DTC has agreed to these procedures in order to facilitate
transfers of interests in the global debentures among the participants of DTC,
it is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. If DTC is at any time unwilling
or unable to continue as depositary and a successor depositary is not appointed
by us within 90 days, we will cause the debentures to be issued in definitive
form in exchange for the global debentures. None of us, the Trustee or any of
their respective agents has any responsibility for the performance by DTC, its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations, including maintaining,
supervising or reviewing the records relating to, or payments made on account
of, beneficial ownership interests in global debentures.

     DTC management is aware that some computer applications, systems and the
like for processing data that are dependent upon calendar dates, including dates
before, on and after January 1, 2000, may encounter "Year 2000 problems." DTC
has informed its participants and other members of the financial community that
it has developed and is implementing a program so that its systems, as the same
relates to the timely payment of distributions (including principal and interest
payments) to securityholders, book-entry deliveries and settlement of trades
within DTC, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.

     However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third-party vendors from whom DTC licenses software and hardware, and
third-party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed its participants and other members of the
financial community that it is contacting (and will continue to contact) third-
party vendors from whom DTC acquires services to: (i) impress upon them the
importance of such services being Year 2000 compliant and (ii) determine the
extent of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, DTC is in the process of developing such
contingency plans as it deems appropriate.

     According to DTC, the foregoing information with respect to DTC has been
provided to its participants and other members of the financial community for
informational purposes only and is not intended to serve as a representation,
warranty or contract modification of any kind.

     Certificated Debentures. Debentures sold to a limited number of "accredited
investors" as defined in Rule 501(a)(1), (2), (3), (5), (6) or (7) under the
Securities Act who are not QIBs were issued in certificated, fully registered
form and may not be represented as a global debenture. QIBs could request that
its debenture be issued in certificated form and may request at any time that
its interest in a global debenture be exchanged for a debenture in certificated
form. Certificated debentures may also be issued in exchange for debentures
represented by the global

                                       34
<PAGE>

debentures if no successor depositary is appointed by us as described above or
in certain other circumstances set forth in the indenture.

     Restrictions on Transfer; Legends. The debentures are subject to certain
transfer restrictions as described above under "Transfer Restrictions" and
certificates evidencing the debentures bear a legend to that effect.


Governing Law

     The indenture and the debentures and the rights and duties of the parties
under each are governed by, and construed in accordance with, the law of the
State of New York.


Information Concerning the Trustee

     We have appointed Bankers Trust Company, as Trustee under the indenture, as
paying agent, conversion agent, registrar and custodian with regard to the
debentures. American Stock Transfer & Trust Company is the transfer agent for
our common stock. The Trustee or its affiliates may in the future provide
banking and other services to us in the ordinary course of their business.


Registration Rights

     The Registration Rights Agreement entered into upon the initial closing of
the offering of the debentures requires us to register the debentures and the
common stock issuable upon conversion of the debentures, at our expense, with
the Commission no later than February 19, 2000. However, if (1) the registration
statement does not become effective by May 5, 2000 or (2) VerticalNet suspends
the use of this prospectus (which is part of this registration statement) for a
period in excess of 45 days (60 days under certain circumstances relating to
pending corporate developments, public filings with the Commission and similar
events), in any three-month period, or in excess of 90 days in any 12-month
period, additional interest as liquidated damages will accrue on the debentures.
The liquidated damages will accrue at a rate per year of one quarter of one
percent (.25%) of the principal amount, to and including the 90/th/ day
following the occurrence of such events and at a rate of one half of one percent
(.5%) of the principal amount from and after the 91/st/ day following the
occurrence of such event.

                                       35
<PAGE>

                          DESCRIPTION OF CAPITAL STOCK

     Our authorized capital stock consists of 90,000,000 shares of common stock,
par value $.01 per share, and 10,000,000 shares of preferred stock, par value
$.01 per share. VerticalNet is a Pennsylvania corporation and is subject to the
Pennsylvania Business Corporation Law of 1988.


Common Stock

     Holders of the common stock are entitled to receive, as, when and if
declared by the board of directors from time to time, such dividends and other
distributions in cash, stock or property from our assets or funds legally
available for such purposes subject to any dividend preferences that may be
attributable to preferred stock that may be authorized. Holders of common stock
are entitled to one vote for each share held of record on all matters on which
shareholders may vote, except with respect to the election of directors in which
case shareholders are entitled to multiply the number of shares held of record
by the number of directors to be elected and distribute such number of votes for
one or among two or more nominees.

     There are no preemptive, conversion, redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and non-assessable. In the event of our liquidation, dissolution or winding
up, holders of common stock are entitled to share ratably in the assets
available for distribution.


Preferred Stock

     Our board of directors, without further action by the shareholders, is
authorized to issue an aggregate of 10,000,000 shares of preferred stock. No
shares of preferred stock are outstanding and we have no plans to issue a new
series of preferred stock. Our board of directors may, without shareholder
approval, issue preferred stock with dividend rates, redemption prices,
preferences on liquidation or dissolution, conversion rights, voting rights and
any other preferences, which rights and preferences could adversely affect the
voting power of the holders of common stock. Issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions or
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or could discourage or delay a third party from
acquiring, a majority of our outstanding stock.


Classified Board of Directors

     Our bylaws, as amended and restated, divide our board of directors into
three classes, with regular three-year staggered terms and initial terms of one
year for the class I directors, two years for the class II directors and three
years for the class III directors. This could prevent a party who acquires
control of the majority of the outstanding voting stock from obtaining control
of the board of directors.

     Our shareholders do not have the right to cumulative voting in the election
of directors.

Shareholder Action by Written Consent

     Under Pennsylvania law, any action that may be taken at a meeting of the
shareholders may be taken without a meeting if such action is authorized by the
unanimous written consent of all shareholders entitled to vote at a meeting for
such purposes.

                                       36
<PAGE>

Special Meetings

     Our articles of incorporation and bylaws provide that special meetings of
our shareholders may be called only by the board or by our chairman or chief
executive officer. This provision may make it more difficult for shareholders to
take action opposed by the board.


Amendments to Our Bylaws

     Our bylaws provide that the vote of a majority of all directors or the vote
of the majority of the outstanding stock entitled to vote is required to alter,
amend or repeal our bylaws.


Indemnification of Directors and Officers

     Section 1741 of the Pennsylvania corporate laws provides the power to
indemnify any officer or director acting in his capacity as our representative
who was, is or is threatened to be made a party to any action or proceeding for
expenses, judgments, penalties, fines and amounts paid in settlement in
connection with such action or proceeding. The indemnity provisions apply
whether the action was instituted by a third party or arose by or in our right.
Generally, the only limitation on our ability to indemnify our officers and
directors is if the act violates a criminal statute or if the act or failure to
act is finally determined by a court to have constituted willful misconduct or
recklessness.

     Our bylaws provide a right to indemnification to the full extent permitted
by law for expenses, attorney's fees, damages, punitive damages, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by any director or officer whether or not the indemnified liability arises or
arose from any threatened, pending or completed proceeding by or in our right by
reason of the fact that such director or officer is or was serving as our
director, officer or employee or, at our request, as a director, officer,
partner, fiduciary or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, unless the act or
failure to act giving rise to the claim for indemnification is finally
determined by a court to have constituted willful misconduct or recklessness.
Our bylaws provide for the advancement of expenses to an indemnified party upon
receipt of an undertaking by the party to repay those amounts if it is finally
determined that the indemnified party is not entitled to indemnification.

     Our bylaws authorize us to take steps to ensure that all persons entitled
to the indemnification are properly indemnified, including, if the board of
directors so determines, purchasing and maintaining insurance.


Limitation of Liability

     Our articles of incorporation provide that none of our directors shall be
personally liable to us or our shareholders for monetary damages for a breach of
fiduciary duty as a director, except for liability:

     .    for any breach of such person's duty of loyalty;

     .    for acts or omissions not in good faith or involving intentional
          misconduct or a knowing violation of law;

     .    for the payment of unlawful dividends and certain other actions
          prohibited by Pennsylvania corporate law; and

     .    for any transaction resulting in receipt by such person of an improper
          personal benefit.

     We maintain directors and officers' liability insurance to provide
directors and officers with insurance coverage for losses arising from claims
based on breaches of duty, negligence, error and other wrongful acts. At
present, there is no pending litigation or proceeding, and we are not aware of
any threatened litigation or proceeding, involving any director, officer,
employee or agent where indemnification will be required or permitted under the
articles of incorporation or our bylaws.

                                       37
<PAGE>

Pennsylvania Control-Share Acquisitions Law

     Generally, subchapters 25E, F, G, H, I and J of the Pennsylvania corporate
laws place certain procedural requirements and establish certain restrictions
upon the acquisition of voting shares of a corporation which would entitle the
acquiring person to cast or direct the casting of a certain percentage of votes
in an election of directors. Subchapter 25E of the Pennsylvania corporate laws
provides generally that, if a company were involved in a "control transaction,"
shareholders of the company would have the right to demand from a "controlling
person or group" payment of the fair value of their shares. For purposes of
subchapter 25E, a "controlling person or group" is a person or group of persons
acting in concert that, through voting shares, has voting power over at least
20% of the votes which shareholders of the company would be entitled to cast in
the election of directors. A control transaction arises, in general, when a
person or group acquires the status of a controlling person or group.

     In general, Subchapter 25F of the Pennsylvania corporate laws delays for
five years and imposes conditions upon "business combinations" between an
"interested shareholder" and us. The term "business combination" is defined
broadly to include various merger, consolidation, division, exchange or sale
transactions, including transactions utilizing our assets for purchase price
amortization or refinancing purposes. An "interested shareholder," in general,
would be a beneficial owner of at least 20% of our voting shares.

     In general, Subchapter 25G of the Pennsylvania corporate laws suspends the
voting rights of the "control shares" of a shareholder that acquires for the
first time 20% or more, 33 1/3% or more, or 50% or more of a company's shares
entitled to be voted in an election of directors. The voting rights of the
control shares generally remain suspended until such time as the
"disinterested" shareholders of the company vote to restore the voting power
of the acquiring shareholder.

     Subchapter 25H of the Pennsylvania corporate laws provides in certain
circumstances for the recovery by a company of profits made upon the sale of its
common stock by a "controlling person or group" if the sale occurs within 18
months after the controlling person or group became such and the common stock
was acquired during such 18 month period or within 24 months before such period.
In general, for purposes of Subchapter 25H, a "controlling person or group" is
a person or group that:

     (1)   has acquired;

     (2)   offered to acquire; or

     (3)   publicly disclosed or caused to be disclosed an intention to acquire
  voting power over shares that would entitle such person or group to cast at
  least 20% of the votes that shareholders of the company would be entitled to
  cast in the election of directors.

     If the disinterested shareholders of a company vote to restore the voting
power of a shareholder who acquires control shares subject to Subchapter 25G,
such company would then be subject to subchapters 25I and J of the Pennsylvania
corporate laws. Subchapter 25I generally provides for a minimum severance
payment to certain employees terminated within two years of such approval.
Subchapter 25J, in general, prohibits the abrogation of certain labor contracts
prior to their stated date of expiration.

     The above descriptions of subchapters of the Pennsylvania corporate laws
summarize the material anti-takeover provisions contained in the Pennsylvania
corporate laws but are not a complete discussion of those provisions.


Certain Anti-Takeover Provisions

     The ability of the board of directors to establish the rights of, and to
issue, substantial amounts of preferred stock without the need for shareholder
approval, may have the effect of discouraging, delaying or preventing a change
in control. Such preferred stock, among other things, may be used to create
voting impediments with respect to any changes in control or to dilute the stock
ownership of holders of common stock seeking to obtain control. See

                                       38
<PAGE>

"Risk Factors--Risks Related to this Offering--Anti-takeover provisions and our
right to issue preferred stock could make a third-party acquisition of us
difficult," "--Common Stock" and "--Preferred Stock."


Registration Rights

     In addition to the registration rights granted in connection with the
offering of the debentures, the holders of 18,671,054 shares of common stock and
warrants to purchase 395,208 shares of common stock are entitled to certain
registration rights. These rights are provided under the terms of agreements
between us and the holders of such securities. Such agreements provide, in
certain instances, demand registration rights. In addition, pursuant to these
agreements, the holders are entitled, subject to certain limitations, to require
us to include their registrable securities in future registration statements we
file under the Securities Act of 1933.

     The holders also are entitled, subject to certain limitations, to require
us to register their registrable securities on a registration statement on Form
S-3 once we are eligible to use a Form S-3 in connection with such
registrations. Registration of shares of common stock pursuant to the exercise
of demand registration rights, piggyback registration rights or S-3 registration
rights under the Securities Act of 1933 would result in such shares becoming
freely tradeable without restriction under the Securities Act of 1933
immediately upon the effectiveness of such registration. "Risk Factors--Risks
Related to this Offering--Shares eligible for future sale by our current
shareholders may cause our stock price to decline" and "Shares Eligible for
Future Sale."


Transfer Agent

     The transfer agent for our common stock is American Stock Transfer and
Trust Company.


                                       39
<PAGE>

                                SELLING HOLDERS

     The debentures were originally issued by VerticalNet and sold by the
initial purchasers in a transaction exempt from the registration requirements of
the Securities Act to persons reasonably believed by such initial purchasers to
be qualified institutional buyers or other institutional accredited investors.
Selling holders, which term includes their transferees, pledgees or donees or
their successors, may from time to time offer and sell pursuant to this
prospectus any or all of the debentures and common stock into which the
debentures are convertible.

     The following table sets forth information, as of December 31, 1999, with
respect to the selling holders and the respective principal amounts of
debentures beneficially owned by each selling holder that may be offered
pursuant to this prospectus.  The information is based on information provided
by or on behalf of the selling holders.  The selling holders may offer all, some
or none of the debentures or common stock into which the debentures are
convertible.  Because the selling holders may offer all or some portion of the
debentures or the common stock, no estimate can be given as to the amount of the
debentures or the common stock that will be held by the selling holders upon
termination of any such sales.  In addition, the selling holders identified
below may have sold, transferred or otherwise disposed of all or a portion of
their debentures since the date on which they provided the information regarding
their debentures in transactions exempt from the registration requirements of
the Securities Act.

<TABLE>
<CAPTION>
                                          Principal Amount of
                                                 Notes
                                         Beneficially Owned and         Common Stock Owned Prior             Common Stock
Name                                    Offered Hereby/(1 )//(2)/      to the Offering /(1)//(2)/         Offered Hereby /(2)/
- ----                                    ------------------------      ---------------------------         ---------------------
<S>                                     <C>                           <C>                                 <C>
Lehman Brothers, Inc. Jagarnauth
AVP...........................................$ 32,832,000                      191,762                      820,800
Deutsche Bank Securities......................  18,762,000                          877                      469,050
Bear, Stearns Securities Corp.................  14,160,000                      300,013                      354,000
Goldman Sachs International...................   9,600,000                          ---                      240,000
Goldman, Sachs & Co...........................   6,750,000                      114,630                      168,750
JMG Triton Offshore Fund Ltd..................   6,150,000                          ---                      153,750
Chase Manhattan Bank..........................   5,000,000                    1,375,568                      125,000
JMG Capital Partner L.P.......................   3,750,000                          ---                       93,750
J.P. Morgan Securities, Inc...................   3,750,000                          500                       93,750
Salomon Smith Barney Inc......................   3,006,000                      194,991                       75,150
BNY - Barclays Capital Securities
Ltd., SBL/PB..................................   2,400,000                          ---                       60,000
RBC Dominion Securities, Inc..................   2,000,000                       13,129                       50,000
BancBoston Robertson Stephens Inc.............   1,900,000                        1,933                       47,500
Morgan, Stanley & Company.....................   1,550,000                      681,612                       38,750
Barclays Capital, Inc.........................   1,000,000                          ---                       25,000
Custodial Trust Company.......................   1,000,000                        1,200                       25,000
Citibank, N.A.................................     410,000                      229,303                       10,250
Boston Safe Deposit and Trust
Company.......................................     330,000                      462,137                        8,250
Northern Trust Company........................     150,000                      211,039                        3,750
State Street Bank and Trust
Company.......................................     150,000                    3,435,324                        3,750
ABN Amro Incorporated.........................     100,000                        2,420                        2,500
Nomura Securities International,
Inc...........................................     100,000                           50                        2,500
Merrill Lynch, Pierce, Fenner &
Smith, Inc....................................      50,000                          ---                        1,250
Any other holder of debentures or
future transferee from any such
holder (3)(4).................................     100,000                          ---                        2,500
                                              ------------                   ----------                    ---------

                    TOTAL                     $115,000,000                    7,216,488                    2,875,000
                                              ============                   ==========                    =========
</TABLE>

____________________

                                      40
<PAGE>

(1)  Includes common stock into which the notes are convertible.
(2)  Reflects a conversion price of $40.00 per share and a cash payment in lieu
     of any fractional interest.
(3)  Information concerning other selling holders of debentures will be set
     forth in prospectus supplements from time to time, if required.
(4)  Assumes that any other holders of debentures or any future transferee from
     any such holder does not beneficially own any common stock other than
     common stock into which the debentures are convertible at the conversion
     price of $40.00 per share.

          None of the selling holders has had any material relationship with
VerticalNet or its affiliates within the past three years.  The selling holders
purchased all of the shares from VerticalNet in private transactions on
September 27 and October 12, 1999. All of the shares were "restricted
securities" under the Securities Act prior to this registration.

          The selling holders have represented to us that they purchased the
shares for their own account for investment only and not with a view toward
selling or distributing them, except pursuant to sales registered under the
Securities Act or exemptions. VerticalNet agreed with the selling holders to
file the registration statement to register the resale of the shares.
VerticalNet agreed to prepare and file all necessary amendments and supplements
to the registration statement to keep it effective until the earlier of (1)
September 27, 2001 and (2) the date on which the debentures and the common stock
into which the notes are convertible no longer qualify as "Registrable
Securities" under the Registration Rights Agreement.

          Information concerning the selling holders may change from time to
time and any such changed information will be set forth in supplements to this
prospectus if and when necessary. In addition, the per share conversion price,
and therefore the number of shares of common stock issuable upon conversion of
the notes, is subject to adjustment under certain circumstances. Accordingly,
the aggregate principal amount of debentures and the number of shares of common
stock into which the notes are convertible may increase or decrease.

                                       41
<PAGE>

                       CERTAIN FEDERAL TAX CONSEQUENCES


     The following is a general discussion of certain anticipated U.S. federal
income tax consequences to a U.S. holder of the purchase, ownership and
disposition of the debentures (or our common stock acquired upon conversion of a
debenture) as of the date hereof. This summary is generally limited to U.S.
holders (as defined below) who will hold the debentures and the shares of common
stock into which the debentures are convertible as "capital assets" within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code") and who acquire the debentures in this offering at the initial offering
price, and does not deal with special situations including those that may apply
to particular holders such as exempt organizations, dealers in securities or
commodities, financial institutions, insurance companies, regulated investment
companies and holders whose "functional currency" is not the U.S. dollar. This
discussion does not address the tax consequences to non-U.S. holders, nor does
it discuss tax consequences arising under any state, local or foreign law. The
federal income tax considerations set forth below are based upon the Internal
Revenue Code of 1986, as amended (the "Code") and Treasury Regulations, court
decisions, and Internal Revenue Service ("IRS") rulings now in effect, all of
which are subject to change. Prospective investors should particularly note that
any such change could have retroactive application so as to result in federal
income tax consequences different from those discussed below. As used herein,
the term "U.S. holder" means a beneficial owner of a debenture (or our common
stock acquired upon conversion of a debenture) that is for U.S. federal income
tax purposes (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity (other than a trust) created or organized in or
under the laws of the United States or of any political subdivision thereof
(other than a partnership that is not treated as a U.S. person under any
applicable Treasury Regulations), (iii) an estate the income of which is subject
to U.S. federal income taxation regardless of its source; or (iv) a trust, if a
court within the United States is able to exercise primary jurisdiction over its
administration and one or more U.S. persons have authority to control all of its
substantial decisions. Prospective investors are urged to consult their tax
advisors regarding the tax consequences, in their particular circumstances, of
purchasing, holding and disposing of the debentures or our common stock,
including the tax consequences arising under any state, local or foreign laws.
We have been advised by our counsel, Morgan, Lewis & Bockius LLP, that, while
the following does not purport to discuss all tax matters relating to the
debentures or the common stock acquired upon conversion of a debenture, the
following are the material tax consequences of the debentures and common stock
acquired upon conversion of a debenture, subject to the qualifications set forth
below.

     Based on currently applicable authorities, we will treat the debentures as
indebtedness for U.S. federal income tax purposes. However, since the debentures
have certain equity characteristics, it is possible that the IRS will contend
that the debentures should be treated as an equity interest in, rather than
indebtedness of VerticalNet. In the event the debentures are treated as equity,
distributions received on a debenture would first be taxable to the holder as
dividend income to the extent of our accumulated earnings and profits, and next
would be treated as a return of capital to the extent of the U.S. holder's tax
basis in the debenture, with any remaining amount treated as gain from the sale
of a debenture. Moreover, in the event of equity treatment, we would not be
entitled to deduct interest on such debentures for U.S. federal income tax
purposes. Additionally, in the event of equity treatment, a distribution to a
corporate U.S. holder may qualify for a dividends received deduction. Except as
otherwise noted, the remainder of this discussion assumes that the debentures
will constitute indebtedness for U.S. tax purposes.

                                       42
<PAGE>

STATED INTEREST

  Interest paid on a debenture will be includable in the income of a U.S. holder
as ordinary income at the time it accrues or is received in accordance with such
holder's method of accounting for U.S. federal income tax purposes. The interest
rate on the debentures is subject to increase in certain circumstances,
including if the debentures are not registered with the Commission within
prescribed time periods. We intend to treat the possibility that we will pay
such additional interest as subject to a remote contingency, within the meaning
of applicable Treasury Regulations and, therefore, we believe that any such
additional interest will not affect the yield to maturity on the debentures and
therefore will be taxable to U.S. holders at the time it accrues or is received
in accordance with each such holder's method of accounting. Similarly, we intend
to take the position that the likelihood of a redemption or repurchase upon a
change of control is remote or incidental within the meaning of the Treasury
Regulations, and likewise does not affect the yield to maturity on the
debentures.


CONVERSION OR REPURCHASE FOR COMMON STOCK

  A U.S. holder will not recognize income, gain or loss upon conversion of the
debentures solely into our common stock or a repurchase for common stock of a
debenture pursuant to exercise of the repurchase right (except with respect to
any amounts attributable to accrued interest on the debentures not previously
included in income, which will be treated as interest for federal income tax
purposes, and except with respect to cash received in lieu of fractional
shares). The U.S. holder's basis in the common stock received on conversion or
repurchase of a debenture for common stock pursuant to the repurchase right will
be the same as the U.S. holder's adjusted tax basis in the debentures at the
time of conversion or repurchase (reduced by any basis allocable to a fractional
share), and the holding period for the common stock received on conversion or
repurchase will include the holding period of the debentures that were converted
or repurchased.

  Cash received in lieu of a fractional share of common stock upon conversion of
the debentures into common stock or upon a repurchase for common stock of a
debenture pursuant to exercise of the repurchase right will be treated as a
payment in exchange for the fractional share of common stock. Accordingly, the
receipt of cash in lieu of a fractional share of common stock generally will
result in capital gain or loss (measured by the difference between the cash
received for the fractional share and the U.S. holder's adjusted tax basis in
the fractional share).


DIVIDENDS ON COMMON STOCK

  Generally, distributions will be treated as a dividend, subject to tax as
ordinary income, to the extent of our current or accumulated earnings or
profits, then as a tax-free return of capital to the extent of such U.S.
holder's adjusted tax basis in the common stock and thereafter as gain from the
sale or exchange of such common stock. Additionally, a dividend distribution to
a corporate U.S. holder may qualify for a dividends received deduction.


DISPOSITION, REDEMPTION OR REPURCHASE FOR CASH

  Except as set forth above under ''Conversion or Repurchase for Common Stock,''
U.S. holders generally will recognize gain or loss upon the sale, redemption
(including a repurchase for cash pursuant to the repurchase right) or other
taxable disposition of the debentures or common stock in an amount equal to the
difference between (1) the U.S. holder's adjusted tax basis in the debentures or
common stock (as the case may be) and (2) the amount of cash and fair market
value of any property received from such

                                       43
<PAGE>

disposition (other than amounts attributable to accrued interest on the
debentures not previously included in income, which will be treated as interest
for federal income tax purposes). A U.S. holder's adjusted tax basis in a
debenture generally will equal the cost of the debenture to such U.S. holder,
less any principal payments received by such U.S. holder.

  Such gain or loss from the taxable disposition of the debentures or common
stock generally will be long-term capital gain or loss if the debentures were
held for more than one year at the time of the disposition and, in the case of
an individual holder, will be taxed at a maximum rate of 20%. Short-term capital
gains realized by individual U.S. holders are taxed at a maximum rate of 39.6%.
Corporate U.S. holders are subject to a maximum regular income tax rate of 35%
on all capital gains and ordinary income. The deductibility of capital losses is
subject to limitations.


ADJUSTMENT OF CONVERSION PRICE

  The Conversion Price of the debentures is subject to adjustment under certain
circumstances. Under Section 305 of the Code and the Treasury Regulations issued
thereunder, adjustments or the failure to make such adjustments to the
Conversion Price of the debentures may result in a taxable constructive
distribution to the U.S. Holders of debentures if, and to the extent that,
certain adjustments in the Conversion Price that may occur in limited
circumstances (particularly an adjustment to reflect a taxable dividend to
holders of our common stock) increase the proportionate interest of a U.S.
holder in our assets or earnings and profits whether or not the U.S. holders
ever convert the debentures. Such constructive distribution will be treated as a
dividend, resulting in ordinary income (and a possible dividends received
deduction in the case of corporate holders) to the extent of our current and
accumulated earnings and profits, with any excess treated first as a tax-free
return of capital which reduces such U.S. holder's tax basis in the debentures
to the extent thereof and thereafter as gain from the sale or exchange of the
debentures. Generally, a U.S. holder's tax basis in a debenture will be
increased to the extent any such constructive distribution is treated as
dividend. Moreover, if there is not a full adjustment to the Conversion Price of
the debentures to reflect a stock dividend or other event increasing the
proportionate interest of the holders of outstanding common stock in our assets
or earnings and profits, then such increase in the proportionate interest of the
holders of the common stock generally will be treated as a constructive
distribution to such holders, taxable as described above. As a result, U.S.
holders of debentures could have taxable income as a result of an event pursuant
to which they receive no cash or property.


DEDUCTIBILITY OF INTEREST

  Generally, under Section 279 of the Code, an interest deduction in excess of
$5 million is not permitted with respect to certain ''corporate acquisition
indebtedness.'' Corporate acquisition indebtedness includes any indebtedness
that is (1) issued to provide consideration for the direct or indirect
acquisition of stock or assets of another corporation; (2) subordinated; (3)
convertible directly or indirectly into the stock of the issuing corporation;
and (4) issued by a corporation that has a debt to equity ratio that exceeds 2
to 1. Our ability to deduct all of the interest payable on the debentures will
depend on the application of the foregoing tests to us. The availability of an
interest deduction with respect to the debentures was not determinative in our
issuance of the debentures pursuant to this offering.


BACKUP WITHHOLDING AND INFORMATION REPORTING

  We or our designated paying agent will, where required, report to U.S. holders
of debentures (or common stock) and the IRS the amount of any interest paid on
the debentures (or dividends paid with respect to the common stock or other
reportable payments) in each calendar year and the amount of tax, if any,
withheld with respect to such payments.

  Under the backup withholding provisions of the Code and the applicable
Treasury Regulations, a U.S. holder of debentures (or our common stock acquired
upon the conversion of a debenture) may be subject to

                                       44
<PAGE>
backup withholding at the rate of 31% with respect to dividends or interest paid
on, or the proceeds of a sale, exchange or redemption of, debentures or common
stock, unless (a) such holder is a corporation or comes within certain other
exempt categories and when required demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. The amount of any backup withholding from a payment to a U.S.
holder will be allowed as a credit against the U.S. holder's federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the IRS.

  Treasury Regulations (the ''New Withholding Regulations''), generally
effective January 1, 2001, subject to certain transition rules, modify the
currently effective information withholding and backup withholding procedures
and requirements. Prospective investors should consult their own tax advisors
concerning the application of the New Withholding Regulations.

  The preceding discussion of certain U.S. federal income tax consequences is
for general information only and is not tax advice. Accordingly, you should
consult your own tax adviser as to particular tax consequences to you of
purchasing, holding and disposing of the debentures and our common stock,
including the applicability and effect of any state, local or foreign tax laws,
and of any proposed changes in applicable laws.

                                       45
<PAGE>
                             PLAN OF DISTRIBUTION


          The selling holders and their successors, which term includes their
transferees, pledgees or donees or their successors, may sell the debentures and
the common stock into which the debentures are convertible directly to
purchasers or through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions from the
selling holders or the purchasers, which discounts, concessions or commissions
as to any particular underwriter, broker-dealer or agent may be in excess of
those customary in the types of transactions involved.

          The debentures and the common stock into which the debentures are
convertible may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at prices related to such
prevailing market prices, at varying prices determined at the time of sale, or
at negotiated prices. Such sales may be effected in transactions, which may
involve crosses or block transactions (1) on any national securities exchange or
quotation service on which the debentures or the common stock may be listed or
quoted at the time of sale, (2) in the over-the-counter market, (3) in
transactions otherwise than on such exchanges or services or in the over-the-
counter market, (4) through the writing of options, whether such options are
listed on an options exchange or otherwise, or (5) through the settlement of
short sales. In connection with the sale of the debentures and the common stock
into which the debentures are convertible or otherwise, the selling holders may
enter into hedging transactions with broker-dealers or other financial
institutions which may in turn engage in short sales of the debentures or the
common stock into which the debentures are convertible and deliver these
securities to close out such short positions, or loan or pledge the debentures
or the common stock into which the debentures are convertible to broker-dealers
that in turn may sell these securities.

     The aggregate proceeds to the selling holders from the sale of the
debentures or common stock into which the debentures are convertible offered by
them hereby will be the purchase price of such debentures or common stock less
discounts and commissions, if any. Each of the selling holders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of notice or common stock to be made
directly or through agents. We will not receive any of the proceeds from this
offering.

     Our outstanding common stock is listed for trading on the Nasdaq National
Market. We do not intend to list the debentures for trading on any national
securities exchange or on the Nasdaq National Market and can give no assurance
about the development of any trading market for the debentures.

     In order to comply with the securities laws of some states, if applicable,
the debentures and common stock into which the debentures are convertible may be
sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in some states the debentures and common stock into which
the debentures are convertible may not be sold unless they have been registered
or qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.

     The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the debentures and common stock into which the
debentures are convertible, may be "underwriters" within the meaning of Section
2(11) of the Securities Act.  Any discounts, commissions, concessions or profit
they earn on any resale of the shares may be underwriting discounts and
commissions under the Securities Act.  Selling holders who are "underwriters"
within the meaning of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act.  The selling holders
have acknowledged that they understand their obligations to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M, and have agreed that they will not
engage in any transaction in violation of such provision.

     In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus.  A selling holder
may not sell any debentures or common stock described herein and may not
transfer devise or gift such securities by other means not described in this
prospectus.

     To the extent required, the specific debentures or common stock to be sold,
the names of the selling holders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, an any

                                      46

<PAGE>
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a post-
effective amendment to the registration statement of which this prospectus is a
part.

     We entered into a Registration Rights Agreement for the benefit of holders
of the debentures to register that their debentures and common stock under
applicable federal and state securities laws under certain circumstances and at
certain times.  The Registration Rights Agreement provides for cross-
indemnification of the selling holders and VerticalNet and their respective
directors, officers and controlling persons against certain liabilities in
connection with the offer and sale of the debentures and the common stock
including liabilities under the Securities Act.  We will pay all of our expenses
and substantially all of the expenses incurred by the selling holders incident
to the offering and sale of the debentures and the common stock, provided that
each selling holder will responsible for payment of commissions, concessions and
discounts of underwriters, broker-dealers or agents.


                                 LEGAL MATTERS

     The validity of the securities offered by this prospectus will be passed
upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.


                                    EXPERTS

     The consolidated financial statements and schedules of VerticalNet, Inc. as
of December 31, 1997 and 1998, and for each of the years in the three-year
period ended December 31, 1998 and the financial statements of CertiSource, Inc.
as of December 31, 1998 and for the year then ended, have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.

     The financial statements of Techspex, Inc., LabX Technologies, Inc.,
Isadra, Inc. and NECX Exchange, LLC incorporated by reference in this prospectus
and elsewhere in the registration statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.


                            ADDITIONAL INFORMATION

     The Commission permits us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file with the
Commission after the date of this prospectus will automatically update and
supersede this information. However, any information contained herein shall
modify or supersede information contained in documents we filed with the
Commission before the date of this prospectus.

     We incorporate by reference our Annual Report on Form 10-K for the year
ended December 31, 1998. We incorporate by reference our Quarterly Reports on
Forms 10-Q for the quarters ended March 31, June 30, and September 30, 1999. We
incorporate by reference our Reports on Form 8-K dated June 14, July 29, August
10, August 25, September 9, September 21, November 16, December 16, 1999 and
February 11, 2000 and 8-K/A filed February 1, 2000. We also incorporate by
reference any future filings made with the Commission under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act until we sell all of the shares of common
stock being registered or until this offering is otherwise terminated.

     If you request a copy of any or all of the documents incorporated by
reference by written or oral request, then we will send to you the copies you
requested at no charge. However, we will not send exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
documents. You should direct requests for such copies to VerticalNet, Inc., 700
Dresher Road, Suite 100, Horsham, Pennsylvania 19044, Attention: James W.
McKenzie, Jr., (215) 315-3592.

                                      47
<PAGE>


     In addition, we file reports, proxy statements and other information with
the Commission under the Exchange Act. You may read and copy this information at
the following locations of the Commission: (1) Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, (2) Midwest Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and (3) Northeast Regional
Office, Seven World Trade Center, New York, New York 10048.

     You may also obtain copies of this information by mail from the Public
Reference Section of the Commission at 450 Fifth Street, NW, Washington, D.C.
20549, at prescribed rates. Further information on the operation of the
Commission's Public Reference Room in Washington, D.C. can be obtained by
calling the Commission at 1-800-SEC-0330.

     Our common stock is quoted on The Nasdaq National Market. Reports, proxy
statements and other information concerning VerticalNet can be inspected at the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.  The Commission maintains a Web site that contains all
information filed electronically by us. The address of the Commission's Web site
is (http://www.sec.gov.).

                                      48
<PAGE>

                                    PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, in connection with the shelf
registration of the debentures, all of which will be paid by VerticalNet, Inc.:

Registration fee..............................................     $30,360
Transfer Agent and Registrar Fees.............................
Printing and Engraving........................................
Legal Fees....................................................      40,000
Blue Sky Fees and Expenses....................................
Accounting Fees...............................................      25,000
Miscellaneous.................................................

  Total.......................................................

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     The Company's Amended and Restated Articles of Incorporation provide that
pursuant to and to the extent permitted by Pennsylvania law, the Company's
directors shall not be personally liable for monetary damages for breach of any
duty owed to the Company and its shareholders. This provision does not eliminate
the duty of care, and, in appropriate circumstances, equitable remedies such as
an injunction or other forms of non-monetary relief would remain available under
Pennsylvania law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company, for acts
or omissions not in good faith or involving knowing violations of law, or for
actions resulting in improper personal benefit to the director, the provision
also does not affect a director's responsibilities under any other law, such as
federal securities laws or state or federal environmental laws. The Company's
Amended and Restated Bylaws provide that the Company shall indemnify its
officers and directors to the fullest extent permitted by Pennsylvania law,
including some instances in which indemnification is otherwise discretionary
under Pennsylvania law. Pennsylvania law permits the Company to provide similar
indemnification to employees and agents who are not directors or officers. The
determination of whether an individual meets the applicable standard of conduct
may be made by the disinterested directors, independent legal counsel or the
shareholders. Pennsylvania law also permits indemnification in connection with a
proceeding brought by or in the right of the Company to procure a judgment in
its favor. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in that Act and is therefore unenforceable.

     In general, any officer or director of the Company shall be indemnified by
the Company against expenses including attorneys' fees, judgments, fines and
settlements actually and reasonably incurred by that person in connection with a
legal proceeding as a result of such relationship, whether or not the
indemnified liability arises from an action by or in the right of the Company,
if the officer or director acted in good faith, and in the manner believed to be
in or not opposed to the Company's best interest, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. Such indemnity is limited to the extent that (i) such person is
not otherwise indemnified and (ii) such indemnifications not prohibited by
Pennsylvania law or any other applicable law.

Any indemnification under the previous paragraph (unless ordered by a court)
shall be made by the Company only as authorized in the specific case upon the
determination that indemnification of the director or officer is proper in the
circumstances because that person has met the applicable standard of conduct
<PAGE>

set forth above. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum of disinterested directors who are not parties to
such action or (ii) if such quorum is not obtainable or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion. To the extent that a director or officer of the Company shall
be successful in prosecuting an indemnity claim, the reasonable expenses of any
such person and the fees and expenses of any special legal counsel engaged to
determine the possibility of indemnification shall be borne by the Company.

     Expenses incurred by a director or officer of the Company in defending a
civil or criminal action, suit or proceeding shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that person is not entitled to be
indemnified by the Company as authorized by our Bylaws.

     The indemnification and advancement of expenses provided by, or granted
pursuant to Article 8 of our Bylaws is not deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled, both as to action in that person's official capacity and as to action
in another capacity while holding such office.

     The Board of Directors has the power to authorize the Company to purchase
and maintain insurance on behalf of the Company and others to the extent that
power to do so has not been prohibited by the Pennsylvania law, create any fund
to secure any of its indemnification obligations and give other indemnification
to the extent permitted by law. The obligations of the Company to indemnify a
director or officer under Article 8 of our Bylaws is a contract between the
Company and such director or officer and no modification or repeal of our Bylaws
shall detrimentally affect such officer or director with regard to that person's
acts or omissions prior to such amendment or repeal.

     The Company has also purchased insurance for its directors and officers for
certain losses arising from claims or charges made against them in their
capacities as directors and officers of the Company.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed as part of this registration statement:

                                   EXHIBITS

Exhibit Number                            Description
- --------------                            -----------
      3.1           Amended and Restated Articles of Incorporation (1)
      3.2           Amended and Restated Bylaws (1)
      4.1           Indenture, dated as of September 27, 1999, between
                    VerticalNet, Inc. and Bankers Trust Company, as trustee (2)
      4.2           Registration Rights Agreement, dated as of September 21,
                    1999, by and among VerticalNet, Inc. and the initial
                    purchasers (2)
      5.1           Opinion of Morgan, Lewis & Bockius LLP regarding the
                    legality of the securities being registered *
      8.1           Opinion of Morgan, Lewis & Bockius LLP regarding Tax Matters
     12.1           Computation of Ratio of Earnings to Fixed Charges (3)
     23.1           Consent of KPMG LLP *
     23.2           Consent of Arthur Andersen LLP *
     23.3           Consent of Arthur Andersen LLP *
     23.4           Consent of Morgan, Lewis & Bockius LLP (included in its
                    opinion filed as Exhibit 5 hereto)
     24.1           Power of Attorney (included on signature page to this
                    Registration Statement)
     25.1           Form T-1 Statement of Eligibility of the Bankers Trust
                    Company to act as trustee under the Indenture *
<PAGE>

*Filed herewith
(1)  Filed as an exhibit to the Registrant's Registration Statement on Form S-1
     (Registration No. 333-68053) filed with the Commission on November 27, 1998
     amended and incorporated herein by reference.
(2)  Filed as an exhibit to the Registrant's report on Form 10-Q dated September
     30, 1999.
(3)  To be filed by amendment.


ITEM 17. UNDERTAKINGS.

  The undersigned registrant hereby undertakes:

     (1)  To file, during any period in which any offers or sales are being
made, a post-effective amendment to this registration statement:



          (i)   To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

          (ii)  To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment hereof) which, individually or in aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and

          (iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any other
material change to such information in the registration statement.

     (2)  That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities
<PAGE>

being offered therein and the offering of such securities at the time may be
deemed to be the initial bona fide offering thereof.

     (3)  To remove from registration by means of a post-effective amendment any
of the securities which are being registered which remain unsold at the
termination of the offering.

     (4)  That for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof

     (5)  Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
by the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

     The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
<PAGE>

                                  SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN HORSHAM, PENNSYLVANIA ON FEBRUARY ___, 2000.

                    VERTICALNET, INC.

                    By: /S/ MARK L. WALSH
                       ________________________________
                           MARK L. WALSH
                            PRESIDENT

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

Each person in so signing also makes, constitutes and appoints Mark L. Walsh and
Gene S. Godick, and each of them acting alone, his or her true and lawful
attorney-in-fact, with full power of substitution, to execute and cause to be
filed with the Securities and Exchange Commission pursuant to the requirements
of the Securities Act of 1933, as amended, any and all amendments and post-
effective amendments to this registration statement, and including any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act, with exhibits thereto and
other documents in connection therewith, and hereby ratifies and confirms all
that said attorney-in-fact or his or her substitute or substitutes may do or
cause to be done by virtue hereof.

<TABLE>
<CAPTION>
NAME                               CAPACITY                             DATE
- ----                               --------                             ----
<S>                                <C>                                  <C>
/S/ MARK L. WALSH
____________________________        President and Chief Executive        February 11, 2000
MARK L. WALSH                       Officer and Director (Principal
                                    Executive Officer)

/S/ MICHAEL J. HAGAN
____________________________        Executive Vice President and Chief   February 11, 2000
MICHAEL J. HAGAN                    Operating Officer and Director

/S/ GENE S. GODICK
____________________________        Senior Vice President and Chief      February 11, 2000
GENE S. GODICK                      Financial Officer (Principal
                                    Financial and Accounting Officer)

/S/ DOUGLAS A. ALEXANDER
____________________________        Chairman of the Board and Director   February 11, 2000
DOUGLAS A. ALEXANDER

/S/ JEFFREY C. BALLOWE
____________________________        Director                             February 11, 2000
JEFFREY C. BALLOWE

/S/ WALTER W. BUCKLEY III
____________________________        Director                             February 11, 2000
WALTER W. BUCKLEY III
</TABLE>

<PAGE>

                                                                     Exhibit 5.1


                                                  February 11, 2000


VerticalNet, Inc.
700 Dresher Rd., Suite 100
Horsham, PA 19044


Ladies and Gentlemen:


     We have acted as counsel to you in connection with the registration under
the Securities Act of 1933, as amended, by VerticalNet, Inc. (the "Company") of
(i) $115,000,000 aggregate principal amount of 5 1/4% Convertible Subordinated
Debentures due 2004 (the "Debentures"), and (ii) such indeterminable number of
shares of common stock, $.10 par value (the "Common Stock") of the Company as
may be required for issuance upon conversion of the Debentures (the "Conversion
Shares"). The Debentures and the Conversion Shares are to be offered and sold by
certain security holders of the Company. In this regard, we have participated in
the preparation of a Registration Statement on Form S-3 relating to the
Debentures and the Conversion Shares (the "Registration Statement") which you
are filing with the Securities and Exchange Commission.

     We have examined the Registration Statement and such documents and records
of the Company and other documents as we have deemed necessary for the purpose
of this opinion. In all examinations made by us in connection with this opinion
letter, we have assumed the genuineness of all signatures, the legal capacity of
all natural persons executing agreements, instruments or documents, the
completeness and authenticity of all records and documents submitted to us as
originals, and the conformity with the originals of all documents submitted to
us as copies. Based upon the foregoing, we are of the opinion that (i) the
Debentures have been duly authorized and, assuming the Debentures were duly
executed by the Company and duly authenticated by the trustee for the
Debentures, have been legally issued and are valid and binding obligations of
the Company, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally, and to
the application of general principles of equity, and (ii) upon conversion of the
Debentures in accordance with their terms and the indenture pursuant to which
they were issued, the Conversion Shares will be duly authorized, validly issued,
fully paid and nonassessable.

     The foregoing opinions shall be limited to the federal laws of the United
States of America and the laws of the Commonwealth of Pennsylvania.
<PAGE>

     We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectus
included in the Registration Statement under the heading "Legal Matters."  In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.

Very truly yours,

/s/ Morgan, Lewis & Bockius LLP

<PAGE>

                                                                     Exhibit 8.1


February 11, 2000


VerticalNet, Inc.
700 Dresher Road
Horsham, PA  19044

Re:  Tax Opinion - Form S-3 Registration Statement
     ---------------------------------------------

Ladies and Gentlemen:

          You have requested our opinion regarding certain federal income tax
aspects of the issuance of convertible subordinated debentures by VerticalNet,
Inc. (the "Company"), as described in the Registration Statement on Form S-3
(File No. 333-_____), as amended, filed with the Securities and Exchange
Commission on the date hereof (the "Registration Statement"). Our opinion
described herein is based upon our review of the Registration Statement and our
assumption that the Issuance will take place in accordance with the description
included in the Registration Statement.

                                    Opinion
                                    -------

          Based on the foregoing and on the Internal Revenue Code of 1986, as
amended (the "Code"), the regulations promulgated thereunder, and judicial and
administrative interpretations thereof, all as in effect on the date of this
letter, it is our opinion that the statements of law and conclusions of law
included in the Registration Statement under the heading "Certain Federal Income
Tax Consequences" are, in all material respects, true, correct and complete.  No
opinion is expressed regarding any statements, assumptions or opinions regarding
factual matters contained in the Registration Statement.

          Should any of the facts, assumptions or understandings referred to
above prove incorrect, please let us know so that we may consider the effect, if
any, on our opinion.  No
<PAGE>

VerticalNet, Inc.
February 11, 2000
Page 2

assurances can be given that any of the foregoing authorities will not be
modified, revoked, supplemented, revised, reversed or overruled or that any such
modification, revocation, supplementation, revision, reversal or overruling will
not adversely affect the opinion set forth above.

          We understand that this opinion is to be used in connection with the
registration of the shares of  Company's Common Stock pursuant to the Securities
Act of 1933, as amended. We consent to the filing of this opinion in connection
with and as a part of the Registration Statement on Form S-3 and amendments
thereto.  We also hereby consent to the reference to our firm under the caption
"Legal Matters" in the Registration Statement.  In giving such consents,
however, we do not thereby admit that we are acting within the category of
persons whose consent is required under Section 7 of the Act and the rules and
regulations of the Securities and Exchange Commission thereunder.


Very truly yours,



/s/ Morgan, Lewis & Bockius LLP

<PAGE>

                                                                    Exhibit 23.1

Consent OF Independent Auditors

The Board of Directors
VerticalNet, Inc.:

We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.

/s/ KPMG LLP

Philadelphia, Pennsylvania
February 10, 2000

<PAGE>

                                                                    EXHIBIT 23.2


                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports on the financial
statements of Techspex, Inc., LabX Technologies Inc. and Isadra, Inc. dated June
15, 1999, July 30, 1999 and June 2, 1999, respectively, which are included in
VerticalNet Inc.'s current reports on Form 8-K dated June 14, 1999, July 29,
1999 and August 25, 1999, respectively, and to all references to our Firm
included in this registration statement.


                                             /s/ Arthur Andersen LLP


Philadelphia, Pennsylvania
 February 11, 2000

<PAGE>

                                                                    EXHIBIT 23.3


                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report on the financial
statements of NECX Exchange, LLC dated December 23, 1999 included in
VerticalNet, Inc.'s current report on Form 8-K/A dated December 16, 1999 and to
all references to our Firm included in this registration statement.


                                             /s/ Arthur Andersen LLP


Boston, Massachusetts
 February 11, 2000

<PAGE>

                                                                    EXHIBIT 25.1

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

                             --------------------
                                   FORM T-1

            STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
            OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

            CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
            PURSUANT TO SECTION 305(b)(2)

                        ------------------------------

                             BANKERS TRUST COMPANY
              (Exact name of trustee as specified in its charter)

NEW YORK                                                  13-4941247
(Jurisdiction of Incorporation or                         (I.R.S. Employer
organization if not a U.S. national bank)                 Identification no.)

FOUR ALBANY STREET
NEW YORK, NEW YORK                                        10006
(Address of principal                                     (Zip Code)
executive offices)

                             Bankers Trust Company
                             Legal Department
                             130 Liberty Street, 31st Floor
                             New York, New York  10006
                             (212) 250-2201
           (Name, address and telephone number of agent for service)

            -------------------------------------------------------

                               VERTICALNET, Inc
            (Exact name of Registrant as specified in its charter)

<TABLE>
  <S>                                                  <C>
               PENNSYLVANIA                                        23-2815834
  (State or other jurisdiction or organization)        (IRS Employer Identification no.)
</TABLE>

                          700 Dresher Road
                          Horsham, Pennsylvania 19044
                          (215) 328-6100
                  (Address, including zip code and telephone
                        of principal executive offices)

                  5 1/4% Convertible Subordinated Debentures
                                   due 2004
                      (Title of the indenture securities)
<PAGE>

Item 1. General Information.
               Furnish the following information as to the trustee.

               (a)  Name and address of each examining or supervising authority
                    to which it is subject.

               Name                                             Address
               ----                                             -------

               Federal Reserve Bank (2nd District)              New York, NY
               Federal Deposit Insurance Corporation            Washington, D.C.
               New York State Banking Department                Albany, NY

               (b)  Whether it is authorized to exercise corporate trust powers.
                    Yes.

Item 2. Affiliations with Obligor.

               If the obligor is an affiliate of the Trustee, describe each such
affiliation.

               None.

Item 3. -15.   Not Applicable

Item 16.       List of Exhibits.

             Exhibit 1 -     Restated Organization Certificate of Bankers Trust
                             Company dated August 6, 1998, Certificate of
                             Amendment of the Organization Certificate of
                             Bankers Trust Company dated September 25, 1998, and
                             Certificate of Amendment of the Organization
                             Certificate of Bankers Trust Company dated December
                             16, 1998, and Certificate of Amendment of the
                             Organization Certificate of Bankers Trust Company
                             dated July 30th, 1999, copies attached.

             Exhibit 2 -     Certificate of Authority to commence business -
                             Incorporated herein by reference to Exhibit 2 filed
                             with Form T-1 Statement, Registration No. 33-21047.


             Exhibit 3 -     Authorization of the Trustee to exercise corporate
                             trust powers - Incorporated herein by reference to
                             Exhibit 2 filed with Form T-1 Statement,
                             Registration No. 33-21047.

             Exhibit 4 -     Existing By-Laws of Bankers Trust Company, as
                             amended on June 22, 1999. Copy attached.

                                      -2-
<PAGE>

             Exhibit 5 -     Not applicable.

             Exhibit 6 -     Consent of Bankers Trust Company required by
                             Section 321(b) of the Act. - Incorporated herein by
                             reference to Exhibit 4 filed with Form T-1
                             Statement, Registration No. 22-18864.

             Exhibit 7 -     The latest report of condition of Bankers Trust
                             Company dated as of June 30, 1999. Copy attached.

             Exhibit 8 -     Not Applicable.

             Exhibit 9 -     Not Applicable.

                                      -3-
<PAGE>

                                   SIGNATURE



        Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on this 9/th/
day of February, 2000


                                   BANKERS TRUST COMPANY



                                   By:  /s/ Marc J. Parilla
                                        -------------------------------
                                        Marc J. Parilla
                                        Assistant Vice President

                                      -5-
<PAGE>

                                   SIGNATURE



        Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on this 9/th/
day of February, 2000.


                                   BANKERS TRUST COMPANY



                                   By: /s/ Marc J. Parilla
                                      ----------------------------------
                                         Marc J. Parilla
                                         Assistant Vice President

                                      -4-
<PAGE>

                                   RESTATED
                                 ORGANIZATION
                                  CERTIFICATE
                                      OF
                             BANKERS TRUST COMPANY


                         ----------------------------

                              Under Section 8007
                              Of the Banking Law

                         ----------------------------











                             Bankers Trust Company
                              130 Liberty Street
                             New York, N.Y. 10006




 Counterpart Filed in the Office of the Superintendent of Banks, State of New
                             York, August 31, 1998
<PAGE>

                       RESTATED ORGANIZATION CERTIFICATE
                                      OF
                                 BANKERS TRUST
                     Under Section 8007 of the Banking Law

                         -----------------------------


        We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary and a Vice President and an Assistant
Secretary of BANKERS TRUST COMPANY, do hereby certify:

         1.    The name of the corporation is Bankers Trust Company.

         2.    The organization certificate of the corporation was filed by the
Superintendent of Banks of the State of New York on the March 5, 1903.

         3.    The text of the organization certificate, as amended heretofore,
is hereby restated without further amendment or change to read as herein set
forth in full, to wit:


                         "Certificate of Organization
                                      of
                             Bankers Trust Company

        Know All Men By These Presents That we, the undersigned, James A. Blair,
James G. Cannon, E. C. Converse, Henry P. Davison, Granville W. Garth, A. Barton
Hepburn, Will Logan, Gates W. McGarrah, George W. Perkins, William H. Porter,
John F. Thompson, Albert H. Wiggin, Samuel Woolverton and Edward F. C. Young,
all being persons of full age and citizens of the United States, and a majority
of us being residents of the State of New York, desiring to form a corporation
to be known as a Trust Company, do hereby associate ourselves together for that
purpose under and pursuant to the laws of the State of New York, and for such
purpose we do hereby, under our respective hands and seals, execute and duly
acknowledge this Organization Certificate in duplicate, and hereby specifically
state as follows, to wit:

           I.  The name by which the said corporation shall be known is Bankers
Trust Company.

          II.  The place where its business is to be transacted is the City of
New York, in the State of New York.

          III. Capital Stock: The amount of capital stock which the corporation
is hereafter to have is Three Billion One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667)
shares with a par value of $10 each designated as Common Stock and 1,000 shares
with a par value of One Million Dollars ($1,000,000) each designated as Series
Preferred Stock.

        (a)    Common Stock

        1.     Dividends: Subject to all of the rights of the Series Preferred
Stock, dividends may be declared and paid or set apart for payment upon the
Common Stock out of any assets or funds of the corporation legally available for
the payment of dividends.
<PAGE>

        2.    Voting Rights: Except as otherwise expressly provided with
respect to the Series Preferred Stock or with respect to any series of the
Series Preferred Stock, the Common Stock shall have the exclusive right to vote
for the election of directors and for all other purposes, each holder of the
Common Stock being entitled to one vote for each share thereof held.

        3.    Liquidation: Upon any liquidation, dissolution or winding up of
the corporation, whether voluntary or involuntary, and after the holders of the
Series Preferred Stock of each series shall have been paid in full the amounts
to which they respectively shall be entitled, or a sum sufficient for the
payment in full set aside, the remaining net assets of the corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests, to the exclusion of the holders of the Series
Preferred Stock.

4.      Preemptive Rights: No holder of Common Stock of the corporation shall be
entitled, as such, as a matter of right, to subscribe for or purchase any part
of any new or additional issue of stock of any class or series whatsoever, any
rights or options to purchase stock of any class or series whatsoever, or any
securities convertible into, exchangeable for or carrying rights or options to
purchase stock of any class or series whatsoever, whether now or hereafter
authorized, and whether issued for cash or other consideration, or by way of
dividend or other distribution.

        (b)    Series Preferred Stock

        1.     Board Authority:  The Series Preferred Stock may be issued from
time to time by the Board of Directors as herein provided in one or more series.
The designations, relative rights, preferences and limitations of the Series
Preferred Stock, and particularly of the shares of each series thereof, may, to
the extent permitted by law, be similar to or may differ from those of any other
series. The Board of Directors of the corporation is hereby expressly granted
authority, subject to the provisions of this Article III, to issue from time to
time Series Preferred Stock in one or more series and to fix from time to time
before issuance thereof, by filing a certificate pursuant to the Banking Law,
the number of shares in each such series of such class and all designations,
relative rights (including the right, to the extent permitted by law, to convert
into shares of any class or into shares of any series of any class), preferences
and limitations of the shares in each such series, including, buy without
limiting the generality of the foregoing, the following:

               (i)    The number of shares to constitute such series (which
        number may at any time, or from time to time, be increased or decreased
        by the Board of Directors, notwithstanding that shares of the series may
        be outstanding at the time of such increase or decrease, unless the
        Board of Directors shall have otherwise provided in creating such
        series) and the distinctive designation thereof;

               (ii)   The dividend rate on the shares of such series, whether or
        not dividends on the shares of such series shall be cumulative, and the
        date or dates, if any, from which dividends thereon shall be cumulative;

               (iii)   Whether or not the share of such series shall be
        redeemable, and, if redeemable, the date or dates upon or after which
        they shall be redeemable, the amount or amounts per share (which shall
        be, in the case of each share, not less than its preference upon
        involuntary liquidation, plus an amount equal to all dividends thereon
        accrued and unpaid, whether or not earned or declared) payable thereon
        in the case of the redemption thereof, which amount may vary at
        different redemption dates or otherwise as permitted by law;

        (iv) The right, if any, of holders of shares of such series to convert
        the same into, or exchange the same for, Common Stock or other stock as
        permitted by law, and the terms and conditions of such conversion or
        exchange, as well as provisions for adjustment of the conversion rate in
        such events as the Board of Directors shall determine;
<PAGE>

               (v)     The amount per share payable on the shares of such series
        upon the voluntary and involuntary liquidation, dissolution or winding
        up of the corporation;

               (vi)    Whether the holders of shares of such series shall have
        voting power, full or limited, in addition to the voting powers provided
        by law and, in case additional voting powers are accorded, to fix the
        extent thereof; and

               (vii)   Generally to fix the other rights and privileges and any
        qualifications, limitations or restrictions of such rights and
        privileges of such series, provided, however, that no such rights,
        privileges, qualifications, limitations or restrictions shall be in
        conflict with the organization certificate of the corporation or with
        the resolution or resolutions adopted by the Board of Directors
        providing for the issue of any series of which there are shares
        outstanding.

        All shares of Series Preferred Stock of the same series shall be
identical in all respects, except that shares of any one series issued at
different times may differ as to dates, if any, from which dividends thereon may
accumulate. All shares of Series Preferred Stock of all series shall be of equal
rank and shall be identical in all respects except that to the extent not
otherwise limited in this Article III any series may differ from any other
series with respect to any one or more of the designations, relative rights,
preferences and limitations described or referred to in subparagraphs (I) to
(vii) inclusive above.

        2.   Dividends: Dividends on the outstanding Series Preferred Stock of
each series shall be declared and paid or set apart for payment before any
dividends shall be declared and paid or set apart for payment on the Common
Stock with respect to the same quarterly dividend period. Dividends on any
shares of Series Preferred Stock shall be cumulative only if and to the extent
set forth in a certificate filed pursuant to law. After dividends on all shares
of Series Preferred Stock (including cumulative dividends if and to the extend
any such shares shall be entitled thereto) shall have been declared and paid or
set apart for payment with respect to any quarterly dividend period, then and
not otherwise so long as any shares of Series Preferred Stock shall remain
outstanding, dividends may be declared and paid or set apart for payment with
respect to the same quarterly dividend period on the Common Stock out the assets
or funds of the corporation legally available therefor.

        All Shares of Series Preferred Stock of all series shall be of equal
rank, preference and priority as to dividends irrespective of whether or not the
rates of dividends to which the same shall be entitled shall be the same and
when the stated dividends are not paid in full, the shares of all series of the
Series Preferred Stock shall share ratably in the payment thereof in accordance
with the sums which would by payable on such shares if all dividends were paid
in full, provided, however, that nay two or more series of the Series Preferred
Stock may differ from each other as to the existence and extent of the right to
cumulative dividends, as aforesaid.

        3.   Voting Rights: Except as otherwise specifically provided in the
certificate filed pursuant to law with respect to any series of the Series
Preferred Stock, or as otherwise provided by law, the Series Preferred Stock
shall not have any right to vote for the election of directors or for any other
purpose and the Common Stock shall have the exclusive right to vote for the
election of directors and for all other purposes.

        4.   Liquidation: In the event of any liquidation, dissolution or
winding up of the corporation, whether voluntary or involuntary, each series of
Series Preferred Stock shall have preference and priority over the Common Stock
for payment of the amount to which each outstanding series of Series Preferred
Stock shall be entitled in accordance with the provisions thereof and each
holder of Series Preferred Stock shall be entitled to be paid in full such
amount, or have a sum sufficient for the payment in full set aside, before any
payments shall be made to the holders of the Common Stock. If, upon liquidation,
dissolution or winding up of the corporation, the assets of the corporation or
proceeds thereof, distributable among the holders of the shares of all series of
the Series Preferred Stock shall be insufficient to pay in full the preferential
amount aforesaid, then such assets, or the proceeds thereof, shall be
distributed among such holders ratably in accordance with the respective amounts
which would be payable if all amounts payable thereon were paid in full. After
the payment to the holders of Series Preferred Stock of all such amounts to
which they are entitled, as above provided, the remaining assets and funds of
the corporation shall be divided and paid to the holders of the Common Stock.
<PAGE>

        5.   Redemption: In the event that the Series Preferred Stock of any
series shall be made redeemable as provided in clause (iii) of paragraph 1 of
section (b) of this Article III, the corporation, at the option of the Board of
Directors, may redeem at any time or times, and from time to time, all or any
part of any one or more series of Series Preferred Stock outstanding by paying
for each share the then applicable redemption price fixed by the Board of
Directors as provided herein, plus an amount equal to accrued and unpaid
dividends to the date fixed for redemption, upon such notice and terms as may be
specifically provided in the certificate filed pursuant to law with respect to
the series.

        6.   Preemptive Rights: No holder of Series Preferred Stock of the
corporation shall be entitled, as such, as a matter or right, to subscribe for
or purchase any part of any new or additional issue of stock of any class or
series whatsoever, any rights or options to purchase stock of any class or
series whatsoever, or any securities convertible into, exchangeable for or
carrying rights or options to purchase stock of any class or series whatsoever,
whether now or hereafter authorized, and whether issued for cash or other
consideration, or by way of dividend.

        (c)  Provisions relating to Floating Rate Non-Cumulative Preferred
Stock, Series A. (Liquidation value $1,000,000 per share.)

        1.   Designation: The distinctive designation of the series established
hereby shall be "Floating Rate Non-Cumulative Preferred Stock, Series A"
(hereinafter called "Series A Preferred Stock").

        2.   Number: The number of shares of Series A Preferred Stock shall
initially be 250 shares. Shares of Series A Preferred Stock redeemed, purchased
or otherwise acquired by the corporation shall be cancelled and shall revert to
authorized but unissued Series Preferred Stock undesignated as to series.

        3.   Dividends:

        (a)  Dividend Payments Dates. Holders of the Series A Preferred Stock
shall be entitled to receive non-cumulative cash dividends when, as and if
declared by the Board of Directors of the corporation, out of funds legally
available therefor, from the date of original issuance of such shares (the
"Issue Date") and such dividends will be payable on March 28, June 28, September
28 and December 28 of each year (:Dividend Payment Date") commencing September
28, 1990, at a rate per annum as determined in paragraph 3(b) below. The period
beginning on the Issue Date and ending on the day preceding the first Dividend
Payment Date and each successive period beginning on a Dividend Payment Date and
ending on the date preceding the next succeeding Dividend Payment Date is herein
called a "Dividend Period". If any Dividend payment Date shall be, in The City
of New York, a Sunday or a legal holiday or a day on which banking institutions
are authorized by law to close, then payment will be postponed to the next
succeeding business day with the same force and effect as if made on the
Dividend Payment Date, and no interest shall accrue for such Dividend Period
after such Dividend Payment Date.

        (b)  Dividend Rate. The dividend rare from time to time payable in
respect of Series A Preferred Stock (the "Dividend Rate") shall be determined on
the basis of the following provisions:

        (i)  On the Dividend Determination Date, LIBOR will be determined on the
basis of the offered rates for deposits in U.S. dollars having a maturity of
three months commencing on the second London Business Day immediately following
such Dividend Determination Date, as such rates appear on the Reuters Screen
LIBO Page as of 11:00 A.M. London time, on such Dividend Determination Date. If
at least two such offered rates appear on the Reuters Screen LIBO Page, LIBOR in
respect of such Dividend Determination Dates will be the arithmetic mean
(rounded to the nearest one-hundredth of a percent, with five one-thousandths of
a percent rounded upwards) of such offered rates. If fewer than those offered
rates appear, LIBOR in respect of such Dividend Determination Date will be
determined as described in paragraph (ii) below.

        (ii) On any Dividend Determination Date on which fewer than those
offered rates for the applicable maturity appear on the Reuters Screen LIBO Page
as specified in paragraph (I) above, LIBOR will be determined on the basis of
the rates at which deposits in U.S. dollars having a maturity of three months
commending on the second London Business Day immediately following such Dividend
Determination Date and in a principal amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time are offered
by three major banks
<PAGE>

in the London interbank market selected by the corporation at approximately
11:00 A.M., London time, on such Dividend Determination Date to prime banks in
the London market. The corporation will request the principal London office of
each of such banks to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR in respect of such Dividend Determination Date
will be the arithmetic mean (rounded to the nearest one-hundredth of a percent,
with five one-thousandths of a percent rounded upwards) of such quotations. If
fewer than two quotations are provided, LIBOR in respect of such Dividend
Determination Date will be the arithmetic mean (rounded to the nearest one-
hundredth of a percent, with five one-thousandths of a percent rounded upwards)
of the rates quoted by three major banks in New York City selected by the
corporation at approximately 11:00 A.M., New York City time, on such Dividend
Determination Date for loans in U.S. dollars to leading European banks having a
maturity of three months commencing on the second London Business Day
immediately following such Dividend Determination Date and in a principal amount
of not less than $1,000,000 that is representative of a single transaction in
such market at such time; provided, however, that if the banks selected as
aforesaid by the corporation are not quoting as aforementioned in this sentence,
then, with respect to such Dividend Period, LIBOR for the preceding Dividend
Period will be continued as LIBOR for such Dividend Period.

        (ii) The Dividend Rate for any Dividend Period shall be equal to the
lower of 18% of 50 basis points above LIBOR for such Dividend Period as LIBOR is
determined by sections (I) or (ii) above.

As used above, the term "Dividend Determination Date" shall mean, with resect to
any Dividend Period, the second London Business Day prior to the commencement of
such Dividend Period; and the term "London Business Day" shall mean any day that
is not a Saturday or Sunday and that, in New York City, is not a day on which
banking institutions generally are authorized or required by law or executive
order to close and that is a day on which dealings in deposits in U.S. dollars
are transacted in the London interbank market.

        4.   Voting Rights: The holders of the Series A Preferred Stock shall
have the voting power and rights set forth in this paragraph 4 and shall have no
other voting power or rights except as otherwise may from time to time be
required by law.

        So long as any shares of Series A Preferred Stock remain outstanding,
the corporation shall not, without the affirmative vote or consent of the
holders of at least a majority of the votes of the Series Preferred Stock
entitled to vote outstanding at the time, given in person or by proxy, either in
writing or by resolution adopted at a meeting at which the holders of Series A
Preferred Stock (alone or together with the holders of one or more other series
of Series Preferred Stock at the time outstanding and entitled to vote) vote
separately as a class, alter the provisions of the Series Preferred Stock so as
to materially adversely affect its rights; provided, however, that in the event
any such materially adverse alteration affects the rights of only the Series A
Preferred Stock, then the alteration may be effected with the vote or consent of
at least a majority of the votes of the Series A Preferred Stock; provided,
further, that an increase in the amount of the authorized Series Preferred Stock
and/or the creation and/or issuance of other series of Series Preferred Stock in
accordance with the organization certificate shall not be, nor be deemed to be,
materially adverse alterations. In connection with the exercise of the voting
rights contained in the preceding sentence, holders of all series of Series
Preferred Stock which are granted such voting rights (of which the Series A
Preferred Stock is the initial series) shall vote as a class (except as
specifically provided otherwise) and each holder of Series A Preferred Stock
shall have one vote for each share of stock held and each other series shall
have such number of votes, if any, for each share of stock held as may be
granted to them.

        The foregoing voting provisions will not apply if, in connection with
the matters specified, provision is made for the redemption or retirement of all
outstanding Series A Preferred Stock.

        5.   Liquidation: Subject to the provisions of section (b) of this
Article III, upon any liquidation, dissolution or winding up of the corporation,
whether voluntary or involuntary, the holders of the Series A Preferred Stock
shall have preference and priority over the Common Stock for payment out of the
assets of the corporation or proceeds thereof, whether from capital or surplus,
of $1,000,000 per share (the "liquidation value") together with the amount of
all dividends accrued and unpaid thereon, and after such payment the holders of
Series A Preferred Stock shall be entitled to no other payments.
<PAGE>

        6.   Redemption: Subject to the provisions of section (b) of this
Article III, Series A Preferred Stock may be redeemed, at the option of the
corporation in whole or part, at any time or from time to time at a redemption
price of $1,000,000 per share, in each case plus accrued and unpaid dividends to
the date of redemption.

        At the option of the corporation, shares of Series A Preferred Stock
redeemed or otherwise acquired may be restored to the status of authorized but
unissued shares of Series Preferred Stock.

        In the case of any redemption, the corporation shall give notice of such
redemption to the holders of the Series A Preferred Stock to be redeemed in the
following manner: a notice specifying the shares to be redeemed and the time and
place or redemption (and, if less than the total outstanding shares are to be
redeemed, specifying the certificate numbers and number of shares to be
redeemed) shall be mailed by first class mail, addressed to the holders of
record of the Series A Preferred Stock to be redeemed at their respective
addressees as the same shall appear upon the books of the corporation, not more
than sixty (60) days and not less than thirty (30) days previous to the date
fixed for redemption. In the event such notice is not given to any shareholder
such failure to give notice shall not affect the notice given to other
shareholders. If less than the whole amount of outstanding Series A Preferred
Stock is to be redeemed, the shares to be redeemed shall be selected by lot or
pro rata in any manner determined by resolution of the Board of Directors to b
fair and proper. From and after the date fixed in any such notice as the date of
redemption (unless default shall be made by the corporation in providing moneys
at the time and place of redemption for the payment of the redemption price) all
dividends upon the Series A Preferred Stock so called for redemption shall cease
to accrue, and all rights of the holders of said Series A Preferred Stock as
stockholders in the corporation, except the right to receive the redemption
price (without interest) upon surrender of the certificate representing the
Series A Preferred Stock so called for redemption, duly endorsed for transfer,
if required, shall cease and terminate. The corporation's obligation to provide
moneys in accordance with the preceding sentence shall be deemed fulfilled if,
on or before the redemption date, the corporation shall deposit with a bank or
trust company (which may e an affiliate of the corporation) having an office in
the Borough of Manhattan, City of New York, having a capital and surplus of at
least $5,000,000 funds necessary for such redemption, in trust with irrevocable
instructions that such funds be applied to the redemption of the shares of
Series A Preferred Stock so called for redemption. Any interest accrued on such
funds shall be paid to the corporation from time to time. Any funds so deposited
and unclaimed at the end of two (2) years from such redemption date shall be
released or repaid to the corporation, after which the holders of such shares of
Series A Preferred Stock so called for redemption shall look only to the
corporation for payment of the redemption price.

             IV.  The name, residence and post office address of each member of
the corporation are as follows:

<TABLE>
<CAPTION>
              Name                Residence                       Post Office Address
              ----
<S>                               <C>                             <C>
James A. Blair                    9 West 50/th/ Street,           33 Wall Street,
                                    Manhattan, New York City        Manhattan, New York City

James G. Cannon                   72 East 54/th/ Street,          14 Nassau Street,
                                    Manhattan New York City         Manhattan, New York City

E. C. Converse                    3 East 78/th/ Street,           139 Broadway,
                                    Manhattan, New York City        Manhattan, New York City

Henry P. Davison                  Englewood,                      2 Wall Street,
                                    New Jersey                      Manhattan, New York City

Granville W. Garth                160 West 57/th/ Street,         33 Wall Street
                                    Manhattan, New York City        Manhattan, New York City

A. Barton Hepburn                 205 West 57/th/ Street          83 Cedar Street
                                    Manhattan, New York City        Manhattan, New York City
</TABLE>

<PAGE>

<TABLE>
<S>                               <C>                             <C>
William Logan                     Montclair,                      13 Nassau Street
                                    New Jersey                      Manhattan, New York City

George W. Perkins                 Riverdale,                      23 Wall Street,
                                    New York                        Manhattan, New York City

William H. Porter                 56 East 67/th/ Street           270 Broadway,
                                    Manhattan, New York City        Manhattan, New York City

John F. Thompson                  Newark,                         143 Liberty Street,
                                    New Jersey                      Manhattan, New York City

Albert H. Wiggin                  42 West 49/th/ Street,          214 Broadway,
                                    Manhattan, New York City        Manhattan, New York City

Samuel Woolverton                 Mount Vernon,                   34 Wall Street,
                                    New York                        Manhattan, New York City

Edward F.C. Young                 85 Glenwood Avenue,             1 Exchange Place,
                                    Jersey City, New Jersey         Jersey City, New Jersey
</TABLE>

        V.   The existence of the corporation shall be perpetual.

        VI.  The subscribers, the members of the said corporation, do, and each
for himself does, hereby declare that he will accept the responsibilities and
faithfully discharge the duties of a director therein, if elected to act as
such, when authorized accordance with the provisions of the Banking Law of the
State of New York.

        VII. The number of directors of the corporation shall not be less that
10 nor more than 25."

        4.   The foregoing restatement of the organization certificate was
authorized by the Board of Directors of the corporation at a meeting held on
July 21, 1998.

        IN WITNESS WHEREOF, we have made and subscribed this certificate this
6th day of August, 1998.



                                                   James T. Byrne, Jr.
                                            --------------------------
                                                   James T. Byrne, Jr.
                                            Managing Director and Secretary


                                                   Lea Lahtinen
                                            --------------------------
                                                   Lea Lahtinen
                                          Vice President and Assistant Secretary


                                                   Lea Lahtinen
                                            --------------------------
                                                   Lea Lahtinen
<PAGE>

State of New York            )
                             )  ss:
County of New York           )


       Lea Lahtinen, being duly sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.

                                                   Lea Lahtinen
                                              -------------------------
                                                   Lea Lahtinen

Sworn to before me this
6th day of August, 1998.


    Sandra L. West
- ----------------------
    Notary Public

         SANDRA L. WEST
 Notary Public State of New York
         No. 31-4942101
   Qualified in New York County
Commission Expires September 19, 1998
<PAGE>

                              State of New York,

                              Banking Department


        I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "RESTATED ORGANIZATION
CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8007 of the Banking Law,"
dated August 6, 1998, providing for the restatement of the Organization
Certificate and all amendments into a single certificate.



Witness, my hand and official seal of the Banking Department at the City of New
                   York, this 31st day of August in the Year of our Lord one
                   thousand nine hundred and ninety-eight.



                                                          Manuel Kursky
                                               --------------------------------
                                                Deputy Superintendent of Banks
<PAGE>

                           CERTIFICATE OF AMENDMENT

                                    OF THE

                           ORGANIZATION CERTIFICATE

                               OF BANKERS TRUST

                     Under Section 8005 of the Banking Law

                        _______________________________

        We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and Secretary and a Vice President and an Assistant Secretary of
Bankers Trust Company, do hereby certify:

        1.  The name of the corporation is Bankers Trust Company.

        2.  The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.

        3.  The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.

        4.  Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:

        "III. The amount of capital stock which the corporation is hereafter to
        have is Three Billion, One Million, Six Hundred Sixty-Six Thousand, Six
        Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred
        Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
        (200,166,667) shares with a par value of $10 each designated as Common
        Stock and 1000 shares with a par value of One Million Dollars
        ($1,000,000) each designated as Series Preferred Stock."

is hereby amended to read as follows:

        "III. The amount of capital stock which the corporation is hereafter to
        have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six
        Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two
        Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
        (200,166,667) shares with a par value of $10 each designated as Common
        Stock and 1500 shares with a par value of One Million Dollars
        ($1,000,000) each designated as Series Preferred Stock."
<PAGE>

        5.  The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.

        IN WITNESS WHEREOF, we have made and subscribed this certificate this
25th day of September, 1998


                                                  James T. Byrne, Jr.
                                          --------------------------------
                                                  James T. Byrne, Jr.
                                           Managing Director and Secretary


                                                      Lea Lahtinen
                                          --------------------------------
                                                      Lea Lahtinen

                                          Vice President and Assistant Secretary

State of New York        )
                         ) ss:
County of New York       )

        Lea Lahtinen, being fully sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.

                                                            Lea Lahtinen
                                                       ----------------------
                                                            Lea Lahtinen

Sworn to before me this 25/th/ day
of September, 1998


        Sandra L. West
- --------------------------
        Notary Public


          SANDRA L. WEST
  Notary Public State of New York
          No. 31-4942101
   Qualified in New York County
Commission Expires September 19, 2000
<PAGE>

                               State of New York,

                               Banking Department

      I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF
THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the
Banking Law," dated September 16, 1998, providing for an increase in authorized
capital stock from $3,001,666,670 consisting of 200,166,667 shares with a par
value of $10 each designated as Common Stock and 1,000 shares with a par value
of $1,000,000 each designated as Series Preferred Stock to $3,501,666,670
consisting of 200,166,667 shares with a par value of $10 each designated as
Common Stock and 1,500 shares with a par value of $1,000,000 each designated as
Series Preferred Stock.


Witness, my hand and official seal of the Banking Department at the City of New
                   York, this 25th day of September in the Year of our Lord one
                   thousand nine hundred and ninety-eight.

                                                    Manuel Kursky
                                            ------------------------------
                                            Deputy Superintendent of Banks
<PAGE>

                            CERTIFICATE OF AMENDMENT

                                     OF THE

                            ORGANIZATION CERTIFICATE

                                OF BANKERS TRUST

                      Under Section 8005 of the Banking Law

                         _____________________________

        We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and Secretary and a Vice President and an Assistant Secretary of
Bankers Trust Company, do hereby certify:

        1.   The name of the corporation is Bankers Trust Company.

        2.   The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.

        3.   The organization certificate as heretofore amended is hereby
amended to increase the aggregate number of shares which the corporation shall
have authority to issue and to increase the amount of its authorized capital
stock in conformity therewith.

        4.   Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:

        "III. The amount of capital stock which the corporation is hereafter to
        have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six
        Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two
        Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
        (200,166,667) shares with a par value of $10 each designated as Common
        Stock and 1500 shares with a par value of One Million Dollars
        ($1,000,000) each designated as Series Preferred Stock."

is hereby amended to read as follows:

        "III. The amount of capital stock which the corporation is hereafter to
        have is Three Billion, Six Hundred Twenty-Seven Million, Three Hundred
        Eight Thousand, Six Hundred Seventy Dollars ($3,627,308,670), divided
        into Two Hundred Twelve Million, Seven Hundred Thirty Thousand, Eight
        Hundred Sixty- Seven (212,730,867) shares with a par value of $10 each
        designated as Common Stock and 1500 shares with a par value of One
        Million Dollars ($1,000,000) each designated as Series Preferred Stock."
<PAGE>

        5.  The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.

        IN WITNESS WHEREOF, we have made and subscribed this certificate this
16th day of December, 1998

                                                James T. Byrne, Jr.
                                        ---------------------------------
                                                James T. Byrne, Jr.
                                         Managing Director and Secretary


                                                      Lea Lahtinen
                                        ---------------------------------
                                                      Lea Lahtinen
                                        Vice President and Assistant Secretary

State of New York       )
                        ) ss:
County of New York      )

        Lea  Lahtinen, being fully sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.

                                                          Lea Lahtinen
                                                  ---------------------------
                                                          Lea Lahtinen

Sworn to before me this 16/th/ day
of December, 1998


        Sandra L. West
- ------------------------------
        Notary Public

           SANDRA L. WEST
    Notary Public State of New York
           No. 31-4942101
     Qualified in New York County
 Commission Expires September 19, 2000
<PAGE>

                              State of New York,

                              Banking Department


        I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section
8005 of the Banking Law," dated December 16, 1998, providing for an increase in
authorized capital stock from $3,501,666,670 consisting of 200,166,667 shares
with a par value of $10 each designated as Common Stock and 1,500 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$3,627,308,670 consisting of 212,730,867 shares with a par value of $10 each
designated as Common Stock and 1,500 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.

Witness, my hand and official seal of the Banking Department at the City of New
                    York, this 18th day of December in the Year of our Lord one
                    thousand nine hundred and ninety-eight.


                                            P. Vincent Conlon
                                      --------------------------------
                                      Deputy Superintendent of Banks
<PAGE>

                           CERTIFICATE OF AMENDMENT

                                    OF THE

                           ORGANIZATION CERTIFICATE

                               OF BANKERS TRUST

                     Under Section 8005 of the Banking Law

                         _____________________________

        We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and Secretary and a Vice President and an Assistant Secretary of
Bankers Trust Company, do hereby certify:

        1.   The name of the corporation is Bankers Trust Company.

        2.   The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.

        3.   The organization certificate as heretofore amended is hereby
amended to reduce the minimum number of directors required from 10 to 7, and to
reduce in the maximum number of directors from 25 to 15.

        4.   Article VII of the organization certificate with reference to
number of directors, which reads as follows:

        "VII. The number of directors of the corporation shall be not less than
10 nor more than 25"

is hereby amended to read as follows:

        "VII. The number of directors of the corporation shall be not less than
7 nor more than 15"

        5.   The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.


        IN WITNESS WHEREOF, we have made and subscribed this certificate this
30th day of July 1999


                                                James T. Byrne, Jr.
                                        ------------------------------------
                                                James T. Byrne, Jr.
                                          Managing Director and Secretary


                                                    Lea Lahtinen
                                        ------------------------------------
                                                    Lea Lahtinen
                                        Vice President and Assistant Secretary
<PAGE>

State of New York          )
                           ) ss:
County of New York         )

        Lea Lahtinen, being fully sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.

                                                      Lea Lahtinen
                                                -----------------------
                                                      Lea Lahtinen

Sworn to before me this 30/th/ day
of July, 1999


        Sandra L. West
- ---------------------------
        Notary Public

          SANDRA L. WEST
  Notary Public State of New York
          No. 31-4942101
   Qualified in New York County
Commission Expires September 19, 2000




<PAGE>

                              State of New York,

                              Banking Department


     I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section
8005 of the Banking Law," dated September 3, 1999, providing for a reduction in
the minimum number of directors required from ten to seven, and a reduction in
the maximum number of directors from twenty-five to fifteen.

Witness, my hand and official seal of the Banking Department at the City of New
York,

             this 3/rd/ day of September in the Year of our Lord one thousand
             nine hundred and ninety-nine.

                                            P. Vincent Conlon
                                      ------------------------------
                                      Deputy Superintendent of Banks
<PAGE>

                                     BY-LAWS



                                  JUNE 22, 1999



                              Bankers Trust Company
                                    New York
<PAGE>

                                    BY-LAWS
                                      of
                             Bankers Trust Company


                                   ARTICLE I

                           MEETINGS OF STOCKHOLDERS


SECTION 1.  The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.

SECTION 2.  Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.

SECTION 3.  At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.

SECTION 4.  The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.


                                   ARTICLE II

                                    DIRECTORS


SECTION 1.  The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than seven nor more than fifteen, as may from time to time be fixed by
resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board of
Directors or any Committee thereof may participate in a meeting of the Board of
Directors or Committee thereof by means of a conference telephone or similar
communications
<PAGE>

equipment which allows all persons participating in the meeting to hear each
other at the same time. Participation by such means shall constitute presence in
person at such a meeting.

All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.

No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.

SECTION 2.  Vacancies not exceeding one-third of the whole number of the Board
of Directors may be filled by the affirmative vote of a majority of the
directors then in office, and the directors so elected shall hold office for the
balance of the unexpired term.

SECTION 3.  The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.

SECTION 4.  The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.

SECTION 5.  Regular meetings of the Board of Directors shall be held from time
to time provided, however, that there shall be at least ten regular monthly
meetings during a calendar year. Special meetings of the Board of Directors may
be called upon at least two day's notice whenever it may be deemed proper by the
Chairman of the Board or, the Chief Executive Officer or, in their absence, by
such other director as the Board of Directors may have designated pursuant to
Section 3 of this Article, and shall be called upon like notice whenever any
three of the directors so request in writing.

SECTION 6.  The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.


                                   ARTICLE III

                                   COMMITTEES


SECTION 1.  There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
<PAGE>

The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.

A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or members of the Committee present, even though
less than a quorum, may designate any one or more of such directors as a
substitute or substitutes for any absent member or members of the Committee, and
each such substitute or substitutes shall be counted for quorum, voting, and all
other purposes as a member or members of the Committee.

SECTION 2.  There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall conduct
the annual directors' examinations of the Company as required by the New York
State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.

In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
Committee shall hold regular quarterly meetings and during the intervals thereof
shall meet at other times on call of the Chairman.

SECTION 3.  The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
<PAGE>

                                   ARTICLE IV

                                    OFFICERS

SECTION 1.  The Board of Directors shall elect from among their number a
Chairman of the Board and a Chief Executive Officer; and shall also elect a
President, and may also elect a Senior Vice Chairman, one or more Vice Chairmen,
one or more Executive Vice Presidents, one or more Senior Managing Directors,
one or more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.

SECTION 2.  The Board of Directors shall designate the Chief Executive Officer
of the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.

The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these By-
Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records and
premises of the Company and shall delegate such authority to his subordinates.
He shall have the duty to report to the Audit Committee on all matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company
<PAGE>

which he deems advisable or which the Audit Committee may request. Additionally,
the General Auditor shall have the duty of reporting independently of all
officers of the Company to the Audit Committee at least quarterly on any matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company that should be brought to the attention of the directors
except those matters responsibility for which has been vested in the General
Credit Auditor. Should the General Auditor deem any matter to be of special
immediate importance, he shall report thereon forthwith to the Audit Committee.
The General Auditor shall report to the Chief Financial Officer only for
administrative purposes.

The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.

SECTION 3.  The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.

SECTION 4.  The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.


                                   ARTICLE V

               INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS

SECTION 1.  The Company shall, to the fullest extent permitted by Section 7018
of the New York Banking Law, indemnify any person who is or was made, or
threatened to be made, a party to an action or proceeding, whether civil or
criminal, whether involving any actual or alleged breach of duty, neglect or
error, any accountability, or any actual or alleged misstatement, misleading
statement or other act or omission and whether brought or threatened in any
court or administrative or legislative body or agency, including an action by or
in the right of the Company to procure a judgment in its favor and an action by
or in the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Company is servicing or
served in any capacity at the request of the Company by reason of the fact that
he, his testator or intestate, is or was a director or officer of the Company,
or is serving or served such other
<PAGE>

corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, amounts paid in
settlement, and costs, charges and expenses, including attorneys' fees, or any
appeal therein; provided, however, that no indemnification shall be provided to
any such person if a judgment or other final adjudication adverse to the
director or officer establishes that (i) his acts were committed in bad faith or
were the result of active and deliberate dishonesty and, in either case, were
material to the cause of action so adjudicated, or (ii) he personally gained in
fact a financial profit or other advantage to which he was not legally entitled.

SECTION 2.  The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.

SECTION 3.  The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.

SECTION 4.  Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief Executive
Officer or the President, and (ii) only if and to the extent that, after making
such efforts as the Chairman of the Board, the Chief Executive Officer or the
President shall deem adequate in the circumstances, such person shall be unable
to obtain indemnification from such other enterprise or its insurer.

SECTION 5.  Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
<PAGE>

SECTION 6.  The right to be indemnified or to the reimbursement or advancement
of expense pursuant to this Article V (i) is a contract right pursuant to which
the person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.

SECTION 7.  If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.

SECTION 8.  A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.


                                   ARTICLE VI

                                      SEAL


SECTION 1.  The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.

SECTION 2.  The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
<PAGE>

                                  ARTICLE VII

                                 CAPITAL STOCK


SECTION 1.  Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.


                                 ARTICLE VIII

                                 CONSTRUCTION


SECTION 1.  The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.


                                  ARTICLE IX

                                  AMENDMENTS


SECTION 1.  These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE>

I, Marc J. Parilla, Assistant Vice President of Bankers Trust Company, New York,
New York, hereby certify that the foregoing is a complete, true and correct copy
of the By-Laws of Bankers Trust Company, and that the same are in full force and
effect at this date.


                                           /s/ Marc J. Parilla
                                           -------------------
                                             Marc J. Parilla
                                        Assistant Vice President



DATED:  February 9, 2000
<PAGE>

<TABLE>
<CAPTION>
<S>                    <C>                       <C>                        <C>                   <C>
Legal Title of Bank:   Bankers Trust Company     Call Date:  09/30/99       State#:  36-4840      FFIEC 031
Address:               130 Liberty Street        Vendor ID:  D              Cert#:   00623        Page RC-1
City, State    ZIP:    New York, NY  10006       Transit#:   21001003

                                                                                                         11
</TABLE>

Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 1999

All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.

Schedule RC--Balance Sheet

<TABLE>
<CAPTION>
                                                                                                                    ------------
                                                                                                                    |  C400    |
                                                                                                   ----------------------------
                                                              Dollar Amounts in Thousands          |  RCFD                     |
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>
ASSETS                                                                                             |  / / / / / / / / / / /    |
  1.  Cash and balances due from depository institutions (from Schedule RC-A):                     |  / / / / / / / / / / /    |
      a.   Noninterest-bearing balances and currency and coin (1) .............                    |   0081        1,652,000   |1.a.
      b.   Interest-bearing balances (2) ......................................                    |   0071        3,292,000   |1.b.
  2.  Securities:                                                                                  |  / / / / / / / / / / /    |
      a.   Held-to-maturity securities (from Schedule RC-B, column A) .........                    |   1754                0   |2.a.
      b.   Available-for-sale securities (from Schedule RC-B, column D)........                    |   1773        3,240,000   |2.b.
  3.  Federal funds sold and securities purchased under agreements to resell...                    |   135        10,104,000     3.
  4.  Loans and lease financing receivables:                                                       |  / / / / / / / / / / /    |
      a.   Loans and leases, net of unearned income (from Schedule RC-C)   RCFD 2122  15,897,000   |  / / / / / / / / / / /    |4.a.
      b.   LESS:   Allowance for loan and lease losses.....................RCFD  3123    444,000   |  / / / / / / / / / / /    |4.b.
      c.   LESS:   Allocated transfer risk reserve ........................RCFD  3128          0   |  / / / / / / / / / / /    |4.c.
      d.   Loans and leases, net of unearned income,                                               |  / / / / / / / / / / /    |
           allowance, and reserve (item 4.a minus 4.b and 4.c) ................                    |   2125       15,453,000   |4.d.
  5.  Trading Assets (from schedule RC-D)  ....................................                    |   3545        8,582,000   | 5.
  6.  Premises and fixed assets (including capitalized leases) ................                    |   2145          757,000   | 6.
  7.  Other real estate owned (from Schedule RC-M) ............................                    |   2150           82,000   | 7.
  8.  Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)     |   2130          773,000   | 8.
  9.  Customers' liability to this bank on acceptances outstanding ............                    |   2155           73,000   | 9.
 10.  Intangible assets (from Schedule RC-M) ..................................                    |   2143           74,000   |10.
 11.  Other assets (from Schedule RC-F) .......................................                    |   2160        3,722,000   |11.
 12.  Total assets (sum of items 1 through 11) ................................                    |   2170       47,804,000   |12.
                                                                                                   -----------------------------
</TABLE>

- --------------------------
(1)   Includes cash items in process of collection and unposted debits.
(2)   Includes time certificates of deposit not held for trading.
<PAGE>

<TABLE>
<S>                   <C>                      <C>                        <C>                   <C>
Legal Title of Bank:  Bankers Trust Company    Call Date: 06/30/99        State#:   364840      FFTEC  031
Address:              130 Liberty Street       Vendor ID: D               Cert#:    00623       Page  RC-2
City, State Zip:      New York, NY  10006      Transit#:  21001003

                                                                                                      12
Schedule RC--Continued
                                               Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13.    Deposits:                                                                                |  / / / / / / / / / / / / / / / / /
       a.   In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)   | RCON 2200    14,113,000  |13.a.
            (1)   Noninterest-bearing(1)..............................................          | RCON 6631     2,748,000  |13.a.(1)
            (2)   Interest-bearing....................................................          | RCON 6636    11,365,000  |13.a.(2)
       b.   In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E   |  / / / / / / / / / / / / / / / / /
            part II)                                                                            | RCFN 2200    11,869,000  |13.b.
            (1)   Noninterest-bearing.................................................          | RCFN 6631     2,329,000  |13.b.(1)
            (2)   Interest-bearing....................................................          | RCFN 6636     9,540,000  |13.b.(2)
14.    Federal funds purchased and securities sold under agreements to repurchase               | RCFD 2800     3,195,000  |14.
15.    a.   Demand notes issued to the U.S. Treasury..................................          | RCON 2840       363,000  |15.a.
       b.   Trading liabilities (from Schedule RC-D)..................................          | RCFD 3548     4,118,000  |15.b.
16.    Other borrowed money (includes mortgage indebtedness and obligations under capitalized
         leases):                                                                               | / / / / / / / / / / / / / / / / /
       a.   With a remaining maturity of one year or less.............................          | RCFD 2332     1,797,000  |16.a.
       b.   With a remaining maturity of more than one year through three years.......          | A547          1,864,000  |16.b.
       c.   With a remaining maturity of more than three years........................          | A548            143,000  |16.c
17.    Not Applicable.                                                                          | / / / / / / / / / / / /  |17.
18.    Bank's liability on acceptances executed and outstanding.......................          | RCFD 2920        73,000  |18.
19.    Subordinated notes and debentures (2)..........................................          | RCFD 3200       330,000  |19.
20.    Other liabilities (from Schedule RC-G).........................................          | RCFD 2930     3,738,000  |20.
21.    Total liabilities (sum of items 13 through 20).................................          | RCFD 2948    41,603,000  |21.
22.    Not Applicable                                                                           |  / / / / / / / / / / / / |
                                                                                                | / / / / / / / / / / / /  |22.
EQUITY CAPITAL                                                                                  | / / / / / / / / / / / /  |
23.    Perpetual preferred stock and related surplus .................................          | RCFD 3838     1,500,000  |23.
24.    Common stock...................................................................          | RCFD 3230     2,127,000  |24.
25.    Surplus (exclude all surplus related to preferred stock).......................          | RCFD 3839       541,000  |25.
26.    a.   Undivided profits and capital reserves....................................          | RCFD 3632     2,124,000  |26.a.
       b.   Net unrealized holding gains (losses) on available-for-sale securities....          | RCFD 8434        (6,000) |26.b.
       c.   Accumulated net gains (losses) on cash flow hedges........................          | RCFD 4336             0  |26c.
27.    Cumulative foreign currency translation adjustments............................          | RCFD 3284       (85,000) |27.
28.    Total equity capital (sum of items 23 through 27)..............................          | RCFD 3210     6,201,000  |28.
29.    Total liabilities and equity capital (sum of items 21 and 28)..................          | RCFD 3300    47,804,000  |29
                                                                                                |__________________________|
Memorandum
To be reported only with the March Report of Condition.
   1.   Indicate in the box at the right the number of the statement below that best describes the
        most comprehensive level of auditing work performed for the bank by independent external     ____________ Number ______
        auditors as of any date during 1997......................................................... |RCFD  6724  N/A         | M.1
                                                                                                      ----------- -------------

1  =    Independent audit of the bank conducted in accordance         4 =  Directors' examination of the bank performed by other
        with generally accepted auditing standards by a certified          external auditors (may be required by state
        public accounting firm which submits a report on the bank          chartering authority)
2  =    Independent audit of the bank's parent holding company        5 =  Review of the bank's financial statements by external
        conducted in accordance with generally accepted auditing           auditors
        standards by a certified public accounting firm which         6 =  Compilation of the bank's financial statements by
        submits a report on the consolidated holding company               external auditors
        (but not on the bank separately)                              7 =  Other audit procedures (excluding tax preparation work)
3  =    Directors' examination of the bank conducted in               8 =  No external audit work
        accordance with generally accepted auditing standards
        by a certified public accounting firm (may be required by
        state chartering authority)
- ----------------------
(1)     Including total demand deposits and noninterest-bearing time and savings deposits.
(2)     Includes limited-life preferred stock and related surplus.
</TABLE>


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