<PAGE>
As filed with the Securities and Exchange Commission on April 14, 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:
Steven M. Ruskin, Esq.
Morgan, Lewis & Bockius LLP
300 South Grand Ave., #2200
Los Angeles, CA 90071
(213) 612-2500
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 Fee
--------------------- -------------- ------------------ ------------------ --------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value per share.......... 3,094,699 $40.25(1) $124,561,634.80(1) $32,885
Common Stock, $.01 par value
per share.................... 366,690 $40.25(2) $ 14,759,272.00(2) $ 3,897
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, and
based upon the average of the high and low prices of the Common Stock
reported on the Nasdaq National Market on April 13, 2000.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(g) under the Securities Act of 1933, as amended, and based upon
the average of the high and low prices of the Common Stock reported on the
Nasdaq National Market on April 13, 2000.
================================================================================
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>
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.
SUBJECT TO COMPLETION, DATED APRIL 14, 2000
PRELIMINARY PROSPECTUS
3,461,389 Shares
VERTICALNET, INC.
Common Stock
This prospectus relates to the public offering, which is not being underwritten,
of 3,461,389 shares of common stock and up to an additional 366,690 shares of
common stock which may be issuable to R. W. Electronics, LLC in connection with
our acquisition of its assets.
The selling shareholders may offer for resale through this prospectus the shares
of common stock at various times at market prices prevailing at the time of sale
or at privately negotiated prices. The selling shareholders may resell 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 not receive any of the proceeds from the resale of the common stock offered
through this prospectus. We will bear all costs, expenses and fees in connection
with the registration of the shares. The selling shareholders will bear all
commissions and discounts, if any, attributable to the sales of the shares.
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 April 13, 2000
was $37.06 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
RISK FACTORS BEGIN ON PAGE 4.
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.
April __, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY..................................................................... 3
RISK FACTORS................................................................ 4
FORWARD-LOOKING STATEMENTS.................................................. 18
USE OF PROCEEDS............................................................. 18
SELLING SHAREHOLDERS........................................................ 19
PLAN OF DISTRIBUTION........................................................ 20
LEGAL MATTERS............................................................... 21
EXPERTS..................................................................... 21
ABOUT THIS PROSPECTUS....................................................... 21
WHERE YOU CAN FIND MORE INFORMATION......................................... 21
</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 two separate two-for-
one splits of our common stock, the first of which was effected on August 20,
1999 and the second of which was effected 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
In December 1999, we acquired NECX.com LLC, a business-to-business market
maker for the electronic component and hardware markets. NECX acts as a third
party intermediary, purchasing electronic hardware and components from various
vendors for resale to foreign and domestic companies. NECX's exchange operates
to match buyers' and suppliers' needs, providing a solution to inventory
imbalances that result from over-capacity or shortages within existing
contractual relationships. In March 2000, we completed our acquisition of R.W.
Electronics, Inc., which operates in the same business as NECX. With these
acquisitions, management has segmented the business into two operating segments,
consisting of vertical trade communities and our exchange business.
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>
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to purchase the shares of common stock
offered through this prospectus.
OUR LIMITED OPERATING HISTORY AND EVOLVING REVENUE MODEL MAKES IT DIFFICULT TO
EVALUATE WHETHER WE CAN SUSTAIN AND GENERATE REVENUES.
We launched our first vertical trade community in October 1995 and thus
have a limited operating history. In addition, our revenue model is evolving,
which, together with our limited operating history, makes evaluating our future
prospects very difficult. Currently, our Internet-based revenues are generated
primarily from the sale of advertising on our vertical trade communities. In
the future, we expect to generate a greater percentage of our revenue from
multiple sources, including e-commerce and business services. In particular, we
expect that a significant percentage of our overall revenues will come from
NECX. We may not be able to sustain our current revenues or successfully
generate e-commerce or business services revenue. We also may not be able to
integrate the revenue streams of NECX successfully into an e-commerce platform.
If we do not sustain our current revenue or generate e-commerce or business
services revenue, including revenue from exchange 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 reported a net loss of $53.5
million for the year ended December 31, 1999. As of December 31, 1999, our
accumulated deficit was $72.8 million. We expect to continue to incur
significant losses in the foreseeable future. We may never be profitable or, if
we become profitable, we may be unable to sustain profitability.
WE EXPECT OUR OPERATING EXPENSES TO INCREASE.
Our limited operating history makes predicting our future operating
results, including operating expenses, difficult. 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. Our revenues may not grow or may not even
continue at their current level. In addition, we plan to increase our operating
expenses significantly to:
. launch additional vertical trade communities;
. increase our internal sales and marketing operations;
. enhance our technologies;
. develop and deploy our e-commerce initiatives;
. design and integrate a scalable on-line exchange for NECX;
. enter into additional sponsorship agreements;
. broaden our customer support capabilities; and
. pursue marketing and distribution alliances.
We also expect our expenses to increase significantly due to the impact of
amortization expense and other charges resulting from completed and future
acquisitions. 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;
4
<PAGE>
. 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 services,
as well as enhancements to our existing products and services, on a
timely basis;
. market conditions in the electronic components industry;
. the amount and seasonal nature of our electronic component sales;
. 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 past and future acquisitions.
Many of these factors are beyond our control.
In the course of our business, we may acquire securities of privately-held
companies with whom we form strategic relationships. Our quarterly operating
results may also fluctuate significantly due to accounting rules governing the
treatment of these investments. Specifically, before the market value of these
securities become readily determinable as a result of being tradable in a public
market, they are carried on our balance sheet at cost. However, if these non-
public securities become salable in the public market as a result of a
transaction in which such securities are exchanged for public securities, the
accounting rules require us to record a non-operating gain or loss equal to the
difference between our cost and the market value of such securities, regardless
of whether we sell or retain them. Our holdings in such securities are then
marked to market at the end of each quarter. In addition, if the market value of
an equity security in which we have invested becomes readily determinable and we
sell the security, we will realize a gain or loss on the transaction. These non-
recurring gains or losses may occur from time to time and could cause
significant fluctuations in our quarterly results. There can be no assurance
that we will realize any gain from our investments. Finally, if it is determined
that a decline in the fair value of one of our investments is other than
temporary, the investment may be deemed impaired and we would be required to
write-down or write-off the carrying value of our investment. Such a result may
be outside of our control and could adversely affect our stock price and
business.
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, quarterly fluctuations in exchange revenues may
disproportionately affect our revenues, due to their 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 and
cause revenues derived from our sales of advertising on co-branded pages to
decrease.
In June 1999, as part of our overall reconsideration of our portal
alliances, we terminated a three-year sponsorship agreement with Excite, Inc.
Additionally, in October 1999, we terminated our sponsorship agreement with Alta
Vista. We are interested in entering into additional alliances 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 alliances. 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 alliances with search engines, these alliances may not necessarily
increase the traffic on our vertical trade communities.
5
<PAGE>
WE MAY ULTIMATELY BE UNABLE TO COMPETE IN THE MARKET FOR INTERNET PRODUCTS AND
SERVICES, ADVERTISING AND E-COMMERCE.
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 and
service 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 on-line services and
traditional off-line media, such as print publications and trade associations.
Several companies offer competitive vertical trade communities. We expect that
additional companies will offer competing vertical trade communities on a
standalone or portfolio basis.
The market for e-commerce solutions in the electronic components industry,
although at an early stage of development, is also intensely competitive,
evolving and subject to rapid technological and other change.
Our competitors in the electronic components industry vary in size and in
the scope and breadth of the services and features offered and include:
. component manufacturers;
. franchised and independent distributors;
. other market makers;
. electronic components brokers;
. on-line catalog aggregators;
. on-line excess surplus auction companies;
. enterprise software companies;
. e-procurement providers; and
. vertical content providers.
We expect the intensity of competition to increase in the future as the amount
of e-commerce transacted over the Internet grows. Increased competition may
result in reduced margins and loss of market share, either of which could
seriously harm our business.
Many of our competitors have longer operating histories, greater brand
recognition and greater financial, technical, marketing and other resources than
we do, 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, ours. If we are unable to compete successfully against our
competitors, our business, financial condition and operating results may be
negatively impacted.
WE MAY NOT REALIZE ANY RETURN ON OUR INVESTMENTS, AND MAY EVEN LOSE ENTIRE
INVESTMENTS UNDERTAKEN IN CONNECTION WITH STRATEGIC RELATIONSHIPS.
In connection with strategic relationships that we enter, we are
increasingly asked to make equity investments in the companies with whom we form
relationships. We may never realize any return on these investments, which
generally exceed $1.0 million in each such instance. In fact, we may lose our
entire investment, which would materially and adversely affect our business and
financial condition. The success of any such investment is far from certain,
given that our partners have limited financial and other resources, yet are
subject to many of the same risks and uncertainties that we face in our
business, including limited operating histories, evolving revenue models and
uncertain market acceptance of their products and services. Moreover, we are
often unable to require terms and conditions of the investment (e.g., board
membership or observer rights) that are particularly favorable to us vis-a-vis
other investors. Allocating our financial resources to these types of
investments, rather than reinvesting those funds in our own business, may
ultimately cause our business to suffer.
6
<PAGE>
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 numerous risks including, without
limitation, the following:
. 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 integrate the services, products and personnel of
any acquisition successfully 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;
. we may not realize any return on our investment and may even 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.
THE INTEGRATION OF THE EXCHANGES INTO OUR OPERATIONS MAY NOT RESULT IN
ADDITIONAL REVENUES.
We believe our acquisition of NECX and other exchanges could result in
substantially higher revenues for us. However, our ability to generate
substantially higher revenues is dependent on our ability to integrate off-line
exchange business with an on-line business. In the two-week period beginning
with our December 16, 1999 acquisition of NECX and ending on December 31, 1999,
NECX generated net revenues of approximately $2.3 million, all of which were
attributable to its off-line market-making business. By comparison, VerticalNet
generated net revenues of approximately $18.4 million in 1999, all of which were
derived from on-line advertising and e-commerce arrangements.
To integrate the exchange into our vertical trade communities, we have
retained Computer Sciences Corporation to help design and build a new on-line
exchange for NECX. We expect this project to be expensive and time-consuming.
Customers who currently use NECX may no longer do so after the transition. There
can be no assurance that this project will be completed at the cost and on the
timeline that we currently contemplate. If we cannot integrate NECX's
traditional off-line business effectively into our on-line solution, whether due
to time, monetary or other limitations, or if we cannot retain existing
customers and attract new ones, the potential to generate additional revenues
through our exchange business may never be realized, which could adversely
affect our business, financial condition and operating results.
OUR ON-LINE EXCHANGE MAY NOT BE SUCCESSFUL IF IT IS NOT ADOPTED BY A SIGNIFICANT
NUMBER OF BUYERS AND SUPPLIERS.
We are attempting to transition the off-line market-making business of NECX
into an on-line exchange. If we do not successfully transition those buyers and
suppliers who use NECX's off-line market-making business to an on-line exchange
and attract a significant number of additional buyers and suppliers to an on-
line exchange, our on-line exchange will not be widely accepted, which in turn
would limit the growth of our e-commerce revenues and could adversely affect our
business, financial condition and operating results. Whether we can retain and
attract buyers and suppliers will depend in large part on our ability to design,
develop and implement a secure, user-friendly application with features and
functionality that buyers and suppliers find attractive in an e-commerce
solution and that provides substantial value to its users over their traditional
procurement methods. Even if and after we launch our on-line exchange, buyers
and suppliers may continue purchasing and selling products through traditional
procurement methods, rather than adopting an Internet-based solution. Buyers
and suppliers also may not use our on-line exchange if they do not perceive it
as a neutral marketplace that does not favor one participant over another.
7
<PAGE>
THE ELECTRONICS INDUSTRY HAS HISTORICALLY EXPERIENCED CYCLES AND DOWNTURNS THAT
COULD ADVERSELY AFFECT OUR BUSINESS.
General economic downturns and business cycles have historically had an
adverse economic effect upon participants in the electronics industry, including
hardware and component manufacturers, distributors and market makers such as
NECX and RW Electronics. In addition, lengthier life-cycles for existing
electronic products and delays in new product development and introduction can
affect demand for electronic hardware and components. If economic downturns or
the cyclical nature of the electronic industry causes a reduction in the amount
of electronic components bought and sold, our business, financial condition and
operating results will be adversely affected.
IF WE ARE UNABLE TO MAINTAIN GROSS PROFIT MARGINS IN OUR EXCHANGE BUSINESS, OUR
OPERATING RESULTS WILL SUFFER.
Gross profit margins in our exchange business are affected by numerous
factors, including the following:
. component supply;
. demand for components;
. inventory levels held by electronic manufacturers and distributors;
. component lead times;
. product sales mix; and
. our ability to purchase components at favorable prices.
Many of these factors are beyond our control. To the extent any decrease in
our gross profit margins is not accompanied by either a proportional increase in
transaction volume or a proportional decrease in our operating expenses, our
operating results, and thus our business, will suffer.
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 increase advertising revenues and develop other sources of
revenues, our business may suffer. Our ability to increase our advertising
revenues depends on many factors, including without limitation:
. 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.
Other factors could also affect our advertising 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.
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
cashflows 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 year ended December 31, 1999, approximately $3.8 million, or 18.1%, of our
reported revenue was generated by barter advertising arrangements.
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
8
<PAGE>
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. In addition, we anticipate seasonality
in our exchange business, as sales of electronic components and hardware have
historically been highest in the last quarter of the calendar year. Thus,
quarterly fluctuations in exchange revenues may disproportionately affect our
revenues because of their substantial contribution to our overall revenues.
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 in part 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 terms similar to those in as our
current agreements.
IF WE DO NOT DEVELOP THE "VERTICALNET" BRAND AND OUR VERTICAL TRADE COMMUNITY
AND OTHER 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) and our recent acquisitions,
including NECX. If our brand awareness is weakened, it could decrease the
attractiveness of our
9
<PAGE>
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 year ended December 31, 1999, approximately 6% of our revenues,
including exchange 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,
Tradeum, Isadra, LabX, CertiSource and RW Electronics. These acquisitions may
not meet our expectations.
IF WE ARE UNABLE TO PROVIDE OUR CUSTOMERS AND USERS WITH REAL-TIME ACCURATE
PRODUCT INFORMATION, OUR E-COMMERCE STRATEGY WILL NOT SUCCEED.
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 database.
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 load this data
accurately 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 business, 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.
WE MAY NOT BE ABLE TO EFFECT OUR GROWTH STRATEGY IF WE ARE UNABLE TO COMPLETE
FUTURE ACQUISITIONS.
We have been growing, and plan to continue to grow, our business through
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
10
<PAGE>
acquisition successfully, finance the acquisition or integrate the acquired
business, products or technologies into our existing business operation. If we
are unable to complete future acquisitions, our business, financial condition
and operating results could be negatively impacted.
OUR RAPID GROWTH MAKES MANAGING OUR GROWTH EFFECTIVELY DIFFICULT.
We have rapidly and significantly expanded our operations and expect to
continue to do so 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 implement
systems, train and manage our employees or integrate our recent and future
acquisitions successfully, our business, financial condition and operating
results could be negatively impacted.
OUR BUSINESS IS SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL
OPERATIONS.
A substantial portion of our current business is based upon international
sales. We believe that our international sales will increase in the future. In
addition, we purchase a substantial amount of components from entities based in
foreign countries. We are subject to a number of risks and uncertainties
associated with these international business activities. These risks and
uncertainties generally include:
. difficulties in the enforcement of contractual obligations and
intellectual property rights, including licensing rights;
. currency exchange rate fluctuations and higher duty rates;
. unexpected changes in regulatory requirements;
. tariffs, import and export controls and regulations and other trade
barriers;
. longer accounts receivable payment cycles and difficulties in collecting
accounts receivable;
. increased costs and difficulties in managing and staffing international
operations;
. compliance with applicable United States and foreign laws, especially
import/export requirements;
. potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
. the costs and burdens of complying with a wide variety of foreign laws
and differing trade customs and practices;
. political instability; and
. potential transportation delays.
These factors may have a negative effect on current and future international
operations and, consequently, on our business, results of operations and
financial condition.
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 on-line 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 appropriate international joint venture partners, 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.
11
<PAGE>
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, buyers and
suppliers 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.
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 acquisitions of Isadra and Tradeum, and their respective technologies,
may not be successfully integrated into our existing technology. Additionally,
we may be unsuccessful in utilizing Tradeum's technology to build the on-line
platform for NECX.
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
respond to these developments successfully 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 brands.
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.
12
<PAGE>
OUR INTERESTS MAY CONFLICT WITH THOSE OF INTERNET CAPITAL GROUP, OUR LARGEST
SHAREHOLDER, WHICH MAY AFFECT OUR BUSINESS STRATEGY AND OPERATIONS NEGATIVELY.
As a result of its stock ownership and board representation, Internet
Capital Group, Inc. 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 March 15, 2000, Internet Capital Group beneficially owned
24,590,020 shares, or 33.5%, of our common stock. In addition, at March 15,
2000, Internet Capital Group owned warrants to purchase an additional 478,624
shares of our common stock and $5.0 million of our convertible subordinated
debentures, convertible into 250,000 shares of our 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 its number of business-to-business
assets, in part through acquisitions and investments. Internet Capital Group,
therefore, may seek to acquire or invest in companies that we would find
attractive. While we may partner with Internet Capital Group on future
acquisitions or investments, we have no current contractual obligations to do
so. We do not have any contracts or other 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.
Additionally, in order to avoid registration under the Investment Company
Act of 1940, Internet Capital Group may need to own more than 25% of our voting
securities. If its ownership interest falls below 25%, Internet Capital Group
may need to either liquidate its position entirely or purchase additional voting
securities to return to an ownership interest of at least 25% in order to avoid
having to register as an investment company. The possible need of Internet
Capital Group to maintain a 25% ownership position could influence its decisions
regarding actions that may otherwise be in the best interest of our public
shareholders.
OUR SUCCESS DEPENDS 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. 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 technical staff, 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 technical salespeople could limit our ability to design,
develop and implement our e-commerce solutions and other technology, increase
sales in our existing vertical trade communities and 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 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 and depends on the increased
acceptance and use of the Internet as a medium of commerce. If e-commerce does
not grow or grows more slowly 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:
. 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;
13
<PAGE>
. customers and suppliers may be unwilling use online vendors due to
security and confidentiality concerns;
. 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 or
inconsistent service quality;
. adverse publicity and concerns about the security and confidentiality of
e-commerce transactions could discourage its acceptance and growth;
. lack of human contact that current traditional suppliers provide; and
. lack of availability of cost-effective, high-speed Internet service.
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 not yet fully occurred.
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.
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 on-line 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 currently use authentication technology, which requires
passwords and other information to prevent unauthorized persons from accessing a
customer's information. We also use encryption technology, which transforms
information into a "code" designed to be unreadable by third parties, to protect
confidential information such as credit card numbers in commerce transactions.
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, which would slow 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,
14
<PAGE>
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.
WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS AND MAY INFRINGE THE
PROPRIETARY RIGHTS OF OTHERS.
Proprietary rights are important to our success and our competitive
position. As of March 20, 2000, we own and use 22 trademarks registered with the
United States Patent and Trademark Office ("PTO"). Additionally, we have 23
applications for registration of various trademarks pending with the PTO.
Outside of the United States, as of March 20, 2000, we own and use 6 trademarks
registered with various foreign patent and trademark offices and have 26
applications pending with foreign patent and trademark offices. Although we seek
to protect our proprietary rights, we may be unable to protect our trademarks
and other proprietary rights adequately or to prevent others from claiming
violations of their trademarks and other proprietary rights. Generally, our
domain names for our vertical trade communities cannot be protected as
trademarks because they are considered "generic" under applicable law. In
addition, effective copyright and trademark protection may be unavailable 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, which makes it 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 and indemnification from those third parties; however,
this may not adequately protect us. Any of these claims, regardless of their
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 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 materially if costs resulting from these claims
are not covered by our insurance or exceed our coverage.
WE MAY BE EXPOSED TO PRODUCT LIABILITY AND OTHER COMMERCIAL CLAIMS.
We face potential liability for claims based on the nature of the products
that we sell and distribute, including those sales 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.
15
<PAGE>
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.
WE MAY NOT HAVE SUFFICIENT CASH FLOW TO SERVICE OUR DEBT.
As of December 31, 1999, we had approximately $118.1 million in long term
debt (including the current portion). 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.
WE MAY REQUIRE ADDITIONAL CAPITAL FOR OUR OPERATIONS, WHICH COULD HAVE A
NEGATIVE EFFECT ON OUR SHAREHOLDERS.
We currently anticipate that the net proceeds of our September 1999
offering of debentures and the sale of our Series A 6% convertible redeemable
preferred stock and a warrant to Microsoft, together with our existing borrowing
arrangements, current investments (including equity interests in other entities)
and other 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 to fund rapid expansion, pursue
customer sales and implementation, develop new or enhanced solutions and
services, respond to competitive pressures or 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 shareholders will be reduced,
shareholders may experience additional dilution and these securities may have
powers, preferences and rights that are senior to those of the rights of 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 could fall.
16
<PAGE>
As of April 10, 2000 the holders of up to approximately 38,044,920 shares
of common stock, warrants to purchase 2,290,416 shares of common stock and
Series A 6.00% convertible redeemable preferred stock convertible into 1,151,080
shares of common stock have demand or 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.
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 models 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.
THE YEAR 2000 PROBLEM MAY STILL HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
We could possibly face problems or disruptions in our business as a result
of the Year 2000 problem and are continuing to assess potential issues. It is
possible that errors or defects remain undetected or that dates other than
January 1 or February 29 trigger Year 2000 type problems. 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 past and 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.
If 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. If our production and operational facilities that support our Web sites
are not Year 2000 compliant, small portions of our Web sites may become
unavailable.
17
<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
5 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 common stock
offered through this prospectus.
18
<PAGE>
SELLING SHAREHOLDERS
The shares of common stock were issued by VerticalNet in connection with
the acquisitions of Tradeum, Inc., National Career Search, Inc., HRLibrary.com,
Inc. and the assets of Leasend.com, Inc. and R.W. Electronics, LLC. In each
case, such transactions were exempt from the registration requirements of the
Securities Act. VerticalNet has agreed with each selling shareholder to file the
registration statement to register for resale the shares of common stock set
forth below. None of the selling shareholders has had a material relationship
with VerticalNet within the past three years other than as a result of the
ownership of our shares or other securities.
The following table sets forth information, as of April 7, 2000, with
respect to each selling shareholder. The information below is based on
information provided by or on behalf of the selling shareholders. The selling
shareholders may offer all, some or none of the common stock. Because the
selling shareholders may offer all or some portion of the common stock, no
estimate can be given as to the amount of the common stock that will be held by
the selling shareholders upon completion of this offering. In addition, the
selling shareholders identified below may have sold, transferred or otherwise
disposed of all or a portion of their common stock since the date on which they
provided the information regarding their common stock.
Shares
Beneficially
Owned Before Shares Offered
Name Offering Hereby
- --------------------------------------------------------------------------------
Zvi Schreiber LLC 389,483 389,483
- --------------------------------------------------------------------------------
Wyoma Investments 302,121 302,121
Limited
- --------------------------------------------------------------------------------
Zev Laderman 217,731/1/ 206,401
- --------------------------------------------------------------------------------
Fenway Partners 192,096 192,096
Capital Fund II, L.P.
- --------------------------------------------------------------------------------
52nd Street 75,186 75,186
Associates
- --------------------------------------------------------------------------------
TEAIT Capital, LLC 44,761 44,761
- --------------------------------------------------------------------------------
Northworld Holdings 42,537 42,537
Limited
- --------------------------------------------------------------------------------
Shmuel Rockman 40,396 40,396
- --------------------------------------------------------------------------------
Eastlane Corporation 27,153 27,153
Limited
- --------------------------------------------------------------------------------
The Danonel Settlement 19,054 19,054
- --------------------------------------------------------------------------------
Solomont Family 19,054 19,054
Investment Trust
- --------------------------------------------------------------------------------
Schimwell Properties 19,054 19,054
Limited
- --------------------------------------------------------------------------------
Tova Osofski 4,573 4,573
- --------------------------------------------------------------------------------
Alfred and Patricia 4,427 4,427
Frei
- --------------------------------------------------------------------------------
Frimer Gellman & Co. 3,003 3,003
Advocates
- --------------------------------------------------------------------------------
Ellis Enterprises 2,286 2,286
- --------------------------------------------------------------------------------
Ronit Hazut 762 762
- --------------------------------------------------------------------------------
Reuters Holdings 105,805 105,805
Switzerland SA
- --------------------------------------------------------------------------------
Israel Seed III L.P. 449,342 449,342
- --------------------------------------------------------------------------------
Israel Seed III (Israel) 26,782 26,782
L.P.
- --------------------------------------------------------------------------------
Vertex Investment 70,342 70,342
(III) Limited
- --------------------------------------------------------------------------------
Vertex-Yozma L.P. 26,122 26,122
- --------------------------------------------------------------------------------
Vertex-Discount L.P. 16,898 16,898
- --------------------------------------------------------------------------------
Jan Baan and Paul Baan 121,822 121,822
- --------------------------------------------------------------------------------
Vertex Management (III) Pte. Ltd. 29,328 29,328
- --------------------------------------------------------------------------------
STI Venture Fund Ltd. 45,848 45,848
- --------------------------------------------------------------------------------
Eris Holding B.V. 289,201 289,201
- --------------------------------------------------------------------------------
Global Employment 78,388 78,388
Solutions, Inc.
- --------------------------------------------------------------------------------
Leasend.com, Inc. 151,352 79,660
- --------------------------------------------------------------------------------
M.H. International
Associates, Inc. 16,818 8,852
- --------------------------------------------------------------------------------
R.W. Electronics, LLC(2) 720,652 720,652
- --------------------------------------------------------------------------------
Total 3,552,377 3,461,389
- --------------------------------------------------------------------------------
/1/ Includes options to purchase 11,330 shares of our common stock exercisable
within 60 days of April 7, 2000.
/2/ An additional number of shares of common stock may be issued to the
shareholder in the event that the average closing price of our common stock
on the Nasdaq National Market for the period commencing on February 17,
2000, and ending on the trading day immediately prior to the date on which
this registration statement becomes effective is less than $94.36 per
share. In such case we will issue such number of additional shares of
common stock equal to $34,600,000 divided by the closing price of our
common stock on the trading day immediately prior to the date on which this
registration statement is declared effective, less 366,690 shares; provided
that in no event shall such number of additional shares of common stock
exceed 366,690 shares. Based on the average closing price of our common
stock for the period from February 17, 2000 through April 13, 2000 and the
closing price of our common stock on April 13, 2000, 366,690 additional
shares of common stock would be issued.
19
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders and their successors, which term includes
their transferees, pledgees or donees or their successors, may sell the common
stock 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 shareholders 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 common stock 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. The common stock may be sold by one or more of,or a
combination of, the following:
. a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction,
. purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
. an exchange distribution in accordance with the rules of such
exchange,
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
. in privately negotiated transactions.
In connection with the sale of the common stock, the selling shareholders
may enter into hedging transactions with broker-dealers or other financial
institutions which may in turn engage in short sales of the common stock and
deliver these securities to close out such short positions, or loan or pledge
the common stock to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling shareholders from the sale of the
common stock offered by them hereby will be the purchase price of such common
stock less discounts and commissions, if any. Each of the selling shareholders
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 common stock to be made
directly or through agents. We will not receive any of the proceeds from this
offering.
Our common stock is listed for trading on the Nasdaq National Market. We
intend to list the common stock offered through this prospectus for trading on
the Nasdaq National Market.
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless it has have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
The selling shareholders and any underwriters, broker-dealers or agents
that participate in the sale of the common stock, may be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933. Any discounts,
commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act of 1933. Selling
shareholders who are "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933 will be subject to the prospectus delivery requirements
of the Securities Act of 1933. The selling shareholders have acknowledged that
they understand their obligations to comply with the provisions of the
Securities Exchange Act of 1934 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 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus. A selling shareholder may not sell any
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 common stock to be sold, the names of
the selling shareholders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any
20
<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.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed
upon for us by our general counsel, James W. McKenzie, Jr.
EXPERTS
The consolidated financial statements and schedule of VerticalNet, Inc. as
of December 31, 1998 and 1999, and for each of the years in the three-year
period ended December 31, 1999, 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 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 report, have been audited by Arthur Andersen
LLP, independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
ABOUT THIS PROSPECTUS
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by
VerticalNet, Inc., any selling shareholder or by any other person. Neither the
delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information herein is correct as of
any time subsequent to the date hereof. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
securities covered by this prospectus, nor does it constitute an offer to or
solicitation of any person in any jurisdiction in which such offer or
solicitation may not lawfully be made.
WHERE YOU CAN FIND MORE INFORMATION
The SEC 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 the documents listed below and any future
filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the offering is completed.
(a) Annual Report on Form 10-K for the year ended December 31, 1999.
(b) Our Current Report on Form 8-K filed on December 29, 1999, as amended
by the Current Report on Form 8-K/A filed on February 1, 2000.
(c) Our Current Reports on Form 8-K filed February 11, 2000, February 22,
2000, April 6, 2000, April 11, 2000 and April 14, 2000.
(d) The description of our common stock contained in a registration
statement on Form 8-A filed January 19, 1999.
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.
21
<PAGE>
In addition, we file reports, proxy statements and other information with
the SEC under the Securities Exchange Act of 1934. 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.).
22
<PAGE>
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM WHAT IS
IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS FROM WHAT
IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT AN
OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY STATE
IN WHICH THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS
IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY CHANGE AFTER
THAT DATE.
-------------
VERTICALNET, INC.
3,461,389 SHARES
OF COMMON STOCK
PROSPECTUS
APRIL , 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses of the issuance and
distribution of the securities offered hereby, all of which will be paid by
VerticalNet, Inc.:
Registration fee.............................................. $36,782
Printing fees................................................. 5,000
Legal Fees.................................................... 5,000
Accounting Fees............................................... 15,000
Miscellaneous................................................. 10,000
-------
Total....................................................... 71,782
=======
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 filed as part of this registration statement are as
follows:
EXHIBITS
Exhibit Number Description
- -------------- -----------
4.1 Registration Rights Agreement dated March 23,2000 between
VerticalNet, Inc. and the Holder's Representative
4.2(1) Asset Purchase Agreement by and among VerticalNet, Inc.,
NECX.com LLC, R.W. Electronics Trust, R.W. Electronics,
Inc., Robert Benedict and Peter L. LeSaffre
5.1 Opinion of James W. McKenzie, Esq. regarding the
legality of the securities being registered
23.1 Consent of KPMG LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of James W. McKenzie, Esq. (included in his
opinion filed as Exhibit 5.1 hereto)
24.1 Power of Attorney (included on signature page to this
Registration Statement)
(1) Filed as an exhibit to the Registrant's report on Form 8-K filed April
14, 2000.
<PAGE>
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.
<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 APRIL 14, 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 April 14, 2000
MARK L. WALSH Officer and Director (Principal
Executive Officer)
/s/ Michael J. Hagan
- ---------------------------- Executive Vice President and Chief April 14, 2000
MICHAEL J. HAGAN Operating Officer and Director
/s/ Gene S. Godick
- ---------------------------- Senior Vice President and Chief April 14, 2000
GENE S. GODICK Financial Officer (Principal
Financial and Accounting Officer)
/s/ Douglas A. Alexander
- ---------------------------- Chairman of the Board and Director April 14, 2000
DOUGLAS A. ALEXANDER
/s/ Jeffrey C. Ballowe
- ---------------------------- Director April 14, 2000
JEFFREY C. BALLOWE
/s/ Walter W. Buckley III
- ---------------------------- Director April 14, 2000
WALTER W. BUCKLEY III
/s/ Leo J. Hindery, Jr.
- ---------------------------- Director April 14, 2000
LEO J. HINDERY, JR.
</TABLE>
<PAGE>
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of March
23, 2000 (the "Effective Date"), is made by and between VerticalNet, Inc., a
Pennsylvania corporation ("VerticalNet"), and the Holders' Representative, as
such term is defined below.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, VerticalNet, VERT Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of VerticalNet ("VERT Sub"), Tradeum, Inc., a
Delaware corporation (the "Company"), and Zvi Schreiber entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, among
other things, VERT Sub merged with and into Tradeum. VerticalNet has agreed to
issue to the Holders that certain number of shares (the "Shares") of Common
Stock, determined in accordance with Section 2.1(a) of the Merger Agreement;
WHEREAS, in order to induce the Company to enter into the Merger
Agreement, VerticalNet has agreed, among other things, to provide registration
rights to the Holders, severally, with respect to the Shares in accordance with
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Definitions.
------------
The following words and terms are used in this Agreement and have the
meanings ascribed to them in this Section 1 or at the locations in the Agreement
indicated below:
(a) "Agreement" is defined in the preamble to this Agreement.
(b) "Black-Out Period" is defined in Section 2(b).
(c) "Board" is defined in Section 2(c).
(d) "Commission" means the U.S. Securities and Exchange Commission.
(e) "Common Stock" means the common stock, par value $.01 per share, of
VerticalNet.
1
<PAGE>
(f) "Effective Date" is defined in the preamble to this Agreement.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Form S-3 Registration Statement" is defined in Section 2(a).
(i) "Holders" means the stockholders of the Company, as reflected on
Appendix A attached hereto.
- ----------
(j) "Holder's Representative" means Michael Eisenberg or such successor
Holders' Representative as shall be designated by the Holders in writing.
(k) "Indemnified Persons" is defined in Section 4(a).
(l) "Indemnifying Persons" is defined in Section 4(a).
(m) "Merger Agreement" is defined in the recitals.
(n) "NASD" means the National Association of Securities Dealers, Inc.
(o) "Registrable Shares" means the 2,573,852 Shares issued to the
Holders pursuant to Section 2.1(a) of the Merger Agreement, and any other shares
of Common Stock issued in respect thereof by reason of a stock split, stock
dividend or similar change in the capitalization of VerticalNet.
(p) "Securities Act" means the Securities Act of 1933, as amended.
(q) "Shares" is defined in the recitals.
(r) "VerticalNet" is defined in the preamble to this Agreement.
2. Registration Rights.
-------------------
(a) Promptly, and in no event later than (i) the third business day
after the date (the "10-K Filing Date") VerticalNet files with the Commission
its Annual Report on Form 10-K for the fiscal year ended December 31, 1999, or
(ii) if the 10-K Filing Date is March 27, 2000, March 31, 2000, VerticalNet will
file with the Commission a shelf registration statement (the "Form S-3
Registration Statement") on Form S-3 (or any successor or other appropriate form
under the Securities Act) covering the Registrable Shares and use reasonable
commercial efforts to cause the Form S-3 Registration Statement to become
effective as promptly as practicable following the filing thereof. VerticalNet
will respond promptly to any communications from the Commission with respect to
the Form S-3 Registration Statement.
(b) VerticalNet shall have the right, upon giving written notice (the
"Suspension Notice") to the Holders' Representative of the exercise of such
right, to require each Holder not to sell any Registrable Shares pursuant to the
Form S-3 Registration
2
<PAGE>
Statement for a reasonable period (as determined in good faith by the Board of
Directors of VerticalNet (the "Board")) from the date on which the Suspension
Notice is given until the date VerticalNet notifies the Holders' Representative
that the use of the prospectus included in such registration statement may be
resumed for the disposition of Registrable Securities (a "Black-Out Period"), if
the Board, in its reasonable judgment upon advice of counsel, determines that
the Form S-3 Registration Statement is no longer effective or usable for resale
of Registrable Securities. During any such Black-Out Period, each Holder agrees
not to sell any Registrable Shares under the Form S-3 Registration Statement for
such period of time as the Board, with the advice of counsel, may in good faith
deem advisable. VerticalNet shall have the right to impose a Black-Out Period no
more than five (5) times, and the number of days subject to Black-Out Periods
shall not exceed 75 days in the aggregate.
(c) Once the Form S-3 Registration Statement has become effective,
VerticalNet will, subject to Sections 2(b) and 2(d), use reasonable commercial
efforts to maintain the effectiveness of such registration statement for a
period of one (1) year following the Effective Date.
(d) Notwithstanding anything to the contrary in Section 2(c),
VerticalNet shall have no obligation to maintain the effectiveness of the Form
S-3 Registration Statement after such time as the Holders are permitted by law
to sell the Registrable Shares pursuant to (a) Rule 144 promulgated by the
Commission under the Securities Act, as such Rule may from time to time be
amended, or (b) any similar rule or regulation hereafter adopted by the
Commission.
(e) Subject to Sections 2(b) and 2(d) hereof, from time to time,
VerticalNet will amend or supplement the registration statement and prospectus
contained therein as and to the extent necessary to comply with the federal
securities and any applicable state securities statute or regulation.
(f) VerticalNet will notify the Holders' Representative (A) when a
prospectus or any prospectus supplement or amendment has been filed and when the
same becomes effective, (B) of any request by the Commission or any other
federal or state governmental authority for amendments or supplements to the
Form S-3 Registration Statement, (C) of the issuance by the Commission or any
other governmental entity of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that purpose, or
(D) of the receipt by VerticalNet of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose.
(g) Notwithstanding anything to the contrary contained herein, no
Holder shall have rights of any nature under this Agreement prior to such time
that such Holder delivers to VerticalNet such documentation as set forth in
Section 6(a) hereof.
3
<PAGE>
3. Termination of Registration Rights. All of each Holder's rights under
----------------------------------
Section 2 of this Agreement shall expire at such time as all of the Registrable
Securities held by such Holder have been sold or have become eligible for sale
in accordance with the provisions of Rule 144 under the Securities Act.
4. Indemnification and Contribution.
--------------------------------
(a) VerticalNet shall indemnify and hold harmless each Holder and any
underwriter (as defined in the Securities Act) for such Holder, each of their
officers, directors, shareholders or partners, and each other person or entity,
if any, who "controls" such Holder or underwriter or entity within the meaning
of the Securities Act (collectively, "Indemnified Persons"), against any losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
("Losses"), joint or several, to which such Indemnified Person may become
subject under the Securities Act or any other statute or at common law, insofar
as such Losses arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and shall pay any reasonable legal or any other reasonable
expenses reasonably incurred in connection with investigating or defending any
such Losses; provided, however, that VerticalNet shall not be liable in any such
case to the extent that any such Losses arise out of or is based upon any
alleged untrue statement or alleged omission made in such registration
statement, preliminary prospectus, final prospectus or amendment or supplement
in reliance upon and in conformity with written information furnished to
VerticalNet by such Holder expressly for use therein or so furnished for such
purposes by any underwriter.
(b) Each Holder shall indemnify and hold harmless VerticalNet, its
directors and officers and each other person or entity, if any, who controls
VerticalNet within the meaning of the Securities Act against any Losses, to
which VerticalNet or any such director or officer or any such person or entity
may become subject under the Securities Act or any other statute or at common
law, with respect to any untrue statement of a material fact in or omission or
alleged omission to state a material fact from such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to VerticalNet by the Holder specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of VerticalNet or any such director, officer, or
controlling person and shall survive the transfer of such securities by such
Holder. The aggregate indemnification and contribution liability of the Holder
shall not exceed the net proceeds received by such Holder in connection with the
sale of shares
4
<PAGE>
pursuant to the registration statement.
(c) Each person entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has knowledge of any claim as to which indemnity may be sought and shall permit
the Indemnifying Party to assume the defense of any such claim and any
litigation resulting therefrom, provided that counsel for the Indemnifying Party
--------
who conducts the defense of such claim or any litigation resulting therefrom
shall be reasonably acceptable to the Indemnified Party (or, in the case of the
Holders, to the Holders' Representative), and the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and provided
--------
further that the failure of any Indemnified Party to give notice as provided
- -------
herein shall not relieve the Indemnifying Party of its obligations under this
Section except to the extent that the Indemnifying Party is prejudiced thereby.
Notwithstanding the foregoing sentence, the Indemnified Party may retain a
single counsel to conduct the defense on behalf of itself (or, in the case of
the Holders, all such Holders) of any such claim or litigation, and shall be
entitled to be reimbursed by the Indemnifying Party for reasonable expenses
incurred by the Indemnified Party in defense of such claim or litigation, in the
event that the Indemnifying Party does not assume the defense of such claim or
litigation within 10 business days after the Indemnifying Party receives notice
thereof from the Indemnified Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall (except with the consent of each Indemnified
Party, or in the case of the Holders, the Holders' Representative) consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing.
(d) To the extent that the indemnification provided for in this Section
4 from the Indemnifying Party is held by a court of competent jurisdiction (by
the entry of a final judgment or decree and the expiration of time to appeal or
the denial of the last right of appeal) to be unavailable to an Indemnified
Party hereunder in respect of any Losses, the Indemnifying Party, in lieu of
indemnifying the Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Parties in connection with the actions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of such
Losses shall be deemed to include any reasonable legal or other reasonable fees
or expenses reasonably incurred by such party in connection with any
investigation or
5
<PAGE>
proceeding. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation, provided
that no Holder will be required to contribute any amount in excess of the net
proceeds received by such Holder in connection with the sale of Registrable
Shares pursuant to the registration statement.
(e) The foregoing indemnity obligations of VerticalNet and the Holders
are subject to the condition that, insofar as they relate to any Losses that
arise out of or are based upon any alleged untrue statement of any material fact
contained in a prospectus or any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading but which are eliminated or remedied in an amendment or
prospectus supplement, such indemnity obligations shall not inure to the benefit
of any Holder asserting the Losses if a copy of the amendment or prospectus
supplement was furnished to the Holder and was not furnished to the person
asserting the Losses at or prior to the time such action is required by the
Securities Act.
5. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of
Registrable Shares without registration, VerticalNet agrees to file with the
Commission in a timely manner all reports and other documents required of
VerticalNet under the Securities Act and the Exchange Act.
6. Covenants of Holders. In connection with the Form S-3 Registration
--------------------
Statement, the Holders agree:
(a) no later than March 24, 2000, each Holder shall deliver to
VerticalNet (i) an executed written agreement in form and substance reasonably
satisfactory to VerticalNet, provided that such Holder agrees to be bound by the
terms of this Agreement and to the appointment to the Holders' Representative
and (ii) such written information and material reasonably required to enable
VerticalNet to comply with all applicable requirements of the Commission.
(b) to provide and supplement when necessary all such information and
material and take all actions as may be reasonably required in order to enable
VerticalNet to comply with all applicable requirements of the Commission and to
obtain acceleration of the effective date of the Form S-3 Registration
Statement;
(c) that the distribution of shares of Common Stock included in the
Form S-3 Registration Statement shall be made in accordance with the plan of
distribution set forth in such registration statements and with all applicable
rules and regulations of the Commission; and
6
<PAGE>
(d) not to deliver any form of prospectus in connection with the sale
of any Registrable Securities as to which VerticalNet has advised the Holders
that it is preparing an amendment or supplement.
7. Delivery of Prospectuses. VerticalNet shall furnish to the Holders'
------------------------
Representative on behalf of the Holders whose Registrable Shares are included in
the Form S-3 Registration Statement pursuant to this Agreement such number of
copies of any prospectus (including any preliminary prospectus, amendment or
prospectus supplement) as the Holders' Representative may reasonably request in
order to effect the offer and sale of their Registrable Shares, but only while
said registration statement remains current.
8. Nasdaq; Blue Sky Laws. VerticalNet shall authorize for listing on the
---------------------
Nasdaq National Market the Registrable Shares. VerticalNet shall use reasonable
commercial efforts to effect such qualifications under applicable blue sky or
other state securities laws as may be necessary to enable the Holders to offer
and sell their Registrable Securities; provided, however, that VerticalNet shall
not be obligated to qualify as a foreign corporation to do business under the
laws of any jurisdiction in which it is not then qualified, or to file any
general consent to service of process.
9. Expenses.
---------
(a) VerticalNet shall pay all expenses incurred in complying with this
Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for VerticalNet, expenses of any special
audits incident to or required by any registration hereunder, expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Section 8.
(b) Notwithstanding anything to the contrary in Section 9(a) or
elsewhere in this Agreement, the Holders shall bear all underwriting discounts
and/or brokers' commissions with respect to the shares of Common Stock sold by
them and registered hereunder.
10. Miscellaneous.
-------------
(a) Severability. If one or more of the provisions contained herein
------------
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(b) Default. Waiver of any default shall not constitute waiver of any
-------
other or subsequent default.
(c) Notices. All notices and other communications hereunder shall be
-------
deemed given and received (i) upon delivery if delivered personally or by
telecopy, (ii) on the next
7
<PAGE>
business day if sent by overnight courier, or (iii) four (4) business days after
mailing if mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to VerticalNet:
VerticalNet, Inc.
700 Dresher Road, Suite 100
Horsham, Pennsylvania, 19044
Attention: James W. McKenzie, Jr., Esq.
(ii) if to the Holders' Representative at the address set
forth below:
Michael Eisenberg
Seed Management Associates, Ltd.
64 Emek Refain Street
Jerusalem, Israel 93142
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which when executed and delivered shall be deemed an
original and one and the same agreement.
(e) Assignment. The rights of a Holder hereunder are not assignable by
----------
such Holder without the prior written consent of VerticalNet.
(f) Amendment. This Agreement may not be amended or modified except by
---------
a written agreement signed by VerticalNet and the Holders' Representative.
(g) Governing Law. This Agreement shall be construed, enforced, and
-------------
administered in accordance with the laws of the Commonwealth of Pennsylvania,
excluding its conflicts of laws rules.
* * *
8
<PAGE>
IN WITNESS WHEREOF, VerticalNet and the Holders' Representatives have
executed this Agreement as of the date first above written.
VERTICALNET, INC.
By: /s/ Michael J. Hagan
-------------------------
Name: Michael J. Hagan
Title: Chief Operating Officer
HOLDERS' REPRESENTATIVE:
Michael Eisenberg
/s/ Michael Eisenberg
9
<PAGE>
Exhibit 5.1
[Letterhead of VerticalNet, Inc.]
James W. McKenzie, Jr.
Senior Vice President and General Counsel
700 Dresher Road, Suite 100
Horsham, Pennsylvania 19044
April 13, 2000
VerticalNet, Inc.
700 Dresher Rd., Suite 100
Horsham, PA 19044
Ladies and Gentlemen:
I 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
3,461,389 shares (the "Shares") of Common Stock of the Company, $.01 par value
per share (the "Common Stock"). The Shares are to be offered and sold by certain
security holders of the Company. In this regard, I have participated in the
preparation of a Registration Statement on Form S-3 relating to the Shares (the
"Registration Statement") which you are filing with the Securities and Exchange
Commission.
I have examined the Registration Statement and such documents and records
of the Company and other documents as I have deemed necessary for the purpose of
this opinion. In all examinations made by me in connection with this opinion
letter, I 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 me as
originals, and the conformity with the originals of all documents submitted to
me as copies. Based upon the foregoing, I am of the opinion that the Shares have
been duly authorized, validly issued, fully paid and nonassessable.
<PAGE>
The foregoing opinions shall be limited to the federal laws of the United
States of America and the laws of the Commonwealth of Pennsylvania.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me in the Prospectus included in
the Registration Statement under the heading "Legal Matters." In giving such
consent, I do not thereby admit that I am in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ James W. McKenzie, Jr.
<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
April 11, 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 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
April 11, 2000
