UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VERTICALBUYER, INC.
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(Name of small business
issuer in its charter)
Delaware 7389 98-0216911
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(State of incorporation (Primary Standard Industrial (I.R.S. Employer
or jurisdiction Classification Code Number) Identification No.)
of organization)
40 Linnell Circle, Billerica, Massachusetts 01821 (978) 663-7598
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(Address and telephone number of principal executive offices)
40 Linnell Circle, Billerica, Massachusetts 01821 (978) 663-7598
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(Address of principal place of business or
intended principal place of business)
Roger Fidler, Esq. 163 South Street, Hackensack, New Jersey 07601 (201) 457-1221
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(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public: as soon as practicable
after the effective date of the registration statement and date of the
prospectus.
The registrant hereby amends the 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 the registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, 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>
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount Proposed Proposed Amount of
Securities Being Being Maximum Maximum Registration
Registered Registered Offering Aggregate Fee
Price Per Offering
Unit (1) Price(1)
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Shares of Common Stock
by Selling Stockholders 2,000,000 $ 1.00 $ 2,000,000 $ 508.00
Shares of Common Stock
Underlying "A" Warrant 1,000,000 1.00 1,000,000 254.00
Shares of Common Stock
Underlying "B" Warrant 1,000,000 1.00 1,000,000 254.00
Shares of Common Stock
Underlying "C" Warrant 1,000,000 1.00 1,000,000 254.00
Shares of Common Stock
Underlying "D" Warrants 225,000 1.00 225,000 57.15
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TOTAL $ 5,225,000 $ 1,327.15
(1) Estimated for purposes of computing the registration fee pursuant to Rule
457.
<PAGE>
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
Part I. Information Required in Prospectus
Item
No. Required Item Location or Caption
- ---- ------------- --------------------
1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and Outside
Prospectus Front Cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and Outside
Front Cover Page of
Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Prospectus Summary -
Price Determination of Offering
Price; High Risk Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Litigation
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management of Common Stock
12. Description of Securities Description of Securities
13. Interest of Named Experts and Legal Opinions; Experts
Counsel
14. Disclosure of Commission Position Statement as to
on Indemnification for Securities Indemnification
Act Liabilities
15. Organization Within Last Management; Certain
Five Years Transactions
<PAGE>
16. Description of Business Proposed Business
17. Management's Discussion Management's Discussion
and Analysis or Plan of and Analysis of Financial
Operation Statements
18. Description of Property Proposed Business
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Stock and Prospectus Summary;
Related Stockholder Matters High Risk Factors
21. Executive Compensation Remuneration
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
<PAGE>
As filed with the Securities and Exchange Commission on April 4, 2000
Registration No.
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PROSPECTUS
Initial Public Offering
VERTICALBUYER, INC.
2,000,000 Shares of Common Stock of Selling Stockholders
3,225,000 Shares of Common Stock Underlying Common Stock Purchase Warrants
VerticalBuyer, Inc. has commenced the development of industry-specific
Internet websites for marketing, sales and procurement of products and services
and has recently launched both an information website and a business to business
auction website dedicated to the commercial lighting industry. We are
registering 2,000,000 shares of our common stock which we previously sold to CSP
Inc., a public company trading under the symbol "CSPI" on the Nasdaq National
Market. CSPI will distribute ratably to its stockholders of record on the date
of this prospectus approximately 750,000 shares of our common stock. We are also
registering 1,000,000 shares of our common stock underlying our Class "A"
Warrant, 1,000,000 shares underlying our Class "B" Warrant and 1,000,000 shares
underlying our Class "C" Warrant all of which were previously issued to CSPI and
225,000 shares underlying our Class "D" Warrants 150,000 of which we issued as
compensation to financial consultants and 75,000 of which we sold to option
holders of CSPI. We will not receive any of the proceeds for the sale of shares
by any selling stockholder.
See "Risk Factors" beginning on page 5 to read about certain factors you
should consider before buying common stock purchase warrants or shares of our
common stock.
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Neither the Securities and Exchange Commission nor any other regulatory body
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.
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Per Security Total
Exercise Price of Warrants.......... $1.00 $ 3,225,000
Commissions......................... $ --- $ ---
Proceeds to VerticalBuyer........... $1.00 $ 3,225,000
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 2000
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, exercise of our common stock warrants, the
shares of our common stock registered and our financial statements and notes to
those statements appearing elsewhere in this prospectus. References in this
prospectus to "VerticalBuyer," "we," "our," "us" and the "Company" refer to
VerticalBuyer, Inc., or, as appropriate, Lightseek Limited, our United Kingdom
subsidiary.
This prospectus contains forward-looking statements based on current
expectations of our company and our industry. You can identify these
forward-looking statements when you see us using words such as "expect,"
"anticipate," estimate" and other similar expressions. These forward-looking
statements involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of the factors described in the "Risk Factors" section and elsewhere in
this prospectus.
We have commenced the development of a portfolio of business to business
Internet websites through the launching of both an information and auction site
relating to the commercial lighting industry. We intend to exploit market-making
opportunities in niche vertical markets with aggregate global revenues in excess
of $20 trillion through satisfying the needs of business buyers in small and
medium sized enterprises.
Our management has an extensive background in vertical market publishing,
software development, corporate finance and emerging public company management.
Our current portfolio consists of the following sites:
o Lightseek.com, sponsored by Philips Lighting, GE Lighting and
Osram-Sylvania, is the premier portal site for lighting designers,
architects and lighting specifiers.
o LightingBuyer.com was recently launched as a global market place for
the commercial lighting industry.
o LightingNews.com, sponsored by Philips Lighting Company, will become a
global newswire service for the world lighting industry when it is
launched in May, 2000.
o FinanceBuyer.com, the product of a strategic alliance with
SierraCities, an online bank, provides online financing for small
businesses.
Since inception, Lightseek was financed by its founders, Tim Rosen and
Leslie Kent. In March, 2000, Lightseek was acquired by a newly formed Delaware
corporation, VerticalBuyer, Inc. Shortly thereafter, VerticalBuyer sold
2,000,000 shares of its common stock and 3,000,000 common stock purchase
warrants to CSP Inc. CSPI intends to distribute approximately 750,000 of the
shares of our common stock it purchased to its stockholders on a basis of one
distributed shares for every five shares owned by shareholders. This
distribution is being registered herein. We intend to file for trading
privileges on the Over the Counter Bulletin Board.
2
<PAGE>
We intend to continue the development of our portfolio of information and
business exchange websites in the following vertical sectors:
o Electrical
o Construction
o Aviation/Aerospace
o Shipping
o Automotive
o Marine
To this end, in addition to our portfolio of websites, we have registered
and own the following Internet website domain names:
o WorldLightingExchange.com
o LightBid.com
o LampX.com
o ElectricalBuyer.com
o ElectricalTimes.com
o ConstructionBuyer.com
o AviationBuyer.com
o MarineBuyer.com
o AutoPartsBuyer.com
o AerospaceBuyer.com
o ShippingBuyer.com
o PlasticsBuyer.com
o FMBuyer.com
o utilitiesbuyer.com
o globalutilitiesexchange.com
The Offering
Shares offered by the selling
stockholders .......................... 2,000,000 shares
Shares underlying warrants .............. 3,225,000 shares
Exercise price of warrants .............. $1.00*
Shares to be outstanding after
warrant exercise ...................... 2,225,000 shares
Use of proceeds from warrant exercise ... For general corporate purposes,
principally working capital and
capital expenditures.
Proposed OTCBB symbol ................... "VERB"
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* The exercise price of the warrants was determined through negotiation
between us and CSPI and with certain consultants and bears no relation to
OUR book value, revenues, profits, our present or proposed business
prospects or other economic criteria of value.
3
<PAGE>
Summary Financial Information
Period Ended
December 31,1999
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Actual Pro-forma
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Statement of Income Data (1):
Net revenues................................. $ 21,945 21,945
Gross profit................................. (80) (80)
Income from operations....................... (25,273) (25,273)
Net income................................... (25,273) (25,273)
Net income (loss) per share(2):
Basic...................................... $ (0.00)
Weighted average shares--basic............. 17,000,000
Diluted (2)................................ $ (0.00)
Weighted average shares--diluted........... 17,000,000
(1) The above Statement of Income Data reflects the operations of Lightseek
Limited for the period from inception (May 13, 1999) through December 31,
1999. The Pro-forma column reflects the consolidated results of
VerticalBuyer and Lightseek as if the acquisition had occurred on December
31, 1999.
(2) Pro-forma diluted loss per share excludes the 3,225,000 shares of common
stock underlying the warrants since the exercise of such warrants would be
antidilutive.
As of December 31, 1999
-----------------------
Pro-forma
Lightseek Before Exercise After Exercise
Limited of Warrants of Warrants
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Balance Sheet Data:
Cash and cash equivalents........... $ - 1,860,000 5,085,000
Working capital..................... (62,311) 1,922,311 5,022,689
Total assets........................ 47.809 1,907,809 5,132,809
Debt and leases, long-term portion.. - - -
Total stockholders' equity.......... (23,658) 1,883,658 5,061,342
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Note: The pro-forma "Before Exercise of Warrants" column represents the
consolidated accounts of VerticalBuyer and Lightseek as if
VerticalBuyer's acquisition of Lightseek and CSPI's acquisition of 2
million shares of VerticalBuyer's common stock had occurred on
December 31, 1999.
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could be
harmed. In such case, the trading price of our Common Stock could decline, and
you may lose all or part of your investment.
We have a limited operating history upon which you may evaluate our operations.
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Our subsidiary, Lightseek, the business of which we have assumed, was
formed only in May, 1999. Accordingly, we have limited operating history upon
which you may evaluate us. In addition, our revenue model is evolving and we
have only a limited number of customers to date. Our lack of operating history,
new management unit and evolving revenue model make it difficult to evaluate our
future prospects and evaluate our business strategy.
This means that you will have only limited information upon which to
base an investment decision. Because of our lack of operating history, we also
believe that period-to-period comparisons of our results of operations will not
be meaningful in the short term and should not be relied upon as indicators of
future performance.
We will encounter risks and difficulties frequently encountered by
early-stage companies in new and rapidly evolving markets. We may not
successfully address any of these risks. If we do not successfully address these
risks, our business would be seriously harmed.
Our e-commerce businesses will rely initially on revenues from lighting
manufacturers, distributors and suppliers and if we do not generate revenues
from these markets, or the revenues are lower than we anticipate, we might not
have the resources to form new strategic alliances.
To address these risks and uncertainties, we must do the following:
o maintain and increase our number of registered users, items listed on
our service and completed auctions;
o maintain and grow our website and customer operations;
o continue to make trading through our service safer for users;
o maintain and enhance our brand;
o successfully execute our business and marketing strategy;
o continue to develop and upgrade our technology and information
processing systems;
o continue to enhance our service to meet the needs of a changing
market;
o provide superior customer service;
o respond to competitive developments; and
o attract, integrate, retain and motivate qualified personnel.
5
<PAGE>
Our inability to generate and increase revenues in our initial market may
depend on the factors stated in other risk factors and other issues, including:
o our ability to develop an active base of users which list items for
sale and which complete transactions through our service;
o our ability to keep our website operational and to manage the number
of items listed on our service;
o federal, state or local government regulation;
o the introduction of new sites, services and products by us and our
competitors;
o the success of our brand building and marketing campaigns;
o the level of use of the Internet and online services by businesses,
and, in particular, the trading of products such as those listed on
our present and planned websites;
o confidence in the security of transactions on our websites;
o our ability to upgrade and develop our systems and infrastructure to
accommodate growth;
o our ability to attract new personnel in a timely and effective manner;
o the volume of items listed on our website;
o technical difficulties or service interruptions;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure;
o general economic conditions and economic conditions specific to the
Internet and electronic commerce industries.
We anticipate we will incur continued losses for the foreseeable future.
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We expect to incur losses for the foreseeable through costs associated with
building the infrastructure necessary for our business, including substantial
expense to recruit and hire personnel. Our revenue may not be sufficient to fund
these expenses. We may never be profitable or, if we become profitable, we may
be unable to sustain profitability.
Anticipated losses may result from our plan to increase our operating
expenses to:
o increase our sales and marketing operations;
o broaden our customer support and software capabilities;
o pursue strategic marketing and distribution alliances; and
o attract qualified managers for our expanded administrative and commercial
functions as well as for possible new acquisitions.
6
<PAGE>
Some of our expenses are or will be fixed, including non-cancelable
agreements, equipment leases and real estate leases. Other expenses will
increase as we hire more personnel. If our revenues do not increase, we may not
be able to compensate by reducing expenses in a timely manner. Expenses may also
increase due to the potential impact of goodwill and other charges from any
future acquisitions.
We believe that profitability and growth will depend in large part on our
ability to do the following:
o develop our brand name awareness;
o provide our customers with superior trading experiences; and
o maintain sufficient transaction volume to attract buyers and sellers.
We may have difficult in obtaining additional funding, if required.
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Although we believe that the funds to be raised through warrant exercise
will be sufficient for our needs for the foreseeable future, if additional funds
are needed, we may have difficulty obtaining them, and we may have to accept
terms that would adversely affect our shareholders. For example, the terms of
any future financings may impose restrictions on our right to declare dividends
or on the manner in which we conduct our business. Also, lending institutions or
private investors may impose restrictions on a future decision by us to make
capital expenditures, acquisitions or asset sales.
We may not be able to locate additional funding sources at all or on
acceptable terms. If we cannot raise funds on acceptable terms, if and when
needed, we may not be able to develop or enhance our services to customers, take
advantage of future opportunities for strategic alliances within a particular
industry, grow our business or respond to competitive pressures or unanticipated
requirements, which could seriously harm our business.
If we cannot protect our trademarks and domain names we may not be able to
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maintain future business.
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Proprietary rights are important to our success and our competitive
position. We are applying for federal registration of "Lightseek.com" and
"LightingBuyer.com" as service marks for use in connection with our electronic
commerce services.
Although we seek to protect our proprietary rights, our actions may be
inadequate to protect any trademarks and other proprietary rights or to prevent
others from claiming violations of their trademarks and other proprietary
rights. We may not be able to protect our domain names for our on-line
industry-specific websites as trademarks because those names may be too generic
or perceived as describing a product or service or its attributes rather than
serving a trademark function.
If we are unable to protect our proprietary rights in trademarks, service
marks and other indications of origin, competitors will be able to use names and
marks that are identical or sufficiently similar to ours to cause confusion
among potential customers between us and our services and our competitors and
their services. This confusion may result in the diversion of business to our
competitors or the loss of potential or existing customers. Also, to the extent
competitors using identical or similar marks have problems with the quality of
their services, this confusion may injure our reputation for quality.
7
<PAGE>
Litigation against infringers of our service marks, trademarks and similar
rights may be expensive. Because of the difficulty in proving damages in
trademark litigation, we may have difficulty in recovering damages should we
elect to bring an action against infringers of our marks.
We may encounter risks in protecting our copyrights and patents.
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While we seek to protect our text, designs and other works of authorship by
copyright, we may not be able to detect all possible infringements. Also,
copyright protection does not extend to functional features of software and will
not be effective to prevent third parties from duplicating our software's
capabilities through engineering research and development.
We have not conducted searches to determine if our software infringes on
any patents of third parties. If our software is found to infringe on the
copyrights or patents of a third party, the third party could require us to pay
royalties for past use and for continued use, or to modify or replace the
software to avoid infringement. We cannot assure you that we will be able to
modify or replace our software. in addition, claims brought by or against us,
could subject us to costly litigation and the diversion of our technical and
management personnel.
The global nature of the Internet makes it impossible to control the
ultimate destination of our work; and our copyrights and trademarks may receive
limited or no protection in some countries.
Acquisitions and new strategic alliances may disrupt or otherwise have a
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negative impact on our business.
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We plan to make investments in complementary companies, technologies and
assets. Future acquisitions are subject to the following risks:
o acquisitions may cause a disruption in our ongoing business, distract
our management and make it difficult to maintain our standards,
controls and procedures;
o we may acquire companies or make strategic alliances in markets in
which we have little experience;
o we may not be able successfully to integrate the services, products
and personnel of any acquisition or new alliance into our operations;
o we may be required to issue equity securities to pay for acquisitions,
which may be dilutive to existing shareholders; and
o our acquisitions may not result in any return on our investment and,
as a result, we may lose our entire investment.
8
<PAGE>
Our common stock price is likely to be highly volatile.
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We initially intend to trade our common stock on the Over-the-Counter
Bulletin Board. The market price of our common stock is likely 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. Our
shareholders may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to this
volatility. The trading prices of many technology and Internet-related
companies' stocks have reached historical highs within the past 24 months and
have reflected relative valuations substantially above historical levels. During
the same period, these companies' stocks have also been highly volatile and have
recorded lows well below those historical highs. We cannot assure you that our
stock will trade at the same levels of other Internet stocks or that Internet
stocks in general will sustain their current market prices.
Factors that could cause this volatility may include, among other
things:
o actual or anticipated variations in quarterly operating results;
o announcements of technological innovations;
o new sales formats or new products or services;
o changes in financial estimates by securities analysts;
o conditions or trends in the lighting industry;
o conditions or trends in the Internet industry;
o changes in the market valuations of other Internet companies;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships or joint ventures;
o changes in capital commitments;
o additions or departures of key personnel; and
o sales of our common stock.
Many of these factors are beyond our control. These factors may materially
adversely affect the market price of our common stock, regardless of our
operating performance.
Shares eligible for future sales by our current stockholders may adversely
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affect the market price of our stock price.
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If our existing shareholders, particularly Tim Rosen, our President, Leslie
Kent, our Treasurer, and CSPI, our major investor and the holder of most of our
warrants (or its stockholders who will receive shares of our common stock as a
distribution), sell in the public market substantial amounts of our common
stock, including shares issued on the exercise of outstanding options and
warrants, then the market price of our common stock could fall.
9
<PAGE>
Fluctuations in our quarterly results may adversely affect our stock price.
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We intend to register our common stock for trading on the Over-the-Counter
Bulletin Board. Our quarterly operating results will likely vary significantly
in the future. Our operating results, from time to time, will likely fall below
the expectations of our investors or analysts and others who may be following
our stock. Our failure to meet these expectations would likely adversely affect
the market price of our common stock.
Our quarterly operating results may vary depending on a number of factors,
including:
o demand of buyers and sellers to use our websites to list and purchase
equipment, inventory and parts;
o actions taken by our competitors, including new product introductions,
fee schedules, pricing policies and enhancements;
o size and timing of sales of our services;
o our ability to control costs;
o budget cycles of buyers and sellers of equipment, inventory and parts
and changes in these budget cycles; and
o general economic factors.
Our success is dependent on retaining our current key personnel and attracting
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additional personnel, particularly in the areas of sales, technical services
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and customer support.
- ---------------------
We believe that our success will depend on continued employment of our
senior management team, particularly Tim Rosen, our President, and Leslie Kent,
our Treasurer, and other key technical personnel for the development of our
on-line services and our ability to attract businesses to use our on-line
websites for the effective management, purchase and sale of equipment, inventory
and assets. Their experience in e-commerce asset management, sales and
procurement is important to the establishment of business in the various
industries in which we hope to develop e-commerce sites. We do not maintain
key-man life insurance on any of our personnel.
Our success also depends on having a highly trained sales force, telesales
group and technical and customer support personnel. We will need to continue to
hire additional personnel as our business grows. A shortage in the number of
trained sales, technical and customer support personnel in the on-line service
industry could limit our ability to increase sales and to sell services.
Competition for personnel, particularly for employees with technical expertise,
is intense. New hires also frequently require extensive training before they
achieve desired levels of productivity. If we cannot hire and retain suitable
personnel, we may not be able to expand and develop new business to business
online communities effectively or support those that are developed, resulting in
loss of customers and revenues.
10
<PAGE>
The interests of our significant shareholders may conflict with our interests
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and the interests of our other shareholders.
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Tim Rosen, President, and Leslie Kent, Treasurer collectively own 95% of
the outstanding common stock. As a result of their stock ownership, one or the
other of these stockholders may be in a position to affect significantly our
corporate actions, including, for example, mergers or takeover attempts, in a
manner that could conflict with the interests of our public shareholders.
Anti-takeover provisions and our right to issue preferred stock could make a
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third party acquisition of us difficult.
- ------------------------------------------
We are a Delaware corporation. Anti-takeover provisions of Delaware law
could make it more difficult for a third party to acquire control of us, even if
a change in control would be beneficial to shareholders.
Our amended certificate of incorporation provides that our board of
directors may issue preferred stock without shareholder approval. The issuance
of preferred stock could make it more difficult for a third party to acquire us.
Our board of directors may issue preferred stock with voting or conversion
rights that may have the effect of delaying, deferring or preventing a change of
control of us and would adversely affect the market price of the VerticalBuyer
stock or voting and other rights of holders of VerticalBuyer common stock.
Our e-commerce business may not develop additional revenue sources.
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We plan to generate revenues through relationships with strategic partners
for the sale of assets and services to particular industries. To generate
significant revenues from Internet business-to-business e-commerce, we will have
to continue to build these business relationships through our contacts and the
expertise of our current or future personnel. We may not be able to form new
strategic alliances due to a lack of sufficient financial resources or expertise
in a newly targeted industry. If we are not able to build these relationships
with strategic partners, we will have difficulty developing additional
businesses to generate revenues.
Marketing and distribution alliances may not generate the expected number of new
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of new customers or may be terminated.
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We intend to use marketing, distribution and strategic trade-group
alliances with other Internet companies to create traffic on our on-line
business communities and, consequently, to generate revenues. These marketing
and distribution alliances will allow us to link our on-line websites to
Internet search engines and other websites. The success of these relationships
depends on the amount of increased traffic we receive from the alliance
partners' websites.
11
<PAGE>
We may have difficulty entering into marketing and distribution alliances.
These arrangements may not generate the number of new customers we expect. We
also cannot assure you that we will be able to enter into these marketing and
distribution alliances or renew any marketing and distribution alliance
agreements that we are able to establish. If we are unable to establish these
alliances or if any of these agreements is terminated, the traffic on our
on-line websites might not grow and could decrease.
We may not be able to compete effectively with other providers of e-commerce
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services.
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We believe that the strongest potential competition does not come from
traditional service groups but rather the evolution of the Internet and the
types of business-to-business service providers that such evolution will create.
As applications for business-to-business e-commerce begin to proliferate and
mature, we will continue to compete with other technology companies and
traditional service providers that seek to integrate on-line business
technologies with their traditional service mix.
Competition for Internet products and services and electronic business
commerce is intense. We expect that competition will continue to intensify.
Barriers to entry are minimal, and competitors can launch new websites at a
relatively low cost. We expect that additional companies will establish
competing on-line business communities on a stand-alone basis.
E-commerce applications are in the early stages of development. Currently,
the principal focus of e-commerce business-to-business groups is to provide
information and generate revenues from advertisement. As e-commerce evolves,
however, we expect that other entrepreneurs and large, well-known leaders in
specific industries will create other niche business-to-business services that
may compete with our services.
These large industry leaders, particularly major original equipment
manufacturers, would have better name recognition in the markets that we may
target. We also expect competition from large consulting firms and software
solution providers, which have begun developing e-commerce applications for
their existing clients. The larger financial resources of these competitors may
enable them to market to potential buyers and sellers of equipment, inventory,
parts and other assets and launch more widespread marketing campaigns that would
make it more difficult for us to compete.
Our success depends on our ability to use an effective Internet marketing
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strategy that depends on Internet governance and regulation which are uncertain.
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The future success of our business is dependent on our ability to use an
effective Internet marketing strategy. Because the original role of the Internet
was to link the government's computers with academic institutions' computers,
the Internet was historically administered by organizations that were involved
in sponsoring research. Private parties have assumed larger roles in the
enhancement and maintenance of the Internet infrastructure. Therefore, it is
unclear what organization, if any, will govern the administration of the
Internet in the future, including the authorization of domain names.
The lack of an appropriate organization to govern the administration of the
Internet infrastructure and the legal uncertainties that may follow pose risks
to the commercial Internet industry and our specific website business. In
addition, the effective operation of the Internet and our business is also
dependent on the continued mutual cooperation among several organizations that
have widely divergent interests, including the government, Internet service
providers and developers of system software and software language. These
organizations may find that achieving a consensus may become difficult,
impossible, time-consuming and costly.
Although we are not subject to direct regulation in the United States other
than federal and state business regulations generally, changes in the regulatory
environment could result in the Federal Communications Commission or other
United States regulatory agencies directly regulating our business.
Additionally, as Internet use becomes more widespread internationally, there is
an increased likelihood of international regulation.
We cannot predict whether or to what extent any new regulation affecting
e-commerce will occur. New regulation could increase our costs. For example, we
do not collect sales or other similar taxes with respect to the equipment,
inventory and other products sold through our on-line communities. One or more
states may seek to impose sales tax collection obligations on out-of-state
companies like ours that engage in or facilitate e-commerce. State and local
governments have made proposals that would impose additional taxes on the sale
of goods and services over the Internet. A successful assertion by one or more
states or any foreign country that we should collect sales and other taxes on
the exchange of equipment, inventory and other goods on our system could
increase costs that we could have difficulty recovering from users of our
websites.
12
<PAGE>
Governmental agencies and their designees regulate the acquisition and
maintenance of web addresses generally. For example, in the United States, the
National Science Foundation had appointed Network Solutions, Inc. as the
exclusive registrar for the ".com," ".net" and ".org" generic top-level
addresses. Although Network Solutions no longer has exclusivity, it remains the
dominant registrar. The regulation of web addresses in the United States and in
foreign countries is subject to change. As a result, we may not be able to
acquire or maintain relevant web addresses in all countries where we conduct
business that are consistent with our brand names and marketing strategy.
Furthermore, the relationship between regulations governing website addresses
and laws protecting trademarks is unclear.
We may face increased access costs from browser providers and Internet
- ----------------------------------------------------------------------
distribution channels.
- ----------------------
Leading website, browser providers and other Internet distribution channels
may begin to charge us to provide access to our products and services which
would increase our cost of doing business.
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, including, for example, business and supply
requirements, credit card numbers and other forms of payment methods, prevents
many potential business customers from engaging in online transactions. If we do
not add sufficient security features to future product releases, our services
may not gain market acceptance or we may face additional legal exposure.
Our infrastructure is potentially vulnerable to physical or electronic
break-ins, computer viruses, hackers or similar problems caused by employees,
customers or other Internet users. If a person circumvents our security
measures, that person 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. These risks may require us to make significant investments
and efforts to protect against or remedy security breaches, which would increase
the costs of maintaining our websites.
We may have interruptions in service.
- -------------------------------------
Our computers and telecommunications equipment are maintained by a third
party server hosting company. Any system interruptions may cause our on-line
websites to be unavailable to web browsers and may reduce their attractiveness
to our customers and potential customers. Also, we could experience delays in
switching to a new service provider. Any delays in response time or performance
problems would cause users of our system to perceive our service as not
functioning properly and cause them to use other methods to sell or procure
equipment, excess inventory and other assets.
13
<PAGE>
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
industry-specific on-line websites, or the downloading and distribution of
content. The representations as to the origin and ownership of licensed content
that we generally obtain may not adequately protect us. In addition, we draw
some of the content provided in our on-line business communities from data
compiled by other parties, including governmental and commercial sources. This
data may contain errors.
We depend on the continuous introduction of enhanced software capabilities and
- ------------------------------------------------------------------------------
expansion of our software services, which we may not be able to project
- -----------------------------------------------------------------------
accurately.
- -----------
As traffic in our on-line businesses increases, we must upgrade our
technology, transaction processing systems and network hardware and software. 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 on-line
businesses. If we do not appropriately upgrade our systems, network hardware and
software on an ongoing basis, we may have difficulty retaining our customers and
competing effectively.
The life cycles of the software used to support our e-commerce services are
difficult to predict because the market for our e-commerce websites for sales
and procurement of equipment, inventory and assets is new and emerging and is
characterized by changing customer needs and industry standards. The
introduction of on-line products employing new technologies and industry
standards could render our existing system obsolete and unmarketable.
Our business may be harmed by fraudulent activities on our website.
- -------------------------------------------------------------------
Our future success will depend largely upon sellers reliably delivering and
accurately representing their listed goods and buyers paying the agreed purchase
price. While we can suspend the accounts of users who fail to fulfill their
obligations to other users, we do not have the ability to require users to make
payments or deliver goods or otherwise make users whole. Any negative publicity
generated as a result of fraudulent or deceptive conduct by users of our service
could damage our reputation and diminish the value of our brand name.
14
<PAGE>
The inability to expand our systems may limit our growth.
- ---------------------------------------------------------
We seek to generate a high volume of traffic and transactions on our
service. The satisfactory performance, reliability and availability of our
website, processing systems and network infrastructure are critical to our
reputation and our ability to attract and retain large numbers of users. Our
revenues depend on the number of items listed by users, the volume of user
auctions that are successfully completed and the final prices paid for the items
listed. If the volume of traffic on our website or the number of auctions being
conducted by customers continues to increase, we will need to expand and upgrade
our technology, transaction processing systems and network infrastructure. We
may not be able to accurately project the rate or timing of increases, if any,
in the use of our service or to timely expand and upgrade our systems and
infrastructure to accommodate any increases.
System failures could harm our business.
- ----------------------------------------
Our future success, and in particular our ability to facilitate trades
successfully and provide high quality customer service, will depend on the
efficient and uninterrupted operation of our computer and communications
hardware and software systems. Our systems and operations are vulnerable to
damage or interruption from a variety of causes. They are also subject to
break-ins, sabotage, intentional acts of vandalism and similar misconduct. We do
not have fully redundant systems, a formal disaster recovery plan or alternative
providers of hosting services, Any damage to or failure of our systems could
result in interruptions in our service. Such interruptions will reduce our
revenues and profits, and our future revenues and profits will be harmed if our
users believe that our system is unreliable.
Unauthorized break-ins to our service could harm our business.
- --------------------------------------------------------------
Our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data or the inability to complete customer auctions. In addition,
unauthorized persons may improperly access our data. Such actions may be very
expensive to remedy and could damage our reputation and discourage new and
existing users from using our service.
There are many risks associated with international operations.
- --------------------------------------------------------------
As we expand internationally, we are subject to risks of doing business
internationally, including the following:
o regulatory requirements that may limit or prevent the offering of our
services in local jurisdictions;
o legal uncertainty regarding liability for the listings of our users,
including less Internet friendly basic law and unique local laws;
o government-imposed limitations on access to the Internet;
o difficulties in staffing and managing foreign operations;
o longer payment cycles, different accounting practices and problems in
collecting accounts receivable;
15
<PAGE>
o political instability;
o seasonal reductions in business activity;
o potentially adverse tax consequences; and
o administrative burdens in collecting local taxes, including value-added
taxes.
To the extent we expand our international operations and have additional
portions of our international revenues denominated in foreign currencies, we
also could become subject to increased difficulties in collecting accounts
receivable and risks relating to foreign currency exchange rate fluctuations.
Our market is intensely competitive.
- ------------------------------------
The market for business to business trading over the Internet is new, rapidly
evolving and intensely competitive, and we expect competition to intensify in
the future. Barriers to entry are relatively low, and current and new
competitors can launch new sites at a relatively low cost using commercially
available software.
Our business is dependent on the development and maintenance of the web
- -----------------------------------------------------------------------
infrastructure.
- ---------------
The success of our service will depend largely on the development and
maintenance of the Internet infrastructure, including a reliable network
backbone with the necessary speed, data capacity and security. Because global
commerce and the online exchange of information is new and evolving, we cannot
predict whether the Web will prove to be a viable commercial marketplace in the
long term. The Web has experienced, and is likely to continue to experience,
significant growth in the numbers of users and amount of traffic. If the Web
continues to experience increased numbers of users, increased frequency of use
or increased bandwidth requirements, the Web infrastructure may be unable to
support the demands placed on it. In addition, the performance of the Web may be
harmed by increased users or bandwidth requirements.
Our business is subject to online commerce security risks.
- ----------------------------------------------------------
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. Our security
measures may not prevent security breaches. Our failure to prevent security
breaches could harm our business. Advances in computer capabilities, new
discoveries in the field of cryptography, or other developments may result in a
compromise or breach of the technology used by us to protect customer
transaction data. Any such compromise of our security could harm our reputation
and, therefore, our business.
16
<PAGE>
We must keep pace with rapid technological change to remain competitive.
- ------------------------------------------------------------------------
The market in which we compete is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
introductions and enhancements and changing customer demands. These market
characteristics are worsened by the emerging nature of the Internet and the
apparent need of companies from a multitude of industries to offer Web-based
products and services. Our future success therefore will depend on our ability
to adapt to rapidly changing technologies, to adapt our services to evolving
industry standards and to continually improve the performance, features and
reliability of our service. Our failure to adapt to such changes would harm our
business.
We are controlled by certain stockholders, executive officers and directors.
- ----------------------------------------------------------------------------
Upon completion warrant exercise, our officers and directors will own
approximately xx% of our outstanding common stock. As a result, they have the
ability to control our company and direct our affairs and business, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of our company and may make some transactions
more difficult or impossible without the support of these stockholders. Any of
these events could decrease the market price of our common stock.
Management will have broad discretion over allocation of proceeds from exercise
- -------------------------------------------------------------------------------
of the warrants.
- ----------------
The net proceeds to us from the exercise of our warrants will be $3,225,000
as all expenses relating to the registration of our shares underlying the
warrants are being paid from funds presently in our treasury. We currently have
no specific plans for a significant portion of the net proceeds from warrant
exercise. Consequently, our management will have the discretion to allocate the
net proceeds to uses that stockholders may not deem desirable. We may be unable
to yield a significant return on any investment of the proceeds. Substantially
all of the proceeds from exercise of our warrants will be invested in
short-term, interest-bearing, investment grade government and corporate
securities and bank deposits.
DILUTION
Our net tangible book value as of March 24, 2000 was $1,836,342. For
purpose of the following table, our net tangible book value has been taken to be
the book value of Lightseek on December 31, 1999 plus the proceeds of the sale
of our common stock to CSPI. Our net tangible book value per share was $0.11 Net
tangible book value represents our net tangible assets which are our total
assets less our total liabilities and intangible assets. The warrant exercise
price is $1.00 which represents both gross and net proceeds per share as there
are no commissions associated with warrant exercise and all expenses of
registering the shares underlying the warrants are being paid from funds in our
treasury. The pro forma net tangible book value after warrant exercise will be
$5,061,342. The pro forma net tangible book value per share after warrant
exercise will be $0.25 per share. The shares purchased by warrantholders who
exercise their warrants will be diluted $0.75 or 75.0%. As of March 24, 2000,
there were 17,000,000 shares of our common stock outstanding. Dilution
represents the difference between the warrant exercise price and the net pro
forma tangible book value per share immediately following the exercise of our
warrants.
17
<PAGE>
The following table illustrates the dilution which will be experienced by
warrantholders who exercise their warrants:
Warrant exercise price .............................................. $ 1.00
Net Tangible book value per share as of December 31, 1999 ........... $(0.00)
Net Tangible book value per share after CSPI's acquisition of
2 million common shares ........................................... $ 0.11
Pro-forma net tangible book value per share after warrant exercise .. $ 0.25
Pro-forma increase per share attributable to warrant exercise ....... $ 0.14
Pro-forma dilution to warrant holders who exercise their warrants ... $ 0.75
The following table sets forth, as of the date of the prospectus, the
percentage of equity to be purchased by warrant holders who exercise their
warrants compared to the percentage of equity to be owned by the present
stockholders, and the comparative amounts paid for the shares by the warrant
holders as compared to the total consideration paid by our present stockholders.
<TABLE>
<CAPTION>
Shares Purchased Percentage of Common Shares Owned
---------------- ---------------------------------
Pro-forma(1) Pro-forma(2) Pro-forma(3) Pro-forma(2) Pro-forma(3)
after after all warrants Pro-forma(1) after after all warrants
Public Dec. 31, 1999 CSP 2 million are exercised Dec. 31, 1999 CSP 2 million are exercised
<S> <C> <C> <C> <C> <C> <C>
------------- ------------- ------------------ ------------- ------------- ------------------
Common Stockholder
- ------------------
New Investors $ - $ - $ 3,225,000 0.0% 0.0% 15.9%
Existing Shareholders
Founders 14,250,000 14,250,000 14,250,000 95.0% 83.8% 70.5%
CSP 2,000,000 2,000,000 0.0% 11.8% 9.9%
Consultants 750,000 750,000 750,000 5.0% 4.4% 3.7%
---------- ---------- ---------- ------ ------ -----
15,000,000 17,000,000 17,000,000 100.0% 100.0% 84.1%
---------- ---------- ---------- ------ ------ -----
$15,000,000 $17,000,000 $20,225,000 100.0% 100.0% 100.0%
========== ========== ========== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Total Consideration Percentage of Total Consideration
------------------- ---------------------------------
Pro-forma(1) Pro-forma(2) Pro-forma(3) Pro-forma(2) Pro-forma(3)
after after all warrants Pro-forma(1) after after all warrants
Public Dec. 31, 1999 CSP 2 million are exercised Dec. 31, 1999 CSP 2 million are exercised
<S> <C> <C> <C> <C> <C> <C>
------------- ------------- ------------------ ------------- ------------- ------------------
Common Stockholder
- ------------------
New Investors $ - $ - $ 3,225,000 0.0% 0.0% 15.9%
Existing Shareholders
Founders 1,615 1,615 1,615 2.1% 0.1% 0.0%
CSP 0 2,000,000 2,000,000 0.0% 96.3% 37.7%
Consultants 75,000 75,000 75,000 97.9% 3.6% 1.4%
--------- --------- ----------- ------ ------ -----
76,615 2,076,615 2,076,615 100.0% 100.0% 39.2%
--------- --------- ----------- ------ ------ -----
$ 76,615 $2,076,615 $5,301,615 100.0% 100.0% 100.0%
========= ========== =========== ====== ====== ======
</TABLE>
Notes:
1) as if the Stock Acquisition had occurred on December 31, 1999.
2) as if the Stock Acquisition and CSP' acquisition of 2 million shares of
VerticalBuyer had occurred on December 31, 1999.
3) as if the Stock Acquisition, CSP' acquisition of 2 million shares of
VerticalBuyer, and the exercise of all warrants had occurred on December
31, 1999.
USE OF PROCEEDS
Both gross and net proceeds of warrant exercise will be $3,225,000 as all
costs associated with registration of the shares of our common stock underlying
the warrants have been or will be paid from funds presently in our treasury. We
will use funds raised through warrant exercise for working capital needs and, as
a result, they are unallocated. Prior to use, all of the proceeds from warrant
exercise will be invested in short-term, interest-bearing, investment grade
government and corporate securities and bank deposits.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999,
and pro forma as adjusted to give effect to the net proceeds from the exercise
of 3,225,000 warrants.
December 31, 1999
----------------------------
Pro-forma
Actual As Adjusted(1)
Long-term debt $ - $ -
Stockholders' equity:
Common stock, $.001 par value; authorized
50,000,000 shares, issued and outstanding
20,225,000,000 shares; 1,615 7,590
Preferred stock, $.001 par value; authorized
5,000,000 shares, issued and outstanding -0-. - -
Additional paid-in capital - 5,079,025
Accumulated Deficit (25,273) (25,273)
----------- ------------
Total stockholders' equity (23,658) 5,061,342
----------- ------------
Total capitalization $ (23,658) $ 5,132,809
=========== ============
- -------------------------
(1) As if our acquisition of Lightseek, the acquisition by CSPI of 2,000,000 of
our shares of common stock, the exercise by CSPI of warrants to purchase
3,000,000 shares of our common stock and the exercise of warrants held by
other warrants holders for 225,000 shares of our common stock all occurred
on December 31, 1999.
18
<PAGE>
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock and do
not anticipate paying any cash dividends in the foreseeable future.
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
Effective February 24, 2000 VerticalBuyer acquired all the outstanding
shares of Lightseek. The acquisition has been accounted for as a "reverse
takeover" by Lightseek, and characterized as a recapitalization of Lightseek for
accounting purposes.
The unaudited pro forma consolidated statement of income data reflects the
acquisition of Lightseek as if such acquisition had occurred on December 31,
1999. The pro forma consolidated statement of income data is presented for
informational purposes only and may not be indicative of the results of
operations had the acquisition occurred on December 31, 1999, nor do they
purport to indicate our future results of the operations.
Year Ended
December 31, 1999
---------------------
Pro Forma Consolidated Statement of Income Data:
Net revenues ............................................ $ 21,945
Cost of sales ........................................... 22,025
-------------
Gross Profit ............................................ (80)
-------------
Operating expenses:
Sales and marketing ................................... 3,165
Product development ................................... 13,686
General and administrative ............................ 8,342
-------------
Net (loss) ............................................ $ (25,273)
=============
Pro forma net (loss) per share (1):
Basic................................................... $ (0.0)
===========
Weighted average shares--basic.......................... 17,000,000
===========
Diluted................................................. $ (0.0)
===========
Weighted average shares--diluted........................ 17,000,000
===========
- --------
(1) Pro-forma diluted loss per share excludes the 3,225,000 shares of our
common stock underlying the warrants since the exercise of such warrants
would be antidilutive.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
We operate business to business Internet e-commerce sites in vertical
market sectors focusing initially on the commercial lighting market.
We commenced our operations as Lightseek Limited, a corporation,
incorporated in May 1999 in the United Kingdom. We were acquired by
VerticalBuyer, Inc. in a transaction characterized as a reverse takeover on
February 24, 2000 and have transferred our operations to VerticalBuyer. We began
development of our first website, an information portal called
www.Lightseek.com, in June, 1999; our business-to-business auction website,
www.LightingBuyer.com, commenced operations in February, 2000. We presently
employ no personnel having outsourced all required activities. We have recently
booked our first auction sales. We commenced www.financeBuyer.com, our small
business online financing website, in February, 2000.
Most of our present income arises from advertising. However, we anticipate
that, ultimately, most of our income will be derived from fees derived from
auction sales.
We do not charge fees to buyers and, to date, we have chosen not to sell
advertising on our auction website. Sellers pay a nominal placement fee to list
items for sale. Sellers also pay a success fee for each item sold, equal to 5%
of the gross value of each transaction.
Revenues from placement fees are recognized when an item is listed;
revenues relating to success fees are recognized at the time that an auction is
successfully concluded. At no point during the auction process do we take
possession of the item being sold. Successful buyers' payments are held in an
escrow account until the goods are received by the buyer.
Our business model differs from those of online sellers of goods. Because
individual sellers list the items, we do not incur any cost for goods sold, nor
do we pay procurement, carrying or shipping costs and bear no inventory risk.
Thus, we anticipate that any growth in our expenses will be driven by increases
in expenditures for advertising and promotion and the development of additional
websites. We anticipate increases in our expenses, and in particular
advertising, promotion and personnel, in our effort to grow our
business-to-business sales.
We have a limited operating history on which to base an evaluation of our
business and prospects. Our prospects must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
their early stages of development, particularly companies in new and rapidly
evolving markets such as online commerce.
It is difficult for us to forecast our revenues or earnings accurately. We
believe that future period-to-period comparisons of our operating results may
not be meaningful and should not be relied upon as an indication of future
performance as we have and will have no backlog of orders. Our operating results
in one or more future quarters may fall below investor expectations. Assuming
our common stock trades on a recognized market, in that event, the future
trading price of our common stock would almost certainly decline.
20
<PAGE>
Results of Operations
- ---------------------
The following table sets forth, for the period from our inception (May 13,
1999) through December 31, 1999, certain data from our statement of income and
the percentage of such data to net revenues. This data has been derived from and
should be read in conjunction with the audited financial statements and notes
thereto of our subsidiary, Lightseek Limited, which is presented elsewhere in
this prospectus. The operating results are not necessarily indicative of the
results that may be expected for any future period.
Period from May 13, 1999 to December 31, 1999
Net revenues....................... $ 21,945 100.0%
Cost of net revenues............... 22,025 100.4
---------
Gross profit...................... (800) -0.4
---------
Operating expenses:
Sales and marketing............... 3,165 14.4
Product development............... 13,686 62.4
General and administrative........ 8,342 38.0
---------
Total operating expenses........ 25,193 114.8
Net (loss) $(25,993) -115.2%
=========
Revenues
- --------
Revenues were $21,945 in 1999 consisting solely of advertising sales on our
www.lightseek.com site. In 1999, there were no revenues from LightingBuyer.com.
Sales in the future will be of an unknown mix of commissions from sales from
auctions and advertising revenues.
Cost of Sales
- -------------
Cost of sales were $22,025 in 1999. These costs consisted of advertising
production for clients of www.lightseek.com, website operations, fees for
independent contractors, software licenses, payments for editorial and technical
support, ISP connectivity charges, and amortization of purchased software.
We anticipate that our costs associated with net revenues will vary, and
may increase, as a percentage of net revenues in future periods as revenues from
www.lightingbuyer.com our auction site develop and as we expands our website
operations.
21
<PAGE>
Sales and Marketing Expense
- ---------------------------
Our sales and marketing expenses primarily consist of expenditures for
sales and marketing activity, including advertising, and other promotional
costs.
Product Development Expense
- ----------------------------
Product development expenses are primarily attributable to consulting costs
related to enhancing the features and functionality of the Company's Web
sites. Product development costs are generally expensed as incurred, except for
certain costs relating to the acquisition or development of internal-use
software that are capitalized in accordance with the American Institute of
Certified Public Accountant's Statement of Position No. 98-1 "Accounting for the
costs of computer software developed or obtained for internal use".
General and Administrative Expense
Our general and administrative expenses were $8,342 consisting of print and
stationary, professional services and miscellaneous travel and entertainment
expenses.
The initial cash funding of both www.lightseek.com and www.lightingbuyer.
com was principally undertaken by Rosen & Kent, the private partnership of the
two founder stockholders. As a result, we did not incur any principal debt
during the period. Thus, our cash flow has no meaningful significance in terms
of future developments.
Currently all sales and the majority of our costs are incurred in UK
sterling and translated at an exchange rate of $1.61 into U.S. dollars. We
expect most revenues and expenses to be incurred in US dollars in future
periods.
We had no material commitments for capital expenditures at December 31,
1999 but expect such expenditures to occur in 2000. We anticipate that such
expenditures will be primarily for computer equipment, furniture and fixtures
and leasehold improvements.
We believe that our existing cash, cash equivalents and short-term
investments and any cash generated from operations together with the proceeds
from warrant exercise will be sufficient to fund our operating activities,
capital expenditures and other obligations for the foreseeable future. However,
if during that period or thereafter, we are not successful in generating
sufficient cash flow from operations or in raising additional capital when
required in sufficient amounts and on terms acceptable to us, our business could
suffer. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our then- current stockholders would be
reduced.
Year 2000 Issues
We have not suffered any programming problems as a result of Year 2000
issues. In the development of our programming, we endeavor to use only vendors
and contractors who are Year 2000 compliant. We have reviewed our internal
programs and have determined that there are no significant Year 2000 issues
within the our systems or services.
22
<PAGE>
BUSINESS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in these forward-looking statements. Factors that may cause such a
difference include, but are not limited to, those discussed in "Risk Factors."
History
- -------
Rosen & Kent, the United Kingdom partnership of Tim Rosen, our President
and Leslie Kent, our Secretary/Treasurer conceived the concept of a business to
business internet site in October 1998. The original concept was to create an
online database of United Kingdom lighting companies where buyers could search
for product information from lighting companies. In December, Rosen & Kent
commissioned an interactive web designer to develop a website known as
www.lightseek.com. Lightseek.com is a portal site aimed at lighting specifiers.
A lighting specifier is a lighting designer, or architect with a lighting design
practice, an electrical contractor or a business end-user.
In September, 1999, Rosen & Kent created a splash page for
www.lightingbuyer.com which elicited in excess of 600 registrations from
companies and individuals seeking to register as either buyers or sellers or
both. In November, 1999, Rosen & Kent commissioned the development of an auction
site capable of allowing sellers to list products for sale in an "English"
auction format. English auctions, as used by Lightingbuyer are ascending
auctions where each subsequent bidder must bid a higher price to achieve a
concluded purchase at the end of the pre-defined auction period. The site went
live in February, 2000.
In May, 1999, Rosen & Kent formed Lightseek, a United Kingdom company. In
February, 2000, Rosen & Kent sold its interest in this business, including
intellectual property rights such as domain names, to Lightseek in return for
all the issued and outstanding ordinary shares. The website developers of the
www.lightseek.com website were granted ordinary shares in Lightseek as partial
compensation for their services. In March, 2000, Lightseek Limited was acquired
by VerticalBuyer, Inc., a newly formed inactive Delaware corporation, for
14,250,000 shares of its common stock. In addition, VerticalBuyer issued 750,000
shares representing for arranging finance and financial consulting fees. Rosen &
Kent registered a number of domains, including www.lightseek.com,
www.lightingbuyer.com, www.financebuyer.com, www.electricalbuyer.com,
www.constructionbuyer.com, www.autopartsbuyer.com, www.aviationbuyer.com,
ww.fmbuyer.com, www.marinebuyer.com and www.shippingbuyer.com. we intend to
develop a portfolio of business to business market making sites in some or all
of the domain names we own. Aside from our sites involving the lighting
industry, we have not as yet started the development of any additional sites.
However, the underlying software architecture of both our lighting news site and
lighting auction exchange site are extensible. Thus, we can rapidly deploy
additional sites with a minimum of further software development.
General
- -------
We were incorporated in Delaware on September 24, 1999, and serve as a
holding company of Lightseek, our wholly-owned subsidiary. Through Lightseek, we
are a business-to-business company specializing in the creation of e-commerce
news portals and marketplaces to enable web-based information and commerce
transactions.
23
<PAGE>
We have created and are developing industry-specific websites for
marketing, sales and procurement of products and services. We refer to this kind
of website as a "vertical portal," which is a website dedicated to a specific
industry for use by companies in that particular industry to buy and sell
products and services. Under this business model, VerticalBuyer intends to
generate commissions based upon these transactions.
Our technology permits us to offer to buyers and sellers a variety of
transaction methods including straight list price, open bid and auction, as well
as e-procurement, inventory management and asset management recovery. Our
technology can be applied and customized across a broad spectrum of industries.
We seek to generate revenue from transaction fees as well as from advertising on
our news portals. Currently, we own and operate one news portal and one
e-commerce site relating to the commercial lighting industry, as well as a
finance portal.
Our operating model is to exploit the benefits of amortizing our
administrative and logistical functions across a broad range of markets. The
marginal cost of entering new markets is therefore small since one of the major
costs associated with establishing market making Internet sites is the capital
cost of developing the core technology architecture. Our management approach is
for each of our vertical market sites to be led by an industry expert whose
principal responsibility is to focus on business development. Operational tasks
are the responsibility of our central operations facility based in Billerica,
Massachusetts.
Some of the key elements of our strategy are:
o growing the community of buyers and sellers so that we become the preferred
method of purchasing and selling excess inventory in the areas in which we
develop websites;
o expanding the number and product categories in each of our websites so as
to attract additional buyers and sellers;
o increasing users' trust through checking of sellers' credibility,
verification of user and insurance;
o enhancing our website features and functionality;
o expanding value-added services, such scanning and uploading photographs of
listed items, logistics and finance; and
o developing international markets by actively marketing and promoting our
website in selected countries.
In addition to developing new vertical markets, we intend to pursue
acquisition opportunities, strategic alliances and act as an incubator for
ventures.
LightingBuyer.com
- -----------------
LightingBuyer.com's purpose is to facilitate the buying and selling of
surplus stock for the lighting industry. In addition to services provided
through its website, www.lightingbuyer.com, it intends to provide related
services in inventory evaluation, inventory cataloging and the off-line sale or
auction of surplus equipment. LightingBuyer.com's available listings originate
largely from overstocked, never-used inventories held by companies based mainly
in the United States. LightingBuyer.com also makes available products available
from foreign companies.
24
<PAGE>
We expect that transaction fees will constitute LightingBuyer.com's
principal compensation. Clients seeking to accelerate the sale of surplus
inventories can arrange for on-line auctions through our website. Those clients
can either participate in general LightingBuyer.com auctions or conduct auctions
under a private arrangement. In a general auction, bidding would occur on
equipment and products of multiple sellers for a listed period of time, and
sales would be made as the bidding process closes for the items. In an auction
under private arrangement, the bidding and sale process would involve one or a
small number of sellers whose equipment and assets would be the only items sold
at that time. Off-line inventory evaluation and disposition services are also
available through LightingBuyer.com.
Browsers can visit the site and review auction listings. However, in order
to participate in the auction process, buyers and sellers are required to
register. Upon registration, buyers are permitted to place bids on auction
listings immediately. Sellers are required to be approved in a process that can
take up to 48 hours. Sellers' bona fides including credit history are checked.
Sellers can list their products for sale using a simple "wizard" process that
guides them through the protocols to set up an auction sale. Required details
include product description, asking price, shipping details. Additional
information such as product images, reserve pricing, product dimensions and
weight can be added voluntarily. A seller can publish its auction listing as
soon as he is satisfied as to the content of the listing.
The website offers a comprehensive categorization of lighting products,
including bulbs, fixtures, ballasts, components and controls with detailed
sub-categorization.
Currently, the functionality of the site permits prospective buyers to bid
in an English auction format. We intend to offer additional auctions formats
including "first come first served," "Exchange bid and counter bid," "reverse
auctions" and "private auctions."
o First come first served auctions allow buyers to acquire title and receive
goods that they are bidding on as soon as the seller's asking price is met.
The benefit of this type of auction is that buyers can obtain their goods
faster than in an English auction (where the auction period, albeit set by
the seller, is an extended one) and sellers can receive their cash more
quickly.
o Exchanges are internet venues where buyers and sellers can bid and
counterbid on product offerings in real time. This method is suitable both
for offers to sell and requests to buy products. It differs from the first
come first served in that in the first come first served there is no
counter bidding for as soon as the seller's predetermined asking price is
met, the bargain is struck.
o Reverse auctions tend to be used by buyers requesting offers from sellers
for products they require. A reverse auction works on the basis of a buyer
setting a maximum price it wishes to pay for an item. Sellers then bid in
amounts below the maximum set by the buyer. The bargain is struck at lowest
price accepted by the buyer.
o Private auctions allow both buyers and sellers to screen and invite
selected participants to bid in their auctions. This process permits the
buyer or seller, as the case may be, to target their products to specific
geographic regions and the class of participant. For example, a seller may
wish to offer goods only to its "Tier 1" distributors and only in certain
geographic locations. Tier 1 distributors are the first level of
distribution which might in turn sell to local distributors, electrical
contractors or end users.
25
<PAGE>
Unlike many business to business or business to consumer auction sites, we
facilitate the transaction between buyers and sellers once there has been a
successful bid. Our management believes that left to their own devices, seller
and buyers fail to complete transactions even when there is active bidding and a
successful bid above any seller's reserve. Consequently, we provide as part of
our site software which permits the buyer to calculate shipping costs provides
online assistance in arranging the logistics, and, if requested, keys into the
online software integrated to the United Parcel Service.
Additionally, and of equal importance. We arrange the flow of capital
between buyer and seller so that both parties are protected. We have established
an escrow account into which buyers may deposit the purchase price. We release
funds to the seller only when the buyer is satisfied with the goods. To avoid
intractable disputes, we also offer arbitration by independent arbitrators and,
where required, we will organize third party evaluation of values of stock.
In order to avoid uncertainty with the system and to reassure buyers and
sellers, we also offer online customer service support in a live chat room. We
intend in the near future to offer additional "concierge" services to private
auction clients including consolidation of stock from various distribution
centers to a single site and repackaging and relabelling to maintain branded
standards. international basis.
Competition
- -----------
We believe that we compete favorably with competing sites because of the
functionality of our e-commerce software and support services. We differentiate
ourself from many of our market competitors through the expertise of our
strategic partners and internal management and operations expertise. Our
management believes that the companies which operate certain competing websites
do not have the management experience within the industries their websites seek
to penetrate. Many of these Internet companies base their competitive strength
on their technology. We believe that our strength is based on our experience
within the targeted industry and its strategic alliance partners.
Other companies do operate Internet websites that currently list lighting
parts and equipment for sale and auction. To the best of our knowledge, these
companies do not have the business skills, business methodologies or industry
related expertise that LightingBuyer.com provides through its internal
operations.
Competitive websites include the following:
o Tradeout.com is a general auction site spanning many industries. ie it
is not industry specific or buyer targeted.
o i2i.com is a new auction/exchange site. It has very few listings and
is not targeting specific categories of its business audience.
o GE SupplyLight.com is the GE Lighting E-commerce site. It only stocks
GE lamps from normal stock.
o Grainger.com sells a broad range of industrial products. Its site is
essentially an online catalog.
26
<PAGE>
LightingNews
- ------------
In October, 1999, we approached Philips Lighting Company, a division of
Philips Electronics North America Corporation, with a concept to create a global
newswire service for the commercial lighting industry. After discussions,
Philips agreed to sponsor an online news forum entitled "www.lightingnews.com"
due to be launched in the second quarter of 2000. It will allow lighting
companies and suppliers to post their press releases on a continuous as needed
basis, initially free of charge. Charges will be made for adding product images,
website links and other information. The site will be designed to be simple to
use and news suppliers which could be a client company or its public relations
firm will be able to post material directly to the site.
Registered users of the site can search by product category, application
(for example, lighting for industry, for institutions, for residences etc.),
people, corporation information. Users can also personalize the site to take
account of individual preferences. They can also customize a newsletter entitled
"My Lighting News.com" which contains news alerts and set the frequency at which
they receive it. In essence, rather than visiting the site, readers can receive
information via email in the categories they have selected and at the frequency
at which they wish to receive it. The software is scalable in that it allows for
a virtually unlimited increase in subscribers or users and also permits added
functionality and the creation of sites for additional vertical industry
sectors.
Lightseek
- ---------
We presently operate Lightseek.com which provides business-to-business
online services that facilitate the exchange of information within the global
lighting industry. Lightseek.com is initially focused on providing news,
articles, industry forums, recruitment services and product information for the
lighting industry. Its revenues have been derived from advertising fees.
The lightseek.com site presently consists of a buyers' guide containing
contact information for almost all UK lighting companies, shop fronts where
advertisers can display information about their product lines, contacts to their
websites and where they can receive online inquiries from their prospective
buyers. The site also contains a message forum where industry professionals can
exchange opinions and ask questions of their peers. It also contains an events
diary of industry expositions and conferences. Since inception, the focus of
lightseek.com has moved from UK centric to international in scale. The major
change has been to feature international news in particular news from the United
States on the site. The site is accepting buyers' guide listings on an
FinanceBuyer
- ------------
One of the domain names transferred to Lightseek by Rosen & Kent was
www.financebuyer.com. We have entered into an agreement with Sierracities, Inc.,
an online financial institution which allows visitors to this website to apply
for loans and equipment leases online and to obtain action on the financing
request within a few minutes. Lightseek receives a commission on all financing
placed through the site.
27
<PAGE>
Marketing
- ---------
We have retained KCSA, Inc. a New York City-based public relations and
investor relations advisory firm. KCSA will undertake trade public relations in
order to attract a critical mass of buyers and sellers initially to our
LightBuyer and eventually to other of our websites as well as providing investor
relations cousultancy. KCSA intends to place press releases and articles in
trade and business publications. We have and intend to continue to purchase
banner advertisements and key words on related trade websites and search
engines. We also plan a print advertising campaign in trade journals. In
addition, we intend to undertake a direct mail campaign targeted to sellers and
buyers, participate in trade shows and hire a sales force to make sales calls on
leading companies in the industry.
Employees
- ---------
As of March 28, 2000, we had no employees but employed consultants or
consultant companies.
Facilities
- ----------
As of March 28, 2000, our principal administrative facilities are located
in the premises of CSPI in Billerica under a memorandum of understanding
pursuant to which office space, computers and administrative personnel are
provided to us free of charge for six months. Our marketing and research and
development office is located in an office of 800 square feet at 7 Gough House,
57 Eden Street, Kingston-Upon-Thames, England pursuant to an oral agreement with
an affiliated party at the rate of one pound annually. We believe that our
existing facilities are adequate to meet our needs for the immediate future and
that future growth can be accommodated by leasing additional or alternative
space near our current facilities.
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding the executive
officers and directors of the Company as of March 28, 2000:
Name Age Position Since
--------------------------- --- ----------------------------- --------
Timothy Neil David Rosen 43 President, Chief Executive 2/2000
40 Linell Circle Officer and a Director
Billerica, MA 01821
Leslie Kent 45 Secretary, Treasurer, Chief
40 Linell Circle Financial Officer and a Director 2/2000
Billerica, MA 01821
Joseph Donahue (1) (2) 53 A Director 2/2000
40 Linell Circle
Billerica, MA 01821
Alexander R. Lupinetti (1)(2) 54 A Director 2/2000
40 Linell Circle
Billerica, MA 01821
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
28
<PAGE>
Tim Rosen has been Commercial Director of Lightseek since its inception in
May, 1999 and of our company since February, 2000. From 1988 to date, he has
been a partner, with Leslie Kent, Secretary/Treasurer, in Rosen & Kent, a
management consultancy. The partnership also incubates new business ventures.
Since 1988, he has also been a director of Litech Ltd., a specialist fiber optic
lighting provider for the commercial lighting industry. From 1983 to 1988, Mr.
Rosen was a director of OmniMedia plc, a digital video and CD-ROM
publisher/developer which traded on the Alternative Investment Market of the
London Stock Exchange. From 1983 to 1988, Mr. Rosen was a director of Oxford
House College, a London-based computer training and language school which was
sold to its employees. He was also a director, from 1983 to 1988 of Catalyst
Communications Group plc, a marketing and media group quoted on the London Stock
Exchange which was sold to another public company, Holmes & Marchant plc. Rosen
& Kent founded Homeshield Warranty, Co. in 1982 as a joint venture with Pentland
Industries plc, an English public company. Homeshield marketed extended
warranties for household appliances and was sold to a trade buyer in 1984. Mr.
Rosen served as an account supervisor at Craton Lodge and Knight plc, a new
product development agency, from 1981 to 1982 and at Grey Advertising from 1979
to 1981. He is a member of the National Association of Auctioneers. Mr. Rosen
received his B.Sc (Econ.) Magna cum Laude in Business Administration from the
Institute of Science and Technology, University of Wales in 1979.
Leslie John Kent has been Marketing Director of Lightseek since its
inception in May, 1999 and, Secretary/Treasurer of our company since February,
2000. From 1988 to 1999, he was a partner, with Tim Rosen, our President, in
Rosen & Kent, a management consultancy. The partnership also incubates new
business ventures. Since 1988, he has also been a director in Litech Ltd., a
specialist fiber optic lighting provider for the commercial lighting industry.
From 1983 to 1988, Mr. Kent was a director of OmniMedia plc, a digital video and
CD-ROM publisher/developer which traded on the Alternative Investment Market of
the London Stock Exchange. From 1983 to 1988, Mr. Kent was a director of Oxford
House College, a London-based computer training and language school which was
sold to its employees. He was also a director, from 1983 to 1988 of Catalyst
Communications Group plc, a marketing and media group quoted on the London Stock
Exchange which was sold to another public company, Holmes & Marchant plc. Rosen
& Kent founded Homeshield Warranty, Co. Ltd. in 1982 as a joint venture with
Pentland Industries plc, an English public company. Homeshield marketed extended
warranties for household appliances and was sold to a trade buyer in 1984. In
1981, Mr. Kent was an advertising account manager at Boase Massimi Pollity plc,
from 1979 to 1981 for Grey Advertising and from 1977 to 1979 for Ted Bates. He
is an associate member of the Institution of Lighting Engineers and Secretary of
The Fibre Optic Lighting Association. Mr. Kent received his Master of Arts in
Philosophy, Politics and Economics from St. Edmund Hall, Oxford University, in
1977.
Joseph Donahue has been principal and President since 1994 of Donahue &
Associates, Trumbull, Connecticut, a financial consultancy which initiates and
arranges acquisitions. From 1982 to 1994, he was Executive Vice-President,
Corporate Finance of Sterling & Company, Los Angeles, California. Mr. Donahue
was International Investment Director of Specialized Systems, Inc., San Diego,
California in 1981 and a consultant and principal, from 1973 to 1981, in the
purchase, sale, exchange, salvage and chartering and management of yachts. He
received his B.A. in European History from the University of California at San
Diego in 1973 and attended University of Mexico in 1971 and San Diego City
College in 1970.
Alexander R. Lupinetti as been a Director of CSPI since 1996; Chairman of
the Class III Board of Directors since January 1998; Chief Executive Officer and
President of CSPI since October 1996; President and Chief Executive Officer of
each of TCAM Systems Inc., Shared Systems Corporation and SoftCom Systems, Inc.,
subsidiaries of Stratus Computer Inc., from 1987 to 1996.
29
<PAGE>
Board Committees
- ----------------
The Audit Committee of our Board consists of Joseph Donahue and Alexander
Lupinetti. The Audit Committee reviews our financial statements and accounting
practices, makes recommendations to our board regarding the selection of
independent auditors and reviews the results and scope of the audit and other
services provided by our independent auditors. The Compensation Committee of our
Board consists of Joseph Donahue and Alexander Lupinetti. The Compensation
Committee makes recommendations to the Board concerning salaries and incentive
compensation for our officers and employees and administers our employee benefit
plans.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee of our board was at any
time since our formation one of our officers or employees.
Director Compensation
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable expenses for attending board
and board committee meetings.
Executive Compensation
The following table shows compensation earned during fiscal 1999 by our
President. The information in the table includes salaries, bonuses, stock
options granted and other miscellaneous compensation. No executive officer who
held office at December 31, 1999 received total annual compensation in excess of
$100,000 in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term and Other
Annual Compensation Compensation
--------------------------------- -----------------------
Number of
Securities
Fiscal Other Annual Underlying All Other
Name and 1999 Principal Positions Year Salary Bonus(1) Compensation(2) Options Compensation
- --------------------------------- ------ -------- -------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tim Rosen 1999 None None None None None
</TABLE>
- --------
30
<PAGE>
The following executive officers received grants of options in 2000
pursuant to the Year 2000 Stock Option Plan.
Option Grants During 2000
<TABLE>
<CAPTION>
Percentage
of Total
Number of Options Potential Realizable Value at
Securities Granted to Assumed Annual Rates of Stock Price
Underlying Employees Exercise Appreciation for Option Term(2)
Options during Price Per Expiration ----------------------------------
Name Granted(1) 2000 Share Date 0% 5% 10%
- - ---- ---------- ---------- --------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Tim Rosen 250,000 16.7% $1.00 4 Years 0 53,877 116,025
Leslie Kent 250,000 16.7% $1.00 4 Years 0 53,877 116,025
Joseph Donahue 250,000 16.7% $1.00 4 Years 0 53,877 116,025
Alexander Lupinetti 250,000 16.7% $1.00 4 Years 0 53,877 116,025
</TABLE>
- ------------
(1) Options granted in 2000 were granted under the Year 2000 Plan. All options
granted were immediately exercisable and were either nonstatutory stock
options. These options were granted by our board of directors and vested
immediately.
(2) Since we are not public, the market price as of the date of issuance is
assumed to be $1.00 as this is the exercise price of the options as well as
all outstanding warrants.
Compensation Arrangements
We have not entered into employment contracts with any of our management
employees. Mr. Rosen and Mr. Kent are compensated at the rate of $150,000 per
annum. Both also receive health insurance and a vehicle allowance.
Indemnification of Directors and Executive Officers and Limitation of Liability
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act.
As permitted by the Delaware General Corporation Law, our amended
certificate of incorporation includes a provision that eliminates the personal
liability of our directors for monetary damages for breach of fiduciary duty as
a director, except for liability (1) for any breach of the director's duty of
loyalty to the Company or its stockholders, (2) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(3) under section 174 of the Delaware General Corporation Law (regarding
unlawful dividends and stock purchases) or (4) for any transaction from which
the director derived an improper personal benefit.
31
<PAGE>
As permitted by the Delaware General Corporation Law, our Bylaws provide
that (1) the Company is required to indemnify its directors and officers,
consultants and employees to the fullest extent permitted by the Delaware
General Corporation Law, subject to certain very limited exceptions, we are
required to advance expenses, as incurred, in connection with a legal proceeding
to the fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions, and the rights conferred in the our Bylaws
are not exclusive.
We have not obtained directors' and officers' liability insurance.
CERTAIN RELATED PARTY TRANSACTIONS
On March 2, 2000, we purchased all the capital stock of Lightseek from its
owners, including Tim Rosen, President and Leslie Kent, Treasurer for an
aggregate of 14,250,000 shares. On that date, we also paid for certain
consulting expenses 750,000 shares of our common stock, including 375,000 shares
to Joseph Donahue, a Director. We have awarded an aggregate of 1,000,000
nonstatutory stock options exercisable at $1.00 pursuant to our Year 2000 Option
Plan to our directors and an aggregate of 300,000 bonus options to members of
our committees and consultants.
On March 2, 2000, we sold 2,000,000 shares of our common stock and three
redeemable common stock purchase warrants (Class A, Class B and Class C)
carrying the right to purchase in the aggregate 3,000,000 of our shares to CSPI.
The options are exercisable at $1.00. CSPI intends to distribute as a dividend
approximately 750,000 of our shares ratable to the holders of its common stock.
Tim Rosen, President, and Leslie Kent, Treasurer, each receive a salary of
$150,000 per annum. Joseph Donahue, Director, received a consulting fee of
$75,000.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our Common Stock as of March 24, 2000 by each
stockholder known by us to be the beneficial owner of more than 5% of our Common
Stock, each of our directors and executive officers, all executive officers and
directors as a group and the selling stockholder.
Shares of Common Stock
Beneficially Owned(1)
Prior to After
Warrant Exercise Warrant Exercise
------------------ ----------------
Name Number Percent Number Percent
- ---- ---------- ------- --------- -------
Tim Rosen 7,025,000 41.3% 7,025,000 34.7%
Leslie Kent 7,025,000 41.3% 7,025,000 34.7%
Joseph Donahue 375,000 2.2% 375,000 1.4%
Alexander Lupinetti 0 -0-% 0 -0-%
CSP Inc. 2,000,000 11.8% 1,300,000 (2) 6.4%
Directorss and officers
(4 persons) 14,425,000 84.9% 14,425,000 71.3%
- -----------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Unless otherwise indicated
below, the persons and entity named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of our common stock
underlying warrants or options that are currently exercisable or
exercisable within 60 days of March 28, 2000 are deemed to be outstanding
and to be beneficially owned by the person holding such options for the
purpose of computing the percentage ownership of such person but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person. The above table does not include shares
underlying bonus options since no such options are exercisable within 60
days of March 28, 2000.
The percentage of beneficial ownership is based on 17,000,000 shares of our
common stock outstanding as of March 28, 2000 and, after warrant exercise,
on 20,225,000 shares of our common stock outstanding.
(2) CSPI intends to distribute approximately 700,000 of our shares of common
stock ratably to its stockholders shortly after the effective date of the
registration statement of which this prospectus is a part.
32
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
- ------------
We are authorized to issue 50 million shares of common stock, $.001 par
value per share, of which 17,000,000 shares are issued and outstanding as of the
date of the prospectus. Each outstanding share of common stock is entitled to
one vote, either in person or by proxy, on all matters that may be voted upon by
their holders at meetings of the stockholders.
Holders of our common stock (i) have equal ratable rights to dividends from
funds legally available therefor, if declared by our board of directors; (ii)
are entitled to share ratably in all of our assets available for distribution to
holders of common stock upon our liquidation, dissolution or winding up; (iii)
do not have preemptive, subscription or conversion rights, or redemption or
sinking fund provisions; and (iv) are entitled to one non-cumulative vote per
share on all matters on which stockholders may vote at all meetings of our
stockholders. Cumulative voting for the election of directors is not provided
for in our amended certificate of incorporation, which means that the holders of
a majority of the shares voted can elect all of the directors then standing for
election.
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of our common stock
are entitled to receive dividends out of legally available at such times and in
such amounts as our board of directors may from time to time determine. Each
stockholder is entitled to one vote for each share of our common stock held on
all matters submitted to a vote of stockholders. Our common stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Upon a liquidation, dissolution or winding-up, the assets legally available for
distribution to stockholders are distributable ratably among the holders of our
common stock and any participating preferred stock outstanding at that time
after payment of liquidation preferences, if any, on any outstanding preferred
stock and payment of other claims of creditors. Each outstanding share of our
common stock is, and all shares of common stock to be outstanding upon exercise
of the warrants will be, fully paid and nonassessable.
Preferred Stock
- ---------------
We may, subject to limitations prescribed by Delaware law, to provide for
the issuance of up to 5,000,000 shares of our preferred stock in one or more
series, to establish from time to time the number of shares to be included in
each such series, to fix the rights, preferences and privileges of the shares of
each wholly unissued series and any qualifications, limitations or restrictions
thereon, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding) without any
further vote or action by the stockholders. Our board of directors may authorize
the issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of our common
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, have the effect of delaying, deferring or preventing a change in
control and may adversely affect the market price of the common stock and the
voting and other rights of the holders of common stock. We have no current plans
to issue any shares of preferred stock.
33
<PAGE>
Common Stock Purchase Warrants
- ------------------------------
We have issued to CSPI three classes of redeemable common stock warrant.
Each class is exercisable for a period of two years commencing the date of the
prospectus. Each warrant entitles the holder to purchase one share of our common
stock at an exercise price of $1.00. The common stock underlying the warrants
will, upon exercise of the warrants, be validly issued, fully paid and
non-assessable. The warrants will be subject to redemption, at any time, for
$0.001 per warrant, upon 30 days' prior written notice under the following
circumstances: as to the "A" Warrants, in the event there is an effective
registration statement relating to the shares underlying the "A" warrants; as to
the "B" Warrants in the event there is an effective registration statement
relating to the shares underlying the "B" warrants and, in addition, if the bid
closing price on the market in which our common stock trades for a period of
twenty consecutive days exceeds $2.00 per share ending within ten days prior to
the date of the notice of redemption; and as to the "C" Warrants, in the event
there is an effective registration statement relating to the shares underlying
the "C" warrants and, in addition, if the bid closing price on the market in
which our common stock trades for a period of twenty consecutive days exceeds
$2.00 per share ending within ten days prior to the date of the notice of
redemption.
The warrants can only be exercised when there is a current effective
registration statement covering the underlying shares of common stock. If we do
not obtain or are unable to maintain a current effective registration statement,
warrantholders will be unable to exercise them and they may become valueless.
Moreover, if the shares of common stock underlying the warrants are not
registered or qualified for sale in the state in which a warrantholder resides,
such holder might not be permitted to exercise any warrants.
Warrants may be exercised by surrendering the warrant certificate, with the
form of election to purchase printed on the reverse side of the warrant
certificate properly completed and executed, together with payment of the
exercise price, to us or the warrant agent. Warrants may be exercised in whole
or from time to time in part. If less than all of the warrants evidenced by a
warrant certificate are exercised, a new warrant certificate will be issued for
the remaining number of unexercised warrants.
Warrantholders are protected against dilution of the equity interest
represented by the underlying shares of common stock upon the occurrence of
certain events, including, but not limited to, issuance of stock dividends. If
we merge, reorganize or are acquired in such a way as to terminate the warrants,
they may be exercised immediately prior to such action. In the event of
liquidation, dissolution or winding up, holders of the warrants are not entitled
to participate in our assets.
For the life of the warrants, holders are given the opportunity to profit
from a rise in the market price of our common stock. The exercise of the
warrants will result in the dilution of the then book value of our common stock
and would result in a dilution of the percentage ownership of then existing
stockholders. The terms upon which we may obtain additional capital may be
adversely affected through the period in which the warrants remain exercisable.
The holders of these warrants may be expected to exercise them at a time when we
would, in all likelihood, be able to obtain equity capital on terms more
favorable than those provided for by the warrants.
We have issued to certain consultants and have sold to holders of CSPI
bonus options, in proportion to their holdings, our Class "D" Warrants. We may
not redeem these warrants, but otherwise they are identical to the other classes
of warrant.
34
<PAGE>
Registration Rights
- -------------------
Pursuant to a registration rights agreement between us and CSPI, dated
March 2, 2000, we agreed to file a registration statement relating to the shares
of our common stock issued to CSPI and the shares of our common stock underlying
the warrants issued to CSPI and issued to CSPI bonus option holders. We agreed
to assume all registration expenses pursuant to the registration rights
agreement. In the event, the registration statement is not effective within 90
days of the date of the agreement, we have agreed to issue to CSPI additional
shares of our common stock equal to one percent of the shares purchased by CSPI
for each full month, prorated daily, after 90 days, continuing through the date
the registration statement is declared effective by the SEC. Our obligations
will expire upon the earlier of the effectiveness of the registration statement
or the date all of the shares covered by the registration rights agreement may
be sold by under Rule 144 under the Securities Act without volume restrictions.
Future Financing
- ----------------
In the event the proceeds of warrant exercise are not sufficient the
development and growth of our business, we may seek additional financing. At
this time we believe that the proceeds of exercise of existing warrants, will be
sufficient for such purpose and therefore do not expect to issue any additional
securities at this time. However, we may issue additional securities, incur debt
or procure other types of financing if needed. We have not entered into any
agreements, plans or proposals for such financing and as of present have no
plans to do so. If we require additional financing, there is no guarantee that
such financing will be available to us or if available that such financing will
be on terms acceptable to us.
Reports to Stockholders
- -----------------------
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable after the end of each fiscal
year. Our fiscal year ends on December 31st.
Dividends
- ---------
We have only been recently organized, have no earnings and have paid no
dividends to date. We anticipate that we will reinvest all earnings, if any, in
our business and do not anticipate declaring or paying dividends in the
foreseeable future.
Transfer Agent
- --------------
We have appointed Olde Monmouth Stock Transfer Co., Inc., 77 Memorial
Parkway, Suite 101, Atlantic Highlands, New Jersey 07716 as transfer agent for
our shares of common stock and our warrants.
35
<PAGE>
PLAN OF DISTRIBUTION
Conduct of the Offering
- -----------------------
CSPI has indicated to us that it intends to distribute to its stockholders
approximately 750,000 shares of our common stock on a basis of one share for
every five shares owned.
We have retained no broker-dealer in connection with the distribution of
our shares to the stockholders of CSPI nor in connection with the exercise of
our warrants by CSPI or of the sale of the shares of our common stock underlying
the warrants.
Method of Subscribing
- ---------------------
CSPI, its transferees, if any, or other warrantholders may exercise their
warrants by filling in and signing the exercise sheet attached to the warrant
and delivering it to us prior to the expiration date of each warrant. Exercising
warrantholders must pay $1.00 in cash or by check, bank draft or postal express
money order payable in United States dollars to "VerticalBuyer, Inc." for each
share they desire to purchase and, in the event of partial exercise, will
receive from us a new warrant representing the right to subscribe for the
remaining shares of our common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon exercise of the warrants, assuming no exercise of outstanding bonus
options, we will have outstanding 20,000,000 shares of our common stock. Of
these shares, the 3,225,000 shares registered herein or underlying warrants,
when exercised, will be freely tradable without restriction under the Securities
Act unless purchased by our "affiliates" as that term is defined in Rule 144
under the Securities Act. These shares will be eligible for sale in the public
market, subject to certain volume limitations and the expiration of applicable
holding periods under Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least one year (including the holding period of any prior owner except an
affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (1) 1% of the number of shares of
Common Stock then outstanding (which will equal approximately 200,000 shares
immediately after warrant exercise) or (2) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. Under Rule 144(k), a person who is
not deemed to have been an affiliate of the Company at any time during the three
months preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least two years (including the holding period of any prior owner
except an affiliate), is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
We have not filed a registration statement relating to the shares subject
to outstanding options under our Year 2000 Option Plan.
We can offer no assurance that an active public market in our shares will
develop. Future sales of substantial amounts of our shares (including shares
issued upon exercise of outstanding options) in the public market could
adversely affect market prices prevailing from time to time and could impair the
our ability to raise capital through the sale of our equity securities.
36
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have not previously been required to comply with the reporting
requirements of the Securities Exchange Act. We have filed with the SEC a
registration statement on form SB-2 to register the shares of our common stock
issued to CSPI and the shares underlying the warrants. The prospectus is part of
the registration statement, and, as permitted by the SEC's rules, does not
contain all of the information in the registration statement. For further
information about us and the securities offered under the prospectus, you may
refer to the registration statement and to the exhibits and schedules filed as a
part of this registration statement. You can review the registration statement
and its exhibits at the public reference facility maintained by the SEC at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the SEC at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The registration statement is also
available electronically on the World Wide Web at http://www.sec.gov.
You can also call or write us at any time with any questions you may have.
We would be pleased to speak with you about any aspect of our business and the
shares of our common stock underlying the warrants.
LEGAL PROCEEDINGS
We not a party to nor are we aware of any existing, pending or threatened
lawsuits or other legal actions.
LEGAL MATTERS
Roger L. Fidler, Esq., 163 South Street, Hackensack, New Jersey 07601 is
passing upon the validity of the shares to be sold by selling stockholders, and
the shares underlying the warrants.
FINANCIAL STATEMENTS
The following are our financial statements, with independent auditor's
report for Lightseek Limited for the period from inception, May 13, 1999, to
December 31, 1999.
37
<PAGE>
LIGHTSEEK LIMITED
FINANCIAL STATEMENTS
PERIOD FROM MAY 13, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
with
INDEPENDENT AUDITOR'S REPORT
<PAGE>
LIGHTSEEK LIMITED
TABLE OF CONTENTS
Page
FINANCIAL STATEMENTS
Independent Auditor's Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
Lightseek Limited
We have audited the accompanying balance sheet of Lightseek Limited (the
"Company") as of December 31, 1999, and the related statements of operations,
stockholders' equity and cash flows for the period from May 13, 1999 (inception)
through December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1999, and the results of its operations and its cash flows for the period
then ended in conformity with generally accepted accounting principles.
/s/ Leslie Sufrin & Company, LLC
--------------------------------
Leslie Sufrin & Company, LLC
March 13, 2000
<PAGE>
F-1
<PAGE>
LIGHTSEEK LIMITED
BALANCE SHEET
December 31, 1999
ASSETS
Current assets:
Accounts receivable $ 1,565
Prepaid expenses 7,591
----------
Total current assets 9,156
Purchased software, net of accumulated
depreciation of $7,729 38,653
----------
$ 47,809
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Cash overdraft $ 423
Accrued expenses 7,881
Due to affiliate (Note 4) 53,069
Deferred revenue 10,094
----------
Total current liabilities 71,467
Stockholders' equity:
Common stock, $1.61 par value; 100,000 shares
authorized, 1,000 issued and outstanding 1,615
Accumulated (deficit) (25,273)
----------
Total stockholders' equity (23,658)
$ 47,809
==========
See accompanying notes.
F-2
<PAGE>
LIGHTSEEK LIMITED
STATEMENT OF OPERATIONS
For the Period from May 13, 1999 (Inception) through December 31, 1999
Revenues $ 21,945
Cost of sales 22,025
----------
Gross profit (80)
Operating expenses:
Sales and marketing 3,165
Product development 13,686
General and administrative 8,342
----------
Total operating expenses 25,193
----------
Net (loss) $ (25,273)
==========
See accompanying notes.
F-3
<PAGE>
LIGHTSEEK LIMITED
STATEMENT OF STOCKHOLDER'S EQUITY
For the Period from May 13, 1999 (Inception) through December 31, 1999
Common Stock Accumulated
Shares Amount (Deficit) Total
------ ------ ------------ -----
Balance, at inception 1,000 $1,615 $ - $ 1,615
Net (loss) - - (25,273) (25,273)
----- ------- ---------- ----------
Balance, December 31, 1999 1,000 $1,615 $ (25,273) $ (23,658)
===== ======= =========== ==========
See accompanying notes.
F-4
<PAGE>
LIGHTSEEK LIMITED
STATEMENT OF CASH FLOWS
For the Period from May 13, 1999 (Inception) through December 31, 1999
Operating activities:
Net (loss) $(25,273)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation of property and equipment 7,729
Change in operating assets and liabilities:
Accounts receivable (1,565)
Prepaid expenses (7,591)
Accrued expenses 7,881
Deferred revenue 10,094
-------
Net cash provided by operating activities (8,725)
-------
Investing activities:
Acquisition of property and equipment (46,382)
--------
Net cash (used in) investing activities (46,382)
--------
Financing activities:
Proceeds from issuance of common stock 1,615
Due to affiliate 53,069
--------
Net cash provided by financing activities 54,684
--------
Decrease in cash (423)
Cash - beginning of period -
-------
Cash - end of period $ (423)
=======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 20
Income taxes $ -
F-5
<PAGE>
LIGHTSEEK LIMITED
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Note 1 - Organization and nature of business
Lightseek Limited (the "Company") was incorporated in the United Kingdom on
May 13, 1999. The Company is principally engaged in the development of Internet
sites designed to exploit business-to-business e-commerce Internet opportunities
within the global commercial electrical and lighting markets.
Note 2 - Summary of significant accounting policies
The following summary of the Company's significant accounting policies is
presented as an integral part of the accompanying financial statements.
Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Concentrations of credit risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The Company
currently places all of its cash with one financial institution and believes it
is not exposed to any significant credit risk on cash. The Company extends
credit to its customers based upon an evaluation of the customer's financial
condition and credit history. The Company since inception has not incurred any
credit losses and believes that its trade accounts receivable credit risk
exposure is limited.
Property and equipment
Purchased software and computer equipment are stated at cost and
depreciated using the straight-line method over the estimated useful lives of
the respective assets, which is 3 years.
Revenue recognition
The Company's revenues are derived principally from the sale of banner and
sponsorship advertisements. Advertising revenues from both banner and
sponsorship contracts are recognized ratably over the period in which the
advertisement is displayed.
Cost of sales
Cost of sales consists of expenses associated with the production of the
Company's online media properties. These costs consist primarily of fees paid to
third parties for Website hosting charges and the depreciation of purchased
software and computer equipment.
F-6
<PAGE>
Note 2 - Summary of significant accounting policies
Product development expenses
Product development expenses are primarily attributable to consulting costs
related to enhancing the features and functionality of the Company's Web sites
and transaction-processing systems, as well as increased investment in systems
and telecommunications infrastructure and new product offerings. Product
development costs are generally expensed as incurred, except for certain costs
relating to the acquisition or development of internal-use software that are
capitalized in accordance with the American Institute of Certified Public
Accountant's Statement of Position No. 98-1 "Accounting for the costs of
computer software developed or obtained for internal use."
Foreign currency translation gain or (loss)
The Company's functional currency is the British Pound. The accompanying
financial statements have been translated to United States dollars using a
year-end rate of exchange for assets and liabilities, and average rates of
exchange for revenues and expenses. Translation gains (losses) are included in
comprehensive income and accumulated as a separate component of stockholders'
equity. The weighted average exchange rate of the British Pound to the U.S.
Dollar for the period from May 13 through December 31, 1999 was virtually
identical to the year-end rate of exchange and, accordingly, there was no
transaction gain or loss for this period.
Income taxes
Deferred income taxes are provided on a liability method whereby deferred
tax assets are established for the difference between the financial reporting
and income tax basis of assets. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
Note 3 - Due to affiliate
At December 31, 1999, the Company owed an affiliated entity $53,069 for
cash advances and certain software acquisitions paid on its behalf. This
affiliate payable is non-interest bearing.
Note 4 - Commitments
The Company has an agreement with an investment banking firm under which it
has agreed to pay a fund raising fee of 7% of all funds raised as a result of
such firms direct involvement in all successful issues, including convertible
securities, debt, cash injections and equity issues. In future successful fund
raising efforts whereby the investment banking firm is indirectly involved in an
intermediary position, the fee will be reduced to 1.5% of the amount raised.
Note 5 - Subsequent events
On February 24, 2000, the Company acquired certain Domain Names and a
Web-site with the URL lightingbuyer.com from the shareholders of the Company in
exchange for 13,250 shares of the Company's authorized common stock.
F-7
<PAGE>
Note 5 - Subsequent events (continued)
On March 1, 2000, the Company was acquired by and became a wholly-owned
subsidiary of VerticalBuyer, Inc., a Delaware corporation ("VerticalBuyer"). On
that date, VerticalBuyer issued 14,250,000 shares of its common stock to the
shareholders of the Company in exchange for all of the outstanding common stock
of the Company. The acquisition will be accounted for as a pooling of interests.
On March 2, 2000, VerticalBuyer entered into a Securities Purchase and
Facilities Agreement (the "Agreement") with CSP Inc., a U.S. publicly traded
company ("CSPI"), under which CSPI purchased two million shares of
VerticalBuyer's common stock and redeemable warrants to purchase up to an
additional three million shares of such stock for an aggregate purchase price of
$2 million. The three classes of warrants (Class A, Class B and Class C) entitle
CSPI, subject to certain conditions and the occurrence of certain events, to
purchase up to one million shares each of VerticalBuyer's common stock at an
exercise price of $1 per share. The warrants are excisable for a period of two
years beginning on the effective date of a registration statement covering the
underlying shares. In a Memorandum of Understanding that was executed in
connection with the Agreement, CSPI agreed to provide VerticalBuyer free of
charge approximately 1,000 square feet of office space and various accounting
services for a period of six months. After the six-month period, VerticalBuyer
and CSPI will negotiate a fee structure for the ongoing use of the office space
and accounting services.
F-8
<PAGE>
VERTICALBUYER, INC.
UNAUDITED PRO-FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 1999
Lightseek Pro-Forma
Limited Adjustments Pro-Forma
---------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ - $ 5,085,000 (a) $ 5,085,000
Accounts receivable 1,565 1,565
Prepaid expenses 7,591 7,591
-------- ------------- -------------
Total current assets 9,156 5,085,000 5,094,156
Property & equipment, net 38,653 38,653
-------- ------------- -------------
$ 47,809 $ 5,085,000 $ 5,132,809
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 423 $ 423
Accrued expenses 7,881 7,881
Due to affiliate 53,069 53,069
Deferred revenue 10,094 10,094
-------- ------------- -------------
Total current liabilities 71,467 71,467
Stockholders' equity:
Common stock 1,615 5,975 (a) 7,590
Additional paid-in capital 5,079,025 (a) 5,079,025
Retained earnings (25,273) (25,273)
Total stockholders' equity (23,658) 5,085,000 5,061,342
-------- ------------- ------------
$ 47,809 $ 5,085,000 $ 5,132,809
========== ============== ============
F-9
<PAGE>
a. Reflects the impact on cash and
stockholders' equity of the following:
Additional
Common Paid-in
stock Capital Total
--------------------------------
(i) the issuance of VerticalBuyer's
common stock and warrants to
CSP Inc. ("CSPI") $ 2,000 $1,998,000 $2,000,000
(ii) the exercise of CSPI's Class A, B and
C warrants to purchase the stock of
VerticalBuyer on the effective date
of the Registration Statement covering
the shares underlying the warrant 3,000 2,997,000 3,000,000
(iii) the issuance of 750,000 shares of
Vertical Buyer's Common Stock in
payment of certain consulting fees
incurred in connection with raising
capital 750 (750) 0
(iv) to record fund raising fees payable
equal to 7% of the $2 million stock
acquisition by CSPI 0 (140,000) (140,000)
(v) the exercise of Class D warrants held
by certain other investors 225 224,775 225,000
-------- ---------- -----------
$ 5,975 $5,079,025 $5,085,000
VERTICALBUYER, INC.
UNAUDITED PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
(In thousands)
Lightseek Pro-Forma
Limited Adjustments Pro-Forma
--------- ----------- ---------
Revenues $ 21,945 $ - $ 21,945
Cost of sales 22,025 - 22,025
--------- ---------- ----------
Gross profit (80) - (80)
Operating expenses 25,193 - 25,193
--------- ---------- ----------
Net (loss) $(25,273) $ - $ (25,273)
========= ========== ==========
F-10
<PAGE>
F-11
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Financial Information (the
"Pro Forma Financial Information") is based on the historical financial
statements of Lightseek Limited and has been prepared to illustrate the effects
of the acquisition of Lightseek by VerticalBuyer.
The Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1999
has been prepared as if the acquisition of Lightseek by VerticalBuyer had
occurred on that date. The Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1999 gives effect to the acquisition
of Lightseek by VerticalBuyer as if it also had occurred as of December 31,
1999.
The Pro Forma Financial Information is not necessarily indicative of the
actual results of operations or financial position of the Company at and for the
year ended December 31, 1999 and does not purport to represent the Company's
results of operations for future periods or its future financial position.
The Pro Forma Financial Information should be read in conjunction with the
Historical Financial Statements of Lightseek Limited and notes thereto which are
included elsewhere in this Prospectus. In management's opinion, the Pro Forma
Financial Information includes all adjustments necessary to reflect the effects
of the acquisition of Lightseek by VerticalBuyer and other transactions
described below.
F-12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law provides for the indemnification of
the officers, directors and corporate employees and agents of VerticalBuyer,
Inc. (the "Registrant") under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstance of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized in this section. Such
expenses including attorneys' fees incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
<PAGE>
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Articles Ninth and Tenth of the Registrant's certificate of incorporation
provide as follows:
NINTH:
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (7) of
subsection (b) of Section 102 of the Delaware General Corporation Law, as the
same may be amended and supplemented.
TENTH:
The Corporation shall, to the fullest extent permitted by the provisions of
Section 145 of the Delaware General Corporation Law, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Article XII of the Registrant's by-laws provides as follows:
ARTICLE XII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. INDEMNIFICATION. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or
was a director, trustee, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, trustee,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, by itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in or not opposed to the best interest of the corporation, and with
respect to any criminal action or proceeding, had reasonable cause to
believe that such person's conduct was lawful.
<PAGE>
2. DERIVATIVE ACTION. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in the corporation's favor by reason of the fact that such person
is or was a director, trustee, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of any other corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the corporation; provided, however, that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of such person's duty
to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that,
despite circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, by itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in or not opposed to the best interest of the corporation.
3. SUCCESSFUL DEFENSE. To the extent that a director, trustee, officer,
employee or agent of the corporation has been successful, on the merits or
otherwise, in whole or in part, in defense of any action, suit or
proceeding referred to in paragraphs 1 and 2 above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith.
4. AUTHORIZATION. Any indemnification under paragraph 1 and 2 above (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the
director, trustee, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of
conduct set forth in paragraph 1 and 2 above. Such determination shall be
made (a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, (b) by independent legal counsel (selected by one or more of
the directors, whether or not a quorum and whether or not disinterested) in
a written opinion, or (c) by the stockholders. Anyone making such a
determination under this paragraph 4 may determine that a person has met
the standards therein set forth as to some claims, issues or matters but
not as to others, and may reasonably prorate amounts to be paid as
indemnification.
5. ADVANCES. Expenses incurred in defending civil or criminal actions, suits
or proceedings shall be paid by the corporation, at any time or from time
to time in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in paragraph 4 above upon
receipt of an undertaking by or on behalf of the director, trustee,
officer, employee or agent to repay such amount unless it shall ultimately
be determined by the corporation that the payment of expenses is authorized
in this Section.
<PAGE>
6. NONEXCLUSIVITY. The indemnification provided in this Section shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any law, by-law, agreement, vote of stockholders or
disinterested director or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee or agent and shall insure to the benefit of the
heirs, executors, and administrators of such a person.
7. INSURANCE. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, trustee,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or
agent of any corporation, partnership, joint venture, trust or other
enterprise, against any liability assessed against such person in any such
capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such
liability.
8. "CORPORATION" DEFINED. For purpose of this action, references to the
"corporation" shall include, in addition to the corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had the power and authority to indemnify its
directors, trustees, officers, employees or agents, so that any person who
is or was a director, trustee, officer, employee or agent of such of
constituent corporation will be considered as if such person was a
director, trustee, officer, employee or agent of the corporation.
Item 25. Expenses of Issuance and Distribution
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Securities and Exchange Commission Registration Fee $ 1,326.88
Legal Fees 20,000.00
Accounting Fees 10,000.00
Printing and Engraving 2,000.00
Blue Sky Qualification Fees and Expenses 950.00
Transfer Agent Fee 5,000.00
Miscellaneous 1,673.12
------------
TOTAL $ 40,000.00
Item 26. Recent Sales of Unregistered Securities
The Registrant purchased all the issued and outstanding capital stock of
Lightseek Limited from four individuals, including Tim Rosen, President, and
Leslie Kent, Secretary/Treasurer, having a book value of $------- in exchange
for 14,250,000 shares of its common stock in February, 2000, and issued 750,000
shares of its common stock in exchange for consulting services valued at $-----
. In March, 2000, the Registrant issued 2,000,000 shares of its common stock and
3,000,000 common stock purchase warrants for $2,000,000 to CSP Inc. and 225,000
warrants to certain consultants. The warrants are exercisable at $1.00. In
March, 2000, the Registrant also issued 1,300,000 bonus options to 10 persons,
including, Tim Rosen, President, Leslie Kent, Secretary/ Treasurer, Joseph
Donahue, a Director and Alexander Lupinetti, a Director (each of whom received
250,000 bonus options) pursuant to its Year 2000 Option Plan. The options are
exercisable at $1.00 for a period of three years.
These securities were sold under the exemption from registration provided
by Section 4(2) of the Securities Act. Neither the Registrant nor any person
acting on its behalf offered or sold the securities by means of any form of
general solicitation or general advertising. All purchasers represented in
writing that they acquired the securities for their own accounts. A legend was
placed on the stock certificates stating that the securities have not been
registered under the Securities Act and cannot be sold or otherwise transferred
without an effective registration or an exemption therefrom.
<PAGE>
EXHIBITS
Item 27.
3.1 Certificate of Incorporation
3.2 Amendment to the Certificate of Incorporation
3.3 By-Laws
4.1 Specimen Certificate of Common Stock
4.2 Form of "A" Warrant
4.3 Form of "B" Warrant
4.4 Form of "C" Warrant
4.5 Form of "D" Warrant
5.1 Opinion of Counsel
10.1 Securities Purchase and Facilities Agreement
10.2 Registration Rights Agreement
10.3 Voting Agreement
23.1 Accountant's Consent to Use Opinion
23.2 Counsel's Consent to Use Opinion
<PAGE>
Item 28.
UNDERTAKINGS
The Registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendment to this registration statement (the "Registration
Statement"):
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933 (the "Securities Act");
(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 thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in this registration
statement, including (but not limited to) the addition of an
underwriter;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) To deposit into the Escrow Account at the closing, certificates in such
denominations and registered in such names as required by the Company to
permit prompt delivery to each purchaser upon release of such securities
from the Escrow Account in accordance with Rule 419 of Regulation C under
the Securities Act. Pursuant to Rule 419, these certificates shall be
deposited into an escrow account, not to be released until a business
combination is consummated.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the Registrant has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized the registration
statement to be signed on its behalf by the undersigned, in the City of
New York, State of New York on March 28, 2000.
VERTICALBUYER, INC.
By: /s/Tim Rosen
---------------------------
Tim Rosen, President and
Chief Executive Officer
/s/Leslie Kent
---------------------------
Leslie Kent, Treasurer and
Chief Financial Officer
In accordance with the requirements of the Securities Act of 1933, the
registration statement was signed by the following persons in the capacities and
on the dates stated.
/s/Tim Rosen
- ------------------------------- Dated: March 28, 2000
Tim Rosen
President, Treasurer, Director
/s/Leslie Kent
- ------------------------------- Dated: March 28, 2000
Leslie Kent
Secretary, Director
/s/Joseph Donahue
- ------------------------------- Dated: March 28, 2000
Joseph Donahue
Director
/s/Alexander Lupinetti
- ------------------------------- Dated: March 28, 2000
Alexander Lupinetti
Director
<PAGE>
CERTIFICATE OF INCORPORATION
OF
VerticalBuyer, Inc.
FIRST: The name of the corporation is VerticalBuyer, Inc.
SECOND: The registered office of the corporation in the State of Delaware
is located at 800 Delaware Avenue, City of Wilmington, New Castle County, 19801.
The registered agent of the corporation at that address is Delaware Corporations
Inc.
THIRD: The purpose of the corporation is to engage in any lawful act of
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is one thousand (1,000) shares of common stock having a par
value of $0.01 per share.
FIFTH: The business and affairs of the corporation shall be managed by or
under the director o the board of directors, and the directors need not be
elected by ballot unless required by the bylaws of the corporation.
SIXTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the board of directors is expressly authorized to
make, amend and repeal the bylaws.
SEVENTH: The corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware. All rights herein conferred are
granted subject to this reservation.
EIGHTH: The incorporator is Delaware Corporations Inc. whose mailing
address is 800 Delaware Ave., P.O. Box 8702, Wilmington, DE 19899.
THE UNDERSIGNED, being the sole incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, does make, file and record
this Certificate of Incorporation, does certify that the facts herein stated are
true, and has caused this Certificate of Incorporation to be duly executed by an
authorized officer this 24th day of September, 199.
DELAWARE CORPORATIONS INC.
Sole Incorporator
By: /s/Robin G. Brooks
Robin G. Brooks, Vice President
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
VerticalBuyer, Inc.
VerticalBuyer, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Company"), hereby certifies that
the Company has not received any payment for any of its stock and that the
amendments set forth below to the Company's Certificate of Incorporation were
duly adopted in accordance with the provisions of Section 241(b) of the General
Corporation Law of the State of Delaware and that the capital of said
corporation shall not be reduced under or by reason of said amendments:
Article FOURTH of the Certificate of Incorporation is hereby amended to
read in its entirety as follows:
This corporation shall have the authority to issue two (2) classes of
capital stock the total of which shall be 55,000,000 shares. The
classification and par value of 50,000,000 shares shall be common voting
stock having a par value of $.001 per share, and each share shall be
entitled to the same dividend, liquidation, and voting rights; the
classification and par value of 5,000,000 shares shall be preferred stock
having a par value of $.001 per share. Said preferred stock may be issued
from time to time in one or more classes or series with such dividend
rates, voting rights, rights of conversion, rights upon dissolution or
liquidation, and with such designations or restrictions thereof as shall be
determined by resolution adopted by the Board of Directors at the time such
stock is issued without further approval of the shareholders."
Article FIFTH of the Certificate of Incorporation is hereby amended to read
in its entirety as follows:
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its board of directors. The number of
directors which shall constitute the whole board of directors shall be
fixed by, or in the manner provided in, the by-laws. The phrase "whole
board" and the phrase "total number of directors" shall be deemed to have
the same meanings to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of directors
need be by written ballot.
<PAGE>
2. After the original or other by-laws of the Corporation have been adopted,
amended, or repealed, as the case may be, in accordance with the provisions
of Section 109 of the Delaware General Corporation Law, and after the
Corporation has received any payment for any of its stock, the power to
adopt, amend, or repeal the by-laws of the Corporation may be exercised by
the board of directors of the Corporation subject to the reserved power of
the stockholders to make, alter and repeal any by-laws adopted by the board
of directors; provided, however, that any provision for the classification
of directors of the Corporation for staggered terms pursuant to the
provisions of subsection (d) of Section 141 of the Delaware General
Corporation Law shall be set forth in an initial by-law or in a by-law
adopted by the stockholders of the Corporation entitled to vote.
3. Whenever the Corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice
of, and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under
the provisions of this certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) to Section 242 of the
Delaware General Corporation Law shall otherwise require; provided, that no
share of any such class which is otherwise denied voting power shall
entitle the holder thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
4. With the consent in writing or pursuant to a vote of the holders of a
majority of the capital stock issued and outstanding, the board of
directors shall have the authority to dispose, in any manner, of the whole
property of the Corporation. 5. The by-laws shall determine whether and to
what extent the accounts and books of the Corporation, or any of them,
shall be open to inspection by the stockholders; and no stockholder shall
have any right or inspect any account or book or document of the
Corporation, except as conferred by law or by by-laws or by resolution of
the stockholders.
6. The stockholders and directors shall have the power to hold their meeting
and to keep the books, documents and papers of the Corporation outside the
State of Delaware at such places as may be from time to time designated by
the by-laws or by resolution of the stockholders or directors, except as
otherwise required by the Delaware General Corporation Law.
7. Any action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, without prior notice and without a vote, if a consent or consents
in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted."
A new Article NINTH to the Certificate of Incorporation is hereby adopted
to read as follows:
"Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and
its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of
the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation
under the provisions of Section 291 of Delaware General Corporation Law or
on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279
of Delaware General Corporation Law order a meeting of the
2
<PAGE>
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case
may be, agree to any compromise or arrangement of the Corporation as
consequence and to any reorganization of such compromise or arrangement,
the said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation."
A new Article TENTH to the Certificate of Incorporation is hereby adopted
to read as follows:
"The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the Delaware General Corporation
Law, as the same may be amended and supplemented."
A new Article ELEVENTH to the Certificate of Incorporation is hereby
adopted to read as follows:
"The Corporation shall, to the fullest extent permitted by the provisions
of Section 145 of the Delaware General Corporation Law, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have
power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
to action In another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, executors and administrators
of such a person. The foregoing right of indemnification shall in no way be
exclusive of any other rights of indemnification to which such person may
be entitled under any by-law, agreement, vote of stockholders or
disinterested directors, or otherwise."
A new Article TWELFTH to the Certificate of Incorporation is hereby adopted
to read as follows:
"The Corporation elects not to be governed by Section 203 of the Delaware
General Corporation Law."
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to
be executed by its sole incorporator thereunto duly authorized as of this
28th day of February, 2000.
DELAWARE CORPORATIONS LLC
By: /s/Robin G. Brooks
-------------------------------
Robin G. Brooks, Vice President
3
<PAGE>
VERTICALBUYER, INC.
A Delaware Corporation
BY-LAWS
ARTICLE I
Principal Executive Office
The principal executive office of VerticalBuyer, Inc. (the "Corporation")
shall be at 40 Linnell Circle, Billerica, Massachusetts 01821. The Corporation
may also have offices at such other places within or without the State of
Delaware as the board of directors shall from time to time determine.
ARTICLE II
Stockholders
SECTION 1. Place of Meetings. All annual and special meetings of the
stockholders shall be held at the principal executive office or at such other
place within or without the State of Delaware as the board of directors may
determine and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders for the election
of directors and for the transaction of any other business shall be held
annually at such date and time as the board of directors may determine.
SECTION 3. Special Meetings. Special meeting of the stockholders for any
purpose or purposes may be called at any time by the board of directors, or by a
committee of the board of directors which as been duly designated by the board
of directors and whose powers and authorities, as provided in a resolution of
the board of directors or in these by-laws, include the power and authority to
call such meetings, or by stockholders owning at least twenty-five percent (25%)
of the entire voting power of the corporation's capital stock but such special
meetings may not be called by any other person or persons.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with these by-laws or as otherwise prescribed by the
board of directors. The chairman or the chief executive officer shall preside at
such meetings.
SECTION 5. Notice of Meeting. Written notice stating the place, day and
time of the meeting and the purpose or purposes for which the meeting is called
shall be mailed by the secretary or the officer performing his duties, not less
than ten days nor more than fifty days before the meeting to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, addressed to the
stockholder at his address as it appears on the stock transfer books or records
as of the record date prescribed in Section 6, with postage thereon prepaid. If
a stockholder be present at a meeting, or in writing waive notice thereof before
or after the meeting, notice of the meeting to such stockholder shall be
unnecessary. When any stockholders' meeting, either annual or special, is
adjourned for thirty days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. It shall not be necessary to give
any notice of the time and place of any meeting adjourned for less than thirty
days or of the business to be transacted at such adjourned meeting, other than
an announcement at the meeting at which such adjournment is taken.
<PAGE>
SECTION 6. Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any stockholders' meeting, or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the record
date for any such determination of stockholders. Such date in any case shall be
not more than sixty days, and in case of a stockholders' meeting, not less than
ten days prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
When a determination of stockholders entitled to vote at any stockholders'
meeting has been made as provided in this section, such determination shall
apply to any adjournment thereof.
SECTION 7. Voting Lists. The officer or agent having charge of the stock
transfer books for shares shall make, at least ten days before each
stockholders' meeting, a complete record of the stockholders entitled to vote at
such meeting or any adjournment thereof, with the address of and the number of
shares held by each. The record, for a period of ten days before such meeting,
shall be kept on file at the principal executive office, whether within or
outside the State of Delaware, and shall be subject to inspection by any
stockholder for any purpose germane to the meeting at any time during usual
business hours. Such record shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any stockholder
for any purpose germane to the meeting during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to the
stockholders entitled to examine such record or transfer books or to vote at any
stockholders' meeting.
SECTION 8. Quorum. One-fourth of the outstanding shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a stockholders'
meeting. If less than one-fourth of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. The stockholders present
at a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
SECTION 9. Proxies. At all stockholders' meetings, a stockholder may vote
by proxy executed in writing by such stockholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by such stockholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after eleven months from the date of its execution unless otherwise provided in
the proxy.
SECTION 10. Voting. At each election for directors every stockholder
entitled to vote at such election shall be entitled to one vote for each share
of stock held. Unless otherwise provided by the certificate of incorporation, by
statute, or by these by-laws, a majority of votes of the shares present in
person or by proxy at a lawful meeting and entitled to vote on the election of
directors shall be sufficient to pass on a transaction or matter, except in the
election of directors, which election shall be determined by a plurality of the
votes of the shares present in person or by proxy at the meeting and entitled to
vote on the election of directors.
2
<PAGE>
SECTION 11. Voting of Shares in the Name of Two or More Persons. When
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any stockholders'
meeting any one or more of such stockholders may cast, in person or by proxy,
all votes to which such ownership is entitled. In the event an attempt is made
to cast conflicting votes, in person or by proxy, by the several persons in
whose name shares of stock stand, the vote or votes to which these persons are
entitled shall be cast as directed by a majority of those holding such stock and
present in person or by proxy at such meeting, but no votes shall be cast for
such stock without the direction of such a majority.
SECTION 12. Voting of Shares by Certain Holders. Shares of capital stock
standing in the name of another corporation may be voted by any officer, agent
or proxy as these by-laws of such corporation may prescribe, or, in the absence
of such provision, as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be voted
by him, either in person or by proxy, without a transfer of such shares into his
name. Shares standing in the name of a trustee may be voted by him, either in
person or by proxy, but no trustee shall be entitled to vote shares held by him
without a transfer of such shares into his name. Shares standing in the name of
a receiver may be voted by such receiver, and shares held by or under the
control of a receiver may be voted by such receiver without the transfer thereof
into his name if authority to do so is contained in an appropriate order of the
court or other public authority by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares at any stockholders' meeting until such shares have been transferred into
the name of the pledgee and thereafter such pledgee shall be entitled to vote
the shares so transferred.
Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Corporation, shall be voted at any stockholders' meeting or counted in
determining the total number of outstanding shares at any given time for
purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any stockholders'
meeting, the chairman of the board or the board of directors may appoint any
persons, other than nominees for office, as inspectors of election to act at
such meeting or any adjournment thereof. The number of inspectors shall be
either one or three. If the board of directors appoints either one or three
inspectors, that appointment shall not be altered at the meeting. If inspectors
of election are not so appointed, the chairman of the board of directors may
make an appointment at the meeting. In case any person appointed as inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment in advance of the meeting or at the meeting by the chairman of the
board of directors or the president of the Corporation.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or vote with fairness to all stockholders.
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SECTION 14. Nominating Committee. The board of directors or a committee
appointed by the board of directors shall act as nominating committee for
selecting the management nominees for election as directors. Except in the case
of a nominee substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver written nominations
to the secretary at least twenty days prior to the date of the annual meeting.
Provided such committee makes such nominations, no nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by stockholders are made in writing and
delivered to the secretary in accordance with the provisions of the
Corporation's certificate of incorporation.
SECTION 15. New Business. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary in accordance
with the provisions of the Corporation's certificate of incorporation. This
provision shall not prevent the consideration and approval or disapproval at the
annual meeting of reports of officers, directors and committees, but in
connection with such reports no new business shall be acted upon at such annual
meeting unless stated and filed as provided in the Corporation's certificate of
incorporation.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be under the direction of the board of directors. The chairman shall
preside at all meetings of the board of directors.
SECTION 2. Number, Term and Election. The number of directors shall be such
number, not less than one nor more than seven (exclusive of directors, if any,
to be elected by holders of preferred stock), as shall be provided from time to
time in a resolution adopted by the board of directors, provided that no
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director, and provided further that no action shall be taken to
decrease or increase the number of directors from time to time unless at least
two-thirds of the directors then in office shall concur in said action.
Exclusive of directors, if any, elected by holders of preferred stock, vacancies
in the board of directors, however caused, and newly created directorships shall
be filled by a vote of two-thirds of the directors then in office, whether or
not a quorum, and any director so chosen shall hold office for a term expiring
at the annual stockholders' meeting at which the term of the class to which the
director has been chosen expires and when the director's successor is elected
and qualified. The board of directors shall be classified in accordance with the
provisions of Section 3 of this Article III.
SECTION 3. Regular Meetings. A regular meeting of the board of directors
shall be held at such time and place as shall be determined by resolution of the
board of directors without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the chairman, the chief executive officer or
one-third of the directors. The person calling the special meetings of the board
of directors may fix any place as the place for holding any special meeting of
the board of directors called by such persons.
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Members of the board of the directors may participate in special meetings
by means of telephone conference or similar communications equipment by which
all persons participating in the meeting can hear each other. Such participation
shall constitute presence in person.
SECTION 5. Notice. Written notice of any special meeting shall be given to
each director at least two days previous thereto delivered personally or by
telegram or at least seven days previous thereto delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid if mailed or when delivered to the telegraph
company if sent by telegram. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
SECTION 6. Quorum. A majority of the number of directors fixed by Section 2
shall constitute a quorum for the transaction of business at any meeting of the
board of directors, but if less than such majority is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time.
Notice of any adjourned meeting shall be given in the same manner as prescribed
by Section 5 of this Article III.
SECTION 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by these by-laws, the
certificate of incorporation, or the General Corporation Law of the State of
Delaware.
SECTION 8. Action Without a Meeting. Any action required or permitted to be
taken by the board of directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors.
SECTION 9. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office addressed to the chairman.
Unless otherwise specified therein such resignation shall take effect upon
receipt thereof by the chairman.
SECTION 10. Vacancies. Any vacancy occurring on the board of directors
shall be filled in accordance with the provisions of the Corporation's
certificate of incorporation. Any directorship to be filled by reason of an
increase in the number of directors may be filled by the affirmative vote of
two-thirds of the directors then in office or by election at an annual meeting
or at a special meeting of the stockholders held for that purpose. The term of
such director shall be in accordance with the provisions of the Corporation's
certificate of incorporation.
SECTION 11. Removal of Directors. Any director or the entire board of
directors may be removed only in accordance with the provisions of the
Corporation's certificate of incorporation.
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SECTION 12. Compensation. Directors, as such, may receive compensation for
service on the board of directors. Members of either standing or special
committees may be allowed such compensation as the board of directors may
determine.
SECTION 13. Age Limitation. No person 72 years or more of age shall be
eligible for election, reelection, appointment or reappointment to the board. No
director shall serve as such beyond the annual meeting immediately following the
director becoming 72 years of age. This age limitation does not apply to an
advisory director.
ARTICLE IV
Committees of the Board of Directors
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, as they may determine to be necessary
or appropriate for the conduct of the business, and may prescribe the duties,
constitution and procedures thereof. Each committee shall consist of one or more
directors appointed by the chairman. The chairman may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
The chairman shall have power at any time to change the members of, to fill
vacancies in, and to discharge any committee of the board. Any member of any
such committee may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board, the chairman of the board, the
chief executive officer, the chairman of such committee, or the secretary shall
be deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. Any member of any such committee may be removed
at any time, either with or without cause, by the affirmative vote of a majority
of the authorized number of directors at any meeting of the board called for
that purpose.
ARTICLE V
Officers
SECTION 1. Positions. The officers shall be a chairman, a president, one or
more vice presidents, a secretary and a treasurer, each of whom shall be elected
by the board of directors. The board of directors may designate one or more vice
presidents as executive vice president or senior vice president. The board of
directors may also elect or authorize the appointment of such other officers as
the business may require. The officers shall have such authority and perform
such duties as the board of directors may from time to time authorize or
determine. In the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
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SECTION 2. Election and Term of Office. The officers shall be elected
annually by the board of directors at the first meeting of the board of
directors held after each annual meeting of the stockholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until his successor shall
have been duly elected and qualified, until his death or until he shall resign
or shall have been removed in the manner hereinafter provided. Election or
appointment of an officer, employee or agent shall not of itself create contract
rights. The board of directors may authorize the Corporation to enter into an
employment contract with any officer in accordance with state law; but no such
contract shall impair the right of the board of directors to remove any officer
at any time in accordance with Section 3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds of the
board of directors whenever, in its judgment, the best interests will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contract rights, if any, of the person so removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be fixed
from time to time by the board of directors, and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director.
ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. Contracts. To the extent permitted by applicable law, and except
as otherwise prescribed by the Corporation's certificate of incorporation or
these by-laws with respect to certificates for shares, the board of directors or
the executive committee may authorize any officer, employee, or agent to enter
into any contract or execute and deliver any instrument in the name of and on
behalf. Such authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf and no evidence of
indebtedness shall be issued in its name unless authorized by the board of
directors. Such authority may be general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
shall be signed by one or more officers, employees or agents in such manner,
including in facsimile form, as shall from time to time be determined by
resolution of the board of directors.
SECTION 4. Deposits. All funds not otherwise employed shall be deposited
from time to time to the credit in any of its duly authorized depositories as
the board of directors may select.
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ARTICLE VII
Certificates for Shares and Their Transfer
SECTION 1. Certificates for Shares. The shares of capital stock shall be
represented by certificates signed by the chairman of the board of directors or
the president or a vice president and by the treasurer or an assistant treasurer
or the secretary or an assistant secretary, and may be sealed with the seal or a
facsimile thereof. Any or all of the signatures upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee. If
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before the certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issue.
SECTION 2. Form of Share Certificates. All certificates representing shares
of capital stock shall set forth upon the face or back that the Corporation will
furnish to any stockholder upon request and without charge a full statement of
the designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined, and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series.
Each certificate representing shares shall state upon the face thereof:
that the Corporation is organized under the laws of the State of Delaware; the
name of the person to whom issued; the number and class of shares, the
designation of the series, if any, which such certificate represents; the par
value of each share represented by such certificate, or a statement that the
shares are without par value. Other matters in regard to the form of the
certificates shall be determined by the board of directors.
SECTION 3. Payment for Shares. No certificate shall be issued for any share
of capital stock until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the issuance
of shares of capital stock shall be paid in accordance with the provisions of
the certificate of incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock shall be
made only on the stock transfer books of the Corporation. Authority for such
transfer shall be given only to the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Corporation. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books shall be deemed by the Corporation to be the owner
thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
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ARTICLE VIII
Fiscal Year; Annual Audit
The fiscal year shall end on the last day of December of each year. The
Corporation shall be subject to an annual audit as of the end of its fiscal year
by independent public accountants appointed by and responsible to the board of
directors.
ARTICLE IX
Dividends
Dividends upon the capital stock, subject to the provisions of the
certificate of incorporation, if any, may be declared by the board of directors
at any regular or special directors' meeting, pursuant to law. Dividends may be
paid in cash, in property or in stock.
ARTICLE X
Corporation Seal
The corporate seal shall be in such form as the board of directors shall
prescribe.
ARTICLE XI
Amendments
Pursuant to the certificate of incorporation, these by-laws may be
repealed, altered, amended or rescinded by the stockholders only by vote of not
less than three-quarters of the voting power of the outstanding shares of
capital stock entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a stockholders' meeting
called for that purpose (provided that notice of such proposed repeal,
alteration, amendment or rescission is included in the notice of such meeting).
In addition, the board of directors may repeal, alter, amend or rescind these
by-laws by vote of two-thirds of the board of directors at a legal meeting held
in accordance with the provisions of these by-laws.
ARTICLE XII
Indemnification of Directors and Officers
1. INDEMNIFICATION. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or
was a director, trustee, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, trustee,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, by itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in or not opposed to the best interest of the corporation, and with
respect to any criminal action or proceeding, had reasonable cause to
believe that such person's conduct was lawful.
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2. DERIVATIVE ACTION. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in the corporation's favor by reason of the fact that such person
is or was a director, trustee, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of any other corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the corporation; provided, however, that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of such person's duty
to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that,
despite circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, by itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in or not opposed to the best interest of the corporation.
3. SUCCESSFUL DEFENSE. To the extent that a director, trustee, officer,
employee or agent of the corporation has been successful, on the merits or
otherwise, in whole or in part, in defense of any action, suit or
proceeding referred to in paragraphs 1 and 2 above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith.
4. AUTHORIZATION. Any indemnification under paragraph 1 and 2 above (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the
director, trustee, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of
conduct set forth in paragraph 1 and 2 above. Such determination shall be
made (a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, (b) by independent legal counsel (selected by one or more of
the directors, whether or not a quorum and whether or not disinterested) in
a written opinion, or (c) by the stockholders. Anyone making such a
determination under this paragraph 4 may determine that a person has met
the standards therein set forth as to some claims, issues or matters but
not as to others, and may reasonably prorate amounts to be paid as
indemnification.
5. ADVANCES. Expenses incurred in defending civil or criminal actions, suits
or proceedings shall be paid by the corporation, at any time or from time
to time in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in paragraph 4 above upon
receipt of an undertaking by or on behalf of the director, trustee,
officer, employee or agent to repay such amount unless it shall ultimately
be determined by the corporation that the payment of expenses is authorized
in this Section.
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6. NONEXCLUSIVITY. The indemnification provided in this Section shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any law, by-law, agreement, vote of stockholders or
disinterested director or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee or agent and shall insure to the benefit of the
heirs, executors, and administrators of such a person.
7. INSURANCE. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, trustee,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or
agent of any corporation, partnership, joint venture, trust or other
enterprise, against any liability assessed against such person in any such
capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such
liability.
8. "CORPORATION" DEFINED. For purpose of this action, references to the
"corporation" shall include, in addition to the corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had the power and authority to indemnify its
directors, trustees, officers, employees or agents, so that any person who
is or was a director, trustee, officer, employee or agent of such of
constituent corporation will be considered as if such person was a
director, trustee, officer, employee or agent of the corporation.
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VERTICALBUYER, INC.
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
This certifies that ----------
is the registered owner of ----------------
fully paid and non-assessable shares of common stock, $.001 par value each of
VERTICALBUYER, INC.
Transferable on the books of the Corporation in person or by attorney upon
surrender of this Certificate duly endorsed or assigned. This Certificate and
the shares represented hereby are subject to the laws of the State of Delaware,
and to the Certificate of Incorporation and By-laws of the Corporation, as now
or hereafter amended. This Certificate is not valid unless countersigned by the
Transfer Agent
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: ----------------
VERTALBUYER, INC.
/s/ Leslie Kent CORPORATE SEAL /s/ Tim Rosen
- ---------------- 1999 --------------------
Secretary DELAWARE President
Countersigned:
Olde Monmouth Stock Transfer Co., Inc.
Transfer Agent
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common and not as community property
UNIFORM GIFTS TO MINORS ACT
(Custodian) (Minor)
under the Uniform Gifts of Minors Act of the State of ------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
Please insert social security
or other identifying number: -----------------
(Insert name and address, including zip code):
- ----------------------------------------------------
- ----------------------------------------------------
- --------------------------------------------- shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------
to transfer the said shares on the books of the within named Corporation
with full power of substitution in the premises.
DATED: ------------- ---------------------------------------
NOTICE: The signature to this assignment must correspond with the name as
it is written upon the face of the Certificate in every particular without
alteration or enlargement or any change whatever.
SIGNATURE GUARANTEE:
<PAGE>
CLASS "A" WARRANT
THIS WARRANT CERTIFIES THAT CSP INC. ("CSPI"), 40 Linnell Circle,
Billerica, MA 01821, a Massachusetts corporation, is entitled to purchase from
VERTICALBUYER, INC., a Delaware corporation, ("VerticalBuyer"), at the price and
during the period as hereinafter specified, up to one (1,000,000) million shares
(the "Shares") of VerticalBuyer common stock, $.001 par value per share.
References to "CSPI" in this apply to CSPI and, as appropriate, to any
transferee, if any, of the Warrant.
1. EXERCISE
(a) Price and Period. The rights represented by this warrant (the
"Warrant") shall be exercisable for a period of two (2) years (the
"Exercise Period") beginning on the effective date (the "Effective
Date") of a registration statement covering the Shares (the
"Registration Statement") filed with the Securities and Exchange
Commission ("SEC") at an exercise price of $1.00 per Share, subject to
adjustment in accordance with paragraph 7 hereof.
(b) Redemption. Commencing on the Effective Date, VerticalBuyer may, at
its option, redeem the Warrant in whole, but not in part, for a
redemption price of $100, on not less than 30 days' notice to CSPI.
The right to redeem the Warrant may be exercised by VerticalBuyer
during the Exercise Period only in the event that (i) the registration
statement (including any post-effective amendment thereto effective
with the SEC, which Registration Statement would enable CSPI to
exercise the Warrant and sell the underlying Shares without
restriction (ii) any notice of the call for redemption is given not
more than 10 business days after the effective date of the
Registration Statement; and (iii) the expiration of the 30 day notice
period is within the Exercise Period. In the event VerticalBuyer
exercises its right to redeem the Warrant, the Expiration Date will be
deemed to be, and the rights under the Warrant will be exercisable
until the close of business on, the date fixed for redemption in such
notice. If any Warrant called for redemption is not exercised by such
time, it will cease to be exercisable and CSPI will be entitled only
to the redemption price.
2. EXERCISE PROCEDURE
The Warrant may be exercised at any time within the period above specified,
in whole or in part, by
(i) the surrender of the Warrant, with the purchase form (the "Purchase
Form") at the end hereof properly executed, at the principal executive
office of VerticalBuyer, at the office of Olde Monmouth Stock
Transfer, Inc., 77 Memorial Parkway (Suite 101), Atlantic Highlands,
New Jersey 07716 (the "Warrant Agent") (or such other office or agency
as VerticalBuyer may designate by notice in writing to CSPI at the
address of CSPI appearing on its books); and
<PAGE>
(ii) payment to VerticalBuyer of the Exercise Price then in effect for the
number of Shares specified in the Purchase Form together with
applicable stock transfer taxes, if any; and
The Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of
business on the date it is surrendered and payment is made in pursuant
to this paragraph, and the person or persons in whose name or names
the certificates for Shares shall be issuable upon such exercise shall
become the holders as of that date. The certificates for the Shares so
purchased shall be delivered to the holder(s) within a reasonable time
after the Warrant shall have been exercised. 2. EXERCISE PROCEDURE
The Warrant may be exercised at any time within the period above specified,
in whole or in part, by
(i) the surrender of the Warrant, with the purchase form (the "Purchase
Form") at the end hereof properly executed, at the principal executive
office of VerticalBuyer, at the office of Olde Monmouth Stock
Transfer, Inc., 77 Memorial Parkway (Suite 101), Atlantic Highlands,
New Jersey 07716 (the "Warrant Agent") (or such other office or agency
as VerticalBuyer may designate by notice in writing to CSPI at the
address of CSPI appearing on its books); and
(ii) payment to VerticalBuyer of the Exercise Price then in effect for the
number of Shares specified in the Purchase Form together with
applicable stock transfer taxes, if any; and
The Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of
business on the date it is surrendered and payment is made in pursuant
to this paragraph, and the person or persons in whose name or names
the certificates for Shares shall be issuable upon such exercise shall
become the holders as of that date. The certificates for the Shares so
purchased shall be delivered to the holder(s) within a reasonable time
after the Warrant shall have been exercised.
3. TRANSFER
The Warrant is issued under Regulation D to the United States Securities
Act of 1933, as amended (the "1933 Act"), and shall not be transferred,
sold, assigned, or hypothecated except pursuant to an effective
registration statement under the 1933 Act or an exemption therefrom. Any
such assignment shall be effected by CSPI by
(i) executing the form of assignment at the end hereof and
(ii) surrendering the Warrant for cancellation at the office or agency of
VerticalBuyer referred to in paragraph 2 hereof,
whereupon VerticalBuyer shall issue, in the name(s) specified by CSPI
("Transferee(s)") and, which may include CSPI, new Warrant of like tenor
representing in the aggregate rights to purchase the same number of Shares
as are purchasable hereunder.
4. UNDERLYING SHARES OF COMMON STOCK
VerticalBuyer covenants and agrees that all Shares which may be issued upon
exercise of the Warrants will, upon issuance, be duly and validly issued,
fully paid and nonassessable. VerticalBuyer further covenants and agrees
that during the periods within which the Warrant may be exercised,
VerticalBuyer will at all times have authorized and reserved a sufficient
number of Shares to provide for the exercise of the Warrant.
2
<PAGE>
5. NO ENTITLEMENT
The Warrant shall not entitle CSPI to any voting, dividend, or other rights
as a stockholder of VerticalBuyer.
6. REGISTRATION STATEMENT AND INDEMNIFICATION
VerticalBuyer will perform and carry out its obligations under that certain
Registration Rights Agreement by and between VerticalBuyer and CSPI, of
even date herewith
7. ADJUSTMENT
The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be subject to
adjustment from time to time upon the happening of certain events as
follows:
(a) In case VerticalBuyer shall (i) declare a dividend or make a
distribution on its outstanding Shares, (ii) subdivide or reclassify
its outstanding shares of into a greater number of shares, or (iii)
combine or reclassify its outstanding shares into a smaller number of
shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that
it shall equal the price determined by multiplying the Exercise Price
by a fraction, the denominator of which shall be the number of shares
outstanding after giving effect to such action, and the numerator of
which shall be the number of shares outstanding immediately prior to
such action.
(b) In case VerticalBuyer shall fix a record date for the issuance of
rights or warrants to all holders of its common stock entitling them
to subscribe for or purchase Shares (or securities convertible into
common stock) at a price (the "Subscription Price") or having a
conversion price per share) less than the current market price of the
Shares (as defined in Subsection (e) below) on the record date
mentioned below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the number of shares
then comprising underlying Shares by the product of the Exercise Price
in effect immediately prior to the date of such issuance multiplied by
a fraction, the numerator of which shall be the sum of the number of
Shares outstanding on the record date mentioned below and the number
of additional Shares which the aggregate offering price of the total
number of Shares so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current
market price per share of its common stock, and the denominator of
which shall be the sum of the number of Shares outstanding on such
record date and the number of additional Shares offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the
extent that Shares are not delivered (or securities convertible into
its common stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis
of delivery of only the number of Shares (or securities convertible
into its common stock actually delivered).
3
<PAGE>
(c) In case VerticalBuyer shall hereafter distribute to the holders of its
common stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to
in Subsection (a) above) or subscription rights or warrants (excluding
those referred to in Subsection (b) above), then in each such case the
Exercise Price in effect thereafter shall be determined by multiplying
the number of shares then comprising an Shares by the product of the
Exercise Price in effect immediately prior thereto multiplied by a
fraction, the numerator of which shall be the total number of Shares
outstanding multiplied by the current market price of the Shares (as
defined in Subsection (e) below), less the fair market value (as
determined by VerticalBuyer's Board of Directors) of the assets or
evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of
Shares outstanding multiplied by such current market price per share
of its common stock. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(d) Whenever the Exercise Price payable upon exercise of the Warrant is
adjusted pursuant to Subsections (a), (b) or (c) above, the number of
Shares purchasable upon exercise of the Warrant shall simultaneously
be adjusted by multiplying the number of Shares initially issuable
upon exercise of the Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(e) For the purpose of any computation under Subsections (b) or (c) above,
the current market price per share of its common stock at any date
shall be deemed to be the average of the daily closing prices for 20
consecutive business days before such date. The closing price for each
day shall be the last sale price regular way or, in case no such
reported sale takes place on such day, the average of the last
reported bid and asked prices regular way, in either case on the
principal national securities exchange on which its common stock is
admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest
reported asked prices as reported by NASDAQ, or if not listed or
admitted to trading on such market, than the Over the Counter Bulletin
Board ("OTCBB") or other similar organization if the OTCBB is no
longer reporting such information, or if not so available, the fair
market price as determined by the Board of Directors.
(f) All calculations under this Section 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 8 to the contrary notwithstanding,
VerticalBuyer shall be entitled, but shall not be required, to make
such changes in the Exercise Price, in addition to those required by
this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in Shares, or any
subdivision, reclassification or combination of its common stock,
hereafter made by VerticalBuyer shall not result in any Federal Income
tax liability to the holders of its common stock or securities
convertible into its common stock.
(g) Whenever the Exercise Price is adjusted, as herein provided,
VerticalBuyer shall promptly, but no later than 10 days after any
request for such an adjustment by CSPI, cause a notice setting forth
the adjusted Exercise Price and adjusted number of Shares issuable
upon exercise of the Warrant and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to
CSPI, at the address set forth herein, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. VerticalBuyer
may retain a firm of independent certified public accountants selected
by its board of directors (which may be the regular accountants
employed by VerticalBuyer) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, CSPI thereafter shall become
entitled to receive any shares of VerticalBuyer, other than its common
stock, thereafter the number of such other shares so receivable upon
exercise of the Warrant shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to its common stock contained in
Subsections (a) to (g), inclusive above.
8. APPLICABLE LAW
The Warrant shall be governed by and in accordance with the laws of the
State of Massachusetts applied to contracts made and before within the
State of Massachusetts.
IN WITNESS WHEREOF, VerticalBuyer, Inc., has caused the Warrant to be
signed by its duly authorized officer under its corporate seal, and the Warrant
to be dated the date first above written.
VERTICALBUYER, INC. CSP INC.
By: --------------------- By: ------------------------------
Tim Rose, President Alexander Lupinetti, President
4
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto -------------------- the right to purchase Shares of the Common Stock of
VerticalBuyer, Inc., in the numbers set forth below represented by the foregoing
Warrant to the extent of ------------ shares and appoints
- --------------------- as attorney-in-fact to transfer such rights on the
books of VerticalBuyer, Inc., with full power of substitution in the premises.
Dated:
Name:
Signature:
Address:
In the presence of:
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Warrant (the "Warrant"),
hereby irrevocably elects to exercise the purchase rights represented by the
Warrant for, and to purchase thereunder, ---------- shares of the common stock,
$.001 par value ("Shares") of VerticalBuyer, Inc., exercisable for a period of
one year after the date of an effective registration statement relating to the
Shares underlying the Warrant makes payment of $---------- therefor, and
requests that the certificates for the Shares be issued in the name(s) of, and
delivered as follows:
Name(s)
Address:
Dated:
<PAGE>
CLASS "B" WARRANT
THIS WARRANT CERTIFIES THAT CSP INC. ("CSPI"), 40 Linnell Circle,
Billerica, MA 01821, a Massachusetts corporation, is entitled to purchase from
VERTICALBUYER, INC., a Delaware corporation, ("VerticalBuyer"), at the price and
during the period as hereinafter specified, up to one (1,000,000) million shares
(the "Shares") of VerticalBuyer common stock, $.001 par value per share.
References to "CSPI" in this apply to CSPI and, as appropriate, to any
transferee, if any, of the Warrant.
1. EXERCISE
(a) Price and Period. The rights represented by this warrant (the
"Warrant") shall be exercisable for a period of two (2) years (the
"Exercise Period") beginning on the effective date (the "Effective
Date") of a registration statement covering the Shares (the
"Registration Statement") filed with the Securities and Exchange
Commission ("SEC"), at an exercise price of $1.00 per Share, subject
to adjustment in accordance with paragraph 7 of hereof.
(b) Redemption. Commencing on the Effective Date, VerticalBuyer may, at
its option, redeem the Warrant in whole, but not in part, for a
redemption price of $100, on not less than 30 days' notice to CSPI.
The right to redeem the Warrant may be exercised by VerticalBuyer
during the Exercise Period only in the event that (i) the closing
price on the market on which the Shares trade as defined in paragraph
7(e) is at least $2.00 subject to adjustment for stock splits and
combinations and similar events for 20 consecutive trading days; (ii)
the registration statement (including any post-effective amendment
thereto is effective with the SEC, which registration statement would
enable CSPI to exercise the Warrant and sell the underlying Shares;
without reservation (iii) any notice of the call for redemption is
given not more than 10 business days after the period of 20
consecutive trading days referred to in (i) above; and (iv) the
expiration of the 30 day notice period is within the Exercise Period.
In the event VerticalBuyer exercises its right to redeem the Warrant,
the Expiration Date will be deemed to be, and the rights under the
Warrant will be exercisable until the close of business on, the date
fixed for redemption in such notice. If any Warrant called for
redemption is not exercised by such time, it will cease to be
exercisable and CSPI will be entitled only to the redemption price.
2. EXERCISE PROCEDURE
The Warrant may be exercised at any time within the period above specified,
in whole or in part, by
(i) the surrender of the Warrant, with the purchase form (the "Purchase
Form") at the end hereof properly executed, at the principal executive
office of VerticalBuyer, at the office of Olde Monmouth Stock
Transfer, Inc., 77 Memorial Parkway (Suite 101), Atlantic Highlands,
New Jersey 07716 (the "Warrant Agent") (or such other office or agency
as VerticalBuyer may designate by notice in writing to CSPI at the
address of CSPI appearing on its books); and
<PAGE>
(ii) payment to VerticalBuyer of the Exercise Price then in effect for the
number of Shares specified in the Purchase Form together with
applicable stock transfer taxes, if any; and
The Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of
business on the date it is surrendered and payment is made in pursuant
to this paragraph, and the person or persons in whose name or names
the certificates for Shares shall be issuable upon such exercise shall
become the holders as of that date. The certificates for the Shares so
purchased shall be delivered to the holder(s) within a reasonable time
after the Warrant shall have been exercised.
3. TRANSFER
The Warrant is issued under Regulation D to the United States Securities
Act of 1933, as amended (the "1933 Act"), and shall not be transferred,
sold, assigned, or hypothecated except pursuant to an effective
registration statement under the 1933 Act or an exemption therefrom. Any
such assignment shall be effected by CSPI by
(i) executing the form of assignment at the end hereof and
(ii) surrendering the Warrant for cancellation at the office or agency of
VerticalBuyer referred to in paragraph 2 hereof,
whereupon VerticalBuyer shall issue, in the name(s) specified by CSPI
("Transferee(s)") and, which may include CSPI, new Warrant of like tenor
representing in the aggregate rights to purchase the same number of Shares
as are purchasable hereunder.
4. UNDERLYING SHARES OF COMMON STOCK
VerticalBuyer covenants and agrees that all Shares which may be issued upon
exercise of the Warrants will, upon issuance, be duly and validly issued,
fully paid and nonassessable. VerticalBuyer further covenants and agrees
that during the periods within which the Warrant may be exercised,
VerticalBuyer will at all times have authorized and reserved a sufficient
number of Shares to provide for the exercise of the Warrant.
2
<PAGE>
5. NO ENTITLEMENT
The Warrant shall not entitle CSPI to any voting, dividend, or other rights
as a stockholder of VerticalBuyer.
6. REGISTRATION STATEMENT AND INDEMNIFICATION
VerticalBuyer will perform and carry out its obligations under that certain
Registration Rights Agreement by and between VerticalBuyer and CSPI, of
even date herewith
7. ADJUSTMENT
The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be subject to
adjustment from time to time upon the happening of certain events as
follows:
(a) In case VerticalBuyer shall (i) declare a dividend or make a
distribution on its outstanding Shares, (ii) subdivide or reclassify
its outstanding shares of into a greater number of shares, or (iii)
combine or reclassify its outstanding shares into a smaller number of
shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that
it shall equal the price determined by multiplying the Exercise Price
by a fraction, the denominator of which shall be the number of shares
outstanding after giving effect to such action, and the numerator of
which shall be the number of shares outstanding immediately prior to
such action.
(b) In case VerticalBuyer shall fix a record date for the issuance of
rights or warrants to all holders of its common stock entitling them
to subscribe for or purchase Shares (or securities convertible into
common stock) at a price (the "Subscription Price") (or having a
conversion price per share) less than the current market price of the
Shares (as defined in Subsection (e) below) on the record date
mentioned below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the number of shares
then comprising underlying Shares by the product of the Exercise Price
in effect immediately prior to the date of such issuance multiplied by
a fraction, the numerator of which shall be the sum of the number of
Shares outstanding on the record date mentioned below and the number
of additional Shares which the aggregate offering price of the total
number of Shares so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current
market price per share of its common stock, and the denominator of
which shall be the sum of the number of Shares outstanding on such
record date and the number of additional Shares offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the
extent that Shares are not delivered (or securities convertible into
its common stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis
of delivery of only the number of Shares (or securities convertible
into its common stock actually delivered).
3
<PAGE>
(c) In case VerticalBuyer shall hereafter distribute to the holders of its
common stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to
in Subsection (a) above) or subscription rights or warrants (excluding
those referred to in Subsection (b) above), then in each such case the
Exercise Price in effect thereafter shall be determined by multiplying
the number of shares then comprising an Shares by the product of the
Exercise Price in effect immediately prior thereto multiplied by a
fraction, the numerator of which shall be the total number of Shares
outstanding multiplied by the current market price of the Shares (as
defined in Subsection (e) below), less the fair market value (as
determined by VerticalBuyer's Board of Directors) of the assets or
evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of
Shares outstanding multiplied by such current market price per share
of its common stock. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(d) Whenever the Exercise Price payable upon exercise of the Warrant is
adjusted pursuant to Subsections (a), (b) or (c) above, the number of
Shares purchasable upon exercise of the Warrant shall simultaneously
be adjusted by multiplying the number of Shares initially issuable
upon exercise of the Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(e) For the purpose of any computation under Subsections (b) or (c) above,
the current market price per share of its common stock at any date
shall be deemed to be the average of the daily closing prices for 20
consecutive business days before such date. The closing price for each
day shall be the last sale price regular way or, in case no such
reported sale takes place on such day, the average of the last
reported bid and asked prices regular way, in either case on the
principal national securities exchange on which its common stock is
admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest
reported asked prices as reported by NASDAQ, or if not listed or
admitted to trading on such market, than the Over the Counter Bulletin
Board ("OTCBB") or other similar organization if the OTCBB is no
longer reporting such information, or if not so available, the fair
market price as determined by the Board of Directors.
(f) All calculations under this Section 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 8 to the contrary notwithstanding,
VerticalBuyer shall be entitled, but shall not be required, to make
such changes in the Exercise Price, in addition to those required by
this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in Shares, or any
subdivision, reclassification or combination of its common stock,
hereafter made by VerticalBuyer shall not result in any Federal Income
tax liability to the holders of its common stock or securities
convertible into its common stock.
(g) Whenever the Exercise Price is adjusted, as herein provided,
VerticalBuyer shall promptly, but no later than 10 days after any
request for such an adjustment by CSPI, cause a notice setting forth
the adjusted Exercise Price and adjusted number of Shares issuable
upon exercise of the Warrant and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to
CSPI, at the address set forth herein, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. VerticalBuyer
may retain a firm of independent certified public accountants selected
by its board of directors (which may be the regular accountants
employed by VerticalBuyer) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
4
<PAGE>
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, CSPI thereafter shall become
entitled to receive any shares of VerticalBuyer, other than its common
stock, thereafter the number of such other shares so receivable upon
exercise of the Warrant shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to its common stock contained in
Subsections (a) to (g), inclusive above.
8. APPLICABLE LAW
The Warrant shall be governed by and in accordance with the laws of the
State of Massachusetts applied to contracts made and before within the
State of Massachusetts.
IN WITNESS WHEREOF, VerticalBuyer, Inc., has caused the Warrant to be
signed by its duly authorized officer under its corporate seal, and the Warrant
to be dated the date first above written.
VERTICALBUYER, INC.
By: By:
------------------- ------------------------------
Tim Rose, President Alexander Lupinetti, President
5
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto -------------------- the right to purchase Shares of the Common Stock of
VerticalBuyer, Inc., in the numbers set forth below represented by the foregoing
Warrant to the extent of ------------ shares and appoints
- --------------------- as attorney-in-fact to transfer such rights on the
books of VerticalBuyer, Inc., with full power of substitution in the premises.
Dated:
Name:
Signature:
Address:
In the presence of:
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Warrant (the "Warrant"),
hereby irrevocably elects to exercise the purchase rights represented by the
Warrant for, and to purchase thereunder, ---------- shares of the common stock,
$.001 par value ("Shares") of VerticalBuyer, Inc., exercisable for a period of
one year after the date of an effective registration statement relating to the
Shares underlying the Warrant makes payment of $---------- therefor, and
requests that the certificates for the Shares be issued in the name(s) of, and
delivered as follows:
Name(s)
Address:
Dated:
<PAGE>
CLASS "C" WARRANT
THIS WARRANT CERTIFIES THAT CSP INC. ("CSPI"), 40 Linnell Circle,
Billerica, MA 01821, a Massachusetts corporation, is entitled to purchase from
VERTICALBUYER, INC., a Delaware corporation, ("VerticalBuyer"), at the price and
during the period as hereinafter specified, up to one (1,000,000) million shares
(the "Shares") of VerticalBuyer common stock, $.001 par value per share.
References to "CSPI" in this apply to CSPI and, as appropriate, to any
transferee, if any, of the Warrant.
1. EXERCISE
(a) Price and Period. The rights represented by this warrant (the
"Warrant") shall be exercisable for a period of two (2) years (the
"Exercise Period") beginning on the effective date (the "Effective
Date") of a registration statement covering the Shares (the
"Registration Statement") filed with the Securities and Exchange
Commission ("SEC"), at an exercise price of $1.00 per Share, subject
to adjustment in accordance with paragraph 7 of hereof.
(b) Redemption. Commencing on the Effective Date, VerticalBuyer may, at
its option, redeem the Warrant in whole, but not in part, for a
redemption price of $100, on not less than 30 days' notice to CSPI.
The right to redeem the Warrant may be exercised by VerticalBuyer
during the Exercise Period only in the event that (i) the closing
price on the market on which the Shares trade as defined in paragraph
7(e) is at least $2.00 subject to adjustment for stock splits and
combinations and similar events for 20 consecutive trading days; (ii)
the registration statement (including any post-effective amendment
thereto is effective with the SEC, which registration statement would
enable CSPI to exercise the Warrant and sell the underlying Shares;
without reservation (iii) any notice of the call for redemption is
given not more than 10 business days after the period of 20
consecutive trading days referred to in (i) above; and (iv) the
expiration of the 30 day notice period is within the Exercise Period.
In the event VerticalBuyer exercises its right to redeem the Warrant,
the Expiration Date will be deemed to be, and the rights under the
Warrant will be exercisable until the close of business on, the date
fixed for redemption in such notice. If any Warrant called for
redemption is not exercised by such time, it will cease to be
exercisable and CSPI will be entitled only to the redemption price.
2. EXERCISE PROCEDURE
The Warrant may be exercised at any time within the period above specified,
in whole or in part, by
(i) the surrender of the Warrant, with the purchase form (the "Purchase
Form") at the end hereof properly executed, at the principal executive
office of VerticalBuyer, at the office of Olde Monmouth Stock
Transfer, Inc., 77 Memorial Parkway (Suite 101), Atlantic Highlands,
New Jersey 07716 (the "Warrant Agent") (or such other office or agency
as VerticalBuyer may designate by notice in writing to CSPI at the
address of CSPI appearing on its books); and
<PAGE>
(ii) payment to VerticalBuyer of the Exercise Price then in effect for the
number of Shares specified in the Purchase Form together with
applicable stock transfer taxes, if any; and
The Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of
business on the date it is surrendered and payment is made in pursuant
to this paragraph, and the person or persons in whose name or names
the certificates for Shares shall be issuable upon such exercise shall
become the holders as of that date. The certificates for the Shares so
purchased shall be delivered to the holder(s) within a reasonable time
after the Warrant shall have been exercised.
3. TRANSFER
The Warrant is issued under Regulation D to the United States Securities
Act of 1933, as amended (the "1933 Act"), and shall not be transferred,
sold, assigned, or hypothecated except pursuant to an effective
registration statement under the 1933 Act or an exemption therefrom. Any
such assignment shall be effected by CSPI by
(i) executing the form of assignment at the end hereof and
(ii) surrendering the Warrant for cancellation at the office or agency of
VerticalBuyer referred to in paragraph 2 hereof,
whereupon VerticalBuyer shall issue, in the name(s) specified by CSPI
("Transferee(s)") and, which may include CSPI, new Warrant of like tenor
representing in the aggregate rights to purchase the same number of Shares
as are purchasable hereunder.
4. UNDERLYING SHARES OF COMMON STOCK
VerticalBuyer covenants and agrees that all Shares which may be issued upon
exercise of the Warrants will, upon issuance, be duly and validly issued,
fully paid and nonassessable. VerticalBuyer further covenants and agrees
that during the periods within which the Warrant may be exercised,
VerticalBuyer will at all times have authorized and reserved a sufficient
number of Shares to provide for the exercise of the Warrant.
2
<PAGE>
5. NO ENTITLEMENT
The Warrant shall not entitle CSPI to any voting, dividend, or other rights
as a stockholder of VerticalBuyer.
6. REGISTRATION STATEMENT AND INDEMNIFICATION
VerticalBuyer will perform and carry out its obligations under that certain
Registration Rights Agreement by and between VerticalBuyer and CSPI, of
even date herewith
7. ADJUSTMENT
The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be subject to
adjustment from time to time upon the happening of certain events as
follows:
(a) In case VerticalBuyer shall (i) declare a dividend or make a
distribution on its outstanding Shares, (ii) subdivide or reclassify
its outstanding shares of into a greater number of shares, or (iii)
combine or reclassify its outstanding shares into a smaller number of
shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that
it shall equal the price determined by multiplying the Exercise Price
by a fraction, the denominator of which shall be the number of shares
outstanding after giving effect to such action, and the numerator of
which shall be the number of shares outstanding immediately prior to
such action.
(b) In case VerticalBuyer shall fix a record date for the issuance of
rights or warrants to all holders of its common stock entitling them
to subscribe for or purchase Shares (or securities convertible into
common stock) at a price (the "Subscription Price") (or having a
conversion price per share) less than the current market price of the
Shares (as defined in Subsection (e) below) on the record date
mentioned below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the number of shares
then comprising underlying Shares by the product of the Exercise Price
in effect immediately prior to the date of such issuance multiplied by
a fraction, the numerator of which shall be the sum of the number of
Shares outstanding on the record date mentioned below and the number
of additional Shares which the aggregate offering price of the total
number of Shares so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current
market price per share of its common stock, and the denominator of
which shall be the sum of the number of Shares outstanding on such
record date and the number of additional Shares offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the
extent that Shares are not delivered (or securities convertible into
its common stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis
of delivery of only the number of Shares (or securities convertible
into its common stock actually delivered).
3
<PAGE>
(c) In case VerticalBuyer shall hereafter distribute to the holders of its
common stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to
in Subsection (a) above) or subscription rights or warrants (excluding
those referred to in Subsection (b) above), then in each such case the
Exercise Price in effect thereafter shall be determined by multiplying
the number of shares then comprising an Shares by the product of the
Exercise Price in effect immediately prior thereto multiplied by a
fraction, the numerator of which shall be the total number of Shares
outstanding multiplied by the current market price of the Shares (as
defined in Subsection (e) below), less the fair market value (as
determined by VerticalBuyer's Board of Directors) of the assets or
evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of
Shares outstanding multiplied by such current market price per share
of its common stock. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(d) Whenever the Exercise Price payable upon exercise of the Warrant is
adjusted pursuant to Subsections (a), (b) or (c) above, the number of
Shares purchasable upon exercise of the Warrant shall simultaneously
be adjusted by multiplying the number of Shares initially issuable
upon exercise of the Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(e) For the purpose of any computation under Subsections (b) or (c) above,
the current market price per share of its common stock at any date
shall be deemed to be the average of the daily closing prices for 20
consecutive business days before such date. The closing price for each
day shall be the last sale price regular way or, in case no such
reported sale takes place on such day, the average of the last
reported bid and asked prices regular way, in either case on the
principal national securities exchange on which its common stock is
admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest
reported asked prices as reported by NASDAQ, or if not listed or
admitted to trading on such market, than the Over the Counter Bulletin
Board ("OTCBB") or other similar organization if the OTCBB is no
longer reporting such information, or if not so available, the fair
market price as determined by the Board of Directors.
(f) All calculations under this Section 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 8 to the contrary notwithstanding,
VerticalBuyer shall be entitled, but shall not be required, to make
such changes in the Exercise Price, in addition to those required by
this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in Shares, or any
subdivision, reclassification or combination of its common stock,
hereafter made by VerticalBuyer shall not result in any Federal Income
tax liability to the holders of its common stock or securities
convertible into its common stock.
(g) Whenever the Exercise Price is adjusted, as herein provided,
VerticalBuyer shall promptly, but no later than 10 days after any
request for such an adjustment by CSPI, cause a notice setting forth
the adjusted Exercise Price and adjusted number of Shares issuable
upon exercise of the Warrant and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to
CSPI, at the address set forth herein, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. VerticalBuyer
may retain a firm of independent certified public accountants selected
by its board of directors (which may be the regular accountants
employed by VerticalBuyer) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
4
<PAGE>
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, CSPI thereafter shall become
entitled to receive any shares of VerticalBuyer, other than its common
stock, thereafter the number of such other shares so receivable upon
exercise of the Warrant shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to its common stock contained in
Subsections (a) to (g), inclusive above.
8. APPLICABLE LAW
The Warrant shall be governed by and in accordance with the laws of the
State of Massachusetts applied to contracts made and before within the
State of Massachusetts.
IN WITNESS WHEREOF, VerticalBuyer, Inc., has caused the Warrant to be
signed by its duly authorized officer under its corporate seal, and the Warrant
to be dated the date first above written.
VERTICALBUYER, INC. CSP INC.
By: By:
--------------------- ------------------------------
Tim Rose, President Alexander Lupinetti, President
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto -------------------------------- the right to purchase Shares of the Common
Stock of VerticalBuyer, Inc., in the numbers set forth below represented by the
foregoing Warrant to the extent of ------------ shares and appoints
- --------------------- as attorney-in-fact to transfer such rights on the books
of VerticalBuyer, Inc., with full power of substitution in the premises.
Dated:
Name:
Signature:
Address:
In the presence of:
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Warrant (the "Warrant"),
hereby irrevocably elects to exercise the purchase rights represented by the
Warrant for, and to purchase thereunder, ---------- shares of the common stock,
$.001 par value ("Shares") of VerticalBuyer, Inc., exercisable for a period of
one year after the date of an effective registration statement relating to the
Shares underlying the Warrant makes payment of $---------- therefor, and
requests that the certificates for the Shares be issued in the name(s) of, and
delivered as follows:
Name(s)
Address:
Dated:
<PAGE>
CLASS "D" WARRANT
THIS WARRANT CERTIFIES THAT -----------------------------------------------
("Holder") is entitled to purchase from VERTICALBUYER, INC., 40 Linnell Circle
Billerica, MA 01821, a Delaware corporation, ("VerticalBuyer"), at the price and
during the period as hereinafter specified, up to ------------------------------
shares (the "Shares") of VerticalBuyer common stock, $.001 par value per share.
References to "Holder" in this apply to the Holder and, as appropriate, to any
transferee, if any, of the Warrants.
1. EXERCISE
Price and Period. The rights represented by this warrant (the "Warrant")
shall be exercisable for a period of two (2) years (the "Exercise Period")
beginning on the effective date (the "Effective Date") of a registration
statement covering the Shares (the "Registration Statement") filed with the
Securities and Exchange Commission ("SEC"), at an exercise price of $1.00
per Share, subject to adjustment in accordance with paragraph 7 of hereof.
2. EXERCISE PROCEDURE
The Warrant may be exercised at any time within the period above specified,
in whole or in part, by
(i) the surrender of the Warrant, with the purchase form (the "Purchase
Form") at the end hereof properly executed, at the principal executive
office of VerticalBuyer, at the office of Olde Monmouth Stock
Transfer, Inc., 77 Memorial Parkway (Suite 101), Atlantic Highlands,
New Jersey 07716 (the "Warrant Agent") (or such other office or agency
as VerticalBuyer may designate by notice in writing to CSPI at the
address of CSPI appearing on its books); and
(ii) payment to VerticalBuyer of the Exercise Price then in effect for the
number of Shares specified in the Purchase Form together with
applicable stock transfer taxes, if any; and
The Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of
business on the date it is surrendered and payment is made in pursuant
to this paragraph, and the person or persons in whose name or names
the certificates for Shares shall be issuable upon such exercise shall
become the holders as of that date. The certificates for the Shares so
purchased shall be delivered to the holder(s) within a reasonable time
after the Warrant shall have been exercised.
3. TRANSFER
The Warrant is issued under Regulation D to the United States Securities
Act of 1933, as amended (the "1933 Act"), and shall not be transferred,
sold, assigned, or hypothecated except pursuant to an effective
registration statement under the 1933 Act or an exemption therefrom. Any
such assignment shall be effected by CSPI by
(i) executing the form of assignment at the end hereof and
(ii) surrendering the Warrant for cancellation at the office or agency of
VerticalBuyer referred to in paragraph 2 hereof,
whereupon VerticalBuyer shall issue, in the name(s) specified by CSPI
("Transferee(s)") and, which may include CSPI, new Warrant of like tenor
representing in the aggregate rights to purchase the same number of Shares
as are purchasable hereunder.
4. UNDERLYING SHARES OF COMMON STOCK
VerticalBuyer covenants and agrees that all Shares which may be issued upon
exercise of the Warrants will, upon issuance, be duly and validly issued,
fully paid and nonassessable. VerticalBuyer further covenants and agrees
that during the periods within which the Warrant may be exercised,
VerticalBuyer will at all times have authorized and reserved a sufficient
number of Shares to provide for the exercise of the Warrant.
5. NO ENTITLEMENT
The Warrant shall not entitle CSPI to any voting, dividend, or other rights
as a stockholder of VerticalBuyer.
6. REGISTRATION STATEMENT AND INDEMNIFICATION
VerticalBuyer will perform and carry out its obligations under that certain
Registration Rights Agreement by and between VerticalBuyer and CSPI, of
even date herewith
7. ADJUSTMENT
The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be subject to
adjustment from time to time upon the happening of certain events as
follows:
(a) In case VerticalBuyer shall (i) declare a dividend or make a
distribution on its outstanding Shares, (ii) subdivide or reclassify
its outstanding shares of into a greater number of shares, or (iii)
combine or reclassify its outstanding shares into a smaller number of
shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that
it shall equal the price determined by multiplying the Exercise Price
by a fraction, the denominator of which shall be the number of shares
outstanding after giving effect to such action, and the numerator of
which shall be the number of shares outstanding immediately prior to
such action.
(b) In case VerticalBuyer shall fix a record date for the issuance of
rights or warrants to all holders of its common stock entitling them
to subscribe for or purchase Shares (or securities convertible into
common stock) at a price (the "Subscription Price") (or having a
conversion price per share) less than the current market price of the
Shares (as defined in Subsection (e) below) on the record date
mentioned below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the number of shares
then comprising underlying Shares by the product of the Exercise Price
in effect immediately prior to the date of such issuance multiplied by
a fraction, the numerator of which shall be the sum of the number of
Shares outstanding on the record date mentioned below and the number
of additional Shares which the aggregate offering price of the total
number of Shares so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current
market price per share of its common stock, and the denominator of
which shall be the sum of the number of Shares outstanding on such
record date and the number of additional Shares offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the
extent that Shares are not delivered (or securities convertible into
its common stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis
of delivery of only the number of Shares (or securities convertible
into its common stock actually delivered).
(c) In case VerticalBuyer shall hereafter distribute to the holders of its
common stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to
in Subsection (a) above) or subscription rights or warrants (excluding
those referred to in Subsection (b) above), then in each such case the
Exercise Price in effect thereafter shall be determined by multiplying
the number of shares then comprising an Shares by the product of the
Exercise Price in effect immediately prior thereto multiplied by a
fraction, the numerator of which shall be the total number of Shares
outstanding multiplied by the current market price of the Shares (as
defined in Subsection (e) below), less the fair market value (as
determined by VerticalBuyer's Board of Directors) of the assets or
evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of
Shares outstanding multiplied by such current market price per share
of its common stock. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(d) Whenever the Exercise Price payable upon exercise of the Warrant is
adjusted pursuant to Subsections (a), (b) or (c) above, the number of
Shares purchasable upon exercise of the Warrant shall simultaneously
be adjusted by multiplying the number of Shares initially issuable
upon exercise of the Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(e) For the purpose of any computation under Subsections (b) or (c) above,
the current market price per share of its common stock at any date
shall be deemed to be the average of the daily closing prices for 20
consecutive business days before such date. The closing price for each
day shall be the last sale price regular way or, in case no such
reported sale takes place on such day, the average of the last
reported bid and asked prices regular way, in either case on the
principal national securities exchange on which its common stock is
admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest
reported asked prices as reported by NASDAQ, or if not listed or
admitted to trading on such market, than the Over the Counter Bulletin
Board ("OTCBB") or other similar organization if the OTCBB is no
longer reporting such information, or if not so available, the fair
market price as determined by the Board of Directors.
(f) All calculations under this Section 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 8 to the contrary notwithstanding,
VerticalBuyer shall be entitled, but shall not be required, to make
such changes in the Exercise Price, in addition to those required by
this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in Shares, or any
subdivision, reclassification or combination of its common stock,
hereafter made by VerticalBuyer shall not result in any Federal Income
tax liability to the holders of its common stock or securities
convertible into its common stock.
(g) Whenever the Exercise Price is adjusted, as herein provided,
VerticalBuyer shall promptly, but no later than 10 days after any
request for such an adjustment by CSPI, cause a notice setting forth
the adjusted Exercise Price and adjusted number of Shares issuable
upon exercise of the Warrant and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to
CSPI, at the address set forth herein, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. VerticalBuyer
may retain a firm of independent certified public accountants selected
by its board of directors (which may be the regular accountants
employed by VerticalBuyer) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, CSPI thereafter shall become
entitled to receive any shares of VerticalBuyer, other than its common
stock, thereafter the number of such other shares so receivable upon
exercise of the Warrant shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to its common stock contained in
Subsections (a) to (g), inclusive above.
8. APPLICABLE LAW
The Warrant shall be governed by and in accordance with the laws of the
State of Massachusetts applied to contracts made and before within the
State of Massachusetts.
IN WITNESS WHEREOF, VerticalBuyer, Inc., has caused the Warrant to be
signed by its duly authorized officer under its corporate seal, and the Warrant
to be dated the date first above written.
VERTICALBUYER, INC.
--------------------- ------------------------
Tim Rose, President
TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto -------------------- the right to purchase Shares of the Common Stock of
VerticalBuyer, Inc., in the numbers set forth below represented by the foregoing
Warrant to the extent of ------------ shares and appoints
- --------------------- as attorney-in-fact to transfer such rights on the
books of VerticalBuyer, Inc., with full power of substitution in the premises.
Dated:
Name:
Signature:
Address:
In the presence of:
PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Warrant (the "Warrant"),
hereby irrevocably elects to exercise the purchase rights represented by the
Warrant for, and to purchase thereunder, ---------- shares of the common stock,
$.001 par value ("Shares") of VerticalBuyer, Inc., exercisable for a period of
one year after the date of an effective registration statement relating to the
Shares underlying the Warrant makes payment of $---------- therefor, and
requests that the certificates for the Shares be issued in the name(s) of, and
delivered as follows:
Name(s)
Address:
Dated:
Roger L. Fidler
Attorney at Law
163 South Street
Hackensack, New Jersey 07601
March 28, 2000
Securities and Exchange Commission
Washington, D.C.
Re: VerticalBuyer, Inc.
To Whom It May Concern:
VerticalBuyer, Inc. (the "Company") is a corporation duly
incorporated and validly existing and in good standing under the laws of the
State of Delaware. The Company has full corporate powers to own its property and
conduct its business, as such business is described in the prospectus which is a
part of a registration statement on Form SB-2. The Company is qualified to do
business as a foreign corporation in good standing in every jurisdiction in
which the ownership of property and the conduct of business requires such
qualification.
This opinion is given in connection with the registration with the
Securities and Exchange Commission of 5,xxx,xxx shares of common stock
("Shares"), 2,000,000 to be sold by selling stockholders, and 3,xxx,xxx
underlying common stock purchase warrants ("Warrants").
I have acted as counsel to the company in connection with the preparation
of the Registration Statement on Form SB-2, pursuant to which the Units (each
consisting of one Share and Five Warrants), and Shares underlying the Warrants
are being registered and, in so acting, I have examined the originals and copies
of the corporate instruments, certificates and other documents of the Company
and interviewed representatives of the Company to the extent I deemed it
necessary in order to form the basis for the opinion hereafter set forth. In
such examination, I have assumed the genuineness of all signatures and
authenticity of all documents submitted to me as certified or photostatic
copies. As to all questions of fact material to this opinion which have not been
independently established, I have relied upon statements or certificates of
officers or representatives of the Company.
All of the 2,000,000 Shares to be sold by selling stockholders and the
3,xxx,xxx Shares underlying the Warrants which are being registered are now
authorized but unissued Shares. Issuance of the Shares and Warrants has been
authorized by the board of directors of the Company
Based upon the foregoing, I am of the opinion that the 2,000,000 Shares, to
be sold by selling stockholders and the 3,xxx,xxx Shares underlying the
Warrants, when exercised, will be legally issued, fully paid and non-assessable
and there will be no personal liability to investors and holders of the Warrants
who exercise them.
/s/Roger L. Fidler
---------------------
Roger L. Fidler
SECURITIES PURCHASE AND FACILITIES AGREEMENT
by and between
CSP INC.
and
VERTICALBUYER, INC.
<PAGE>
AGREEMENT
AGREEMENT (this "Agreement" is dated as of March 2, 2000 by and between CSP
Inc., a Massachusetts corporation ("CSPI", and VerticalBuyer, Inc., a Delaware
corporation ("VerticalBuyer").
WHEREAS, CSPI is a publicly-traded company the common stock of which is
traded on the National Market System of the National Association of Securities
Dealers Automatic Quotation Market ("NASDAQNM") and
WHEREAS, business and financial information concerning CSPI is available on
the Electronic Data Gathering, Analysis and Retrieval System (known as "EDGAR")
maintained by the United States Securities and Exchange Commission ("SEC") on
its World Wide Web site, www.sec.gov; and
WHEREAS, VerticalBuyer is a private Delaware corporation which is the
holding company and parent of its wholly-owned subsidiary, a United Kingdom
company, Lightseek, Limited ("Lightseek"); and
WHEREAS, CSPI desires to purchase an aggregate of 5,000,000 shares of the
common stock, $.001 par value each) of VerticalBuyer ("VerticalBuyer Common
Stock"), at $1.00 per share, representing, after the purchase, 25% of the issued
and outstanding shares of VerticalBuyer Common Stock and VerticalBuyer desires
to sell to CSPI 5,000,000 shares of VerticalBuyer Common Stock, ("Shares")
subject to the terms and conditions hereinafter set forth; and
WHEREAS, CSPI desires to assist in the establishment of VerticalBuyer's
United States office through provision of office space, computer facilities and
related personnel and services and by the provision of members of its board of
directors on the board of directors and committees of the of VerticalBuyer and
VerticalBuyer desire the assistance of CSPI pursuant to the terms and conditions
hereafter set forth; and
WHEREAS, CSPI and VerticalBuyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("Regulation D"), as promulgated by the SEC under the
1933 act of 1933, as amended (the "1933 Act"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Parties are executing and delivering a registration rights
agreement pursuant to which VerticalBuyer has agreed to provide certain
registration rights under the 1933 act and the rules and regulations promulgated
thereunder, a voting agreement among the majority stockholders of VerticalBuyer
and CSPI and three warrants, all in the forms attached hereto as Exhibit 2.02.
NOW THEREFORE, in consideration of the premises and the covenants set forth
herein, the parties hereto (the "Parties" and, individually, a "Party") hereby
agree as follows:
2
<PAGE>
ARTICLE 1
PURCHASE AND SALE OF SECURITIES - FACILITIES PROVIDED
1.01 Purchase and Sale.
(a) Subject to the terms and conditions of this Agreement, CSPI hereby
purchases and VerticalBuyer hereby sells to CSPI 2,000,000 Shares and
three redeemable common stock purchase warrants (the "Warrants") each
warrant containing the right to purchase 1,000,000 Shares at $1.00 for
a period of two years from the date of an effective registration
statement relating to the underlying Shares. The three classes of
Warrant are redeemable upon thirty days' written notice as follows:
Class "A", upon the effectiveness of a registration statement relating
to the underlying shares of VerticalBuyer Common Stock; Class "B", in
the event the closing price of the Shares on VerticalBuyer's public
trading market exceeds $2.00 for a period of twenty (20) continuous
trading days; and Class "C", in the event the closing price of the
Shares on VerticalBuyer's trading market exceeds $3.00 for a period of
twenty (20) continuous trading days. In the event the closing price of
the Shares on VerticalBuyer's public trading market exceeds $3.00, the
time period for redemption of the Class "B" and Class "C" Warrants
will run concurrently.
(b) In addition, VerticalBuyer agrees to issue and sell 75,000 additional
Class "B" Warrants to holders of existing CSPI options whose names and
addresses are listed on Schedule 1.01 at a price of $.01 per Class "B"
Warrant. These Warrants will be included in the same registration
statement to be filed with the SEC relating to the Shares purchased by
CSPI and the Shares underlying the Warrants purchased by CSPI.
(c) The number and exercise price of the Warrants shall be adjusted
appropriately in the event of an acquisition, stock split, sale of
stock at prices less than the market price of the Shares or similar
transaction pursuant to paragraph 7 of the Warrant to be entered into
simultaneously with this Agreement.
1.02 Purchase Price. The purchase price of the 2,000,000 Shares and the
3,000,000 Warrants pursuant to paragraph 1.01 above is $2,000,000.
1.03 Exemption from Registration. Certificates representing the shares of
VerticalBuyer Common Stock issued to CSPI shall bear a restrictive legend
setting forth that the shares were issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "1933 Act")
and may not be transferred unless pursuant to an effectiveness registration
statement filed with the SEC or an exemption therefrom.
1.04 Registration Statement. VerticalBuyer will file a registration statement
relating to the Shares issued to CSPI, the Warrants issued to CSPI and to
stockholders of CSPI and the Shares underlying the Warrants pursuant to a
registration rights agreement (the "Registration Rights Agreement") to be
signed by the Parties at or prior to the Closing.
1.05 Facilities Provision. CSPI shall provide from the date of the Closing use
of office space in its headquarters office, consultation and other
facilities as set forth in a memorandum of understanding attached hereto as
Exhibit 1.05.
3
<PAGE>
ARTICLE 2
CLOSING
2.01 The Closing. The transactions contemplated by this Agreement shall be
completed simultaneously or prior to the execution of this Agreement. The
Closing shall take place at the offices of CSPI or at another place
mutually agreed upon by the Parties. The "Closing" shall mean the
deliveries to be made by the Parties at the Closing in accordance with this
Agreement.
2.02 Deliveries by VerticalBuyer. At the Closing, VerticalBuyer shall deliver to
CSPI Share certificates, and the Warrants all duly and properly executed,
representing the Shares and Warrants purchased by CSPI pursuant to
paragraph 1.01(a). If not previously delivered, VerticalBuyer shall also
deliver to CSPI at the Closing the documents specified in Exhibit 2.02.
2.03 Deliveries by CSPI. At the Closing, CSPI shall deliver a certified or bank
check in the amount of $2,000,000 to the order of "VerticalBuyer, Inc."
2.04 Further Assurances. At or after the Closing, each Party shall prepare,
execute, and deliver, such further instruments of conveyance, sale,
assignment, or transfer, and shall take or cause to be taken such other or
further action, as any Party shall reasonably request of any other Party at
any time or from time to time in order to consummate, in any other manner,
the terms and provisions of this Agreement, including opinions of counsel
for each Party relating to the representations and warranties set forth in
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF VERTICALBUYER
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the financial condition,
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity or group of entities. In this
Agreement, any reference to a "Material Adverse Effect" with respect to any
entity or group of entities means any event, change or effect that is materially
adverse to the financial condition, properties, assets, liabilities, business,
operations or results of operations of such entity. In this Agreement, any
reference to a Party's "knowledge" means such Party's actual knowledge after
reasonable inquiry of officers, directors and other employees of such Party
reasonably believed to have knowledge of such matters. VerticalBuyer represents
and warrants to CSPI as follows:
3.01 Organization, Standing and Power. VerticalBuyer and Lightseek are
corporations duly organized, validly existing and in good standing under
the laws of Delaware and the United Kingdom, respectively. VerticalBuyer
and Lightseek have the corporate power to own their properties and to carry
on their business as now being conducted and as proposed to be conducted
and are duly qualified to do business and are in good standing in each
jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on VerticalBuyer or Lightseek as the
case may be. VerticalBuyer has delivered a true and correct copy of its
certificate of incorporation, certificate of amendment, certificate of good
standing and by-laws or other charter documents, as applicable, to CSPI.
Neither VerticalBuyer nor Lightseek is in violation of any of the
provisions of its respective certificate of incorporation or bylaws or
equivalent organizational documents. VerticalBuyer has no direct or
indirect majority-owned subsidiaries other than Lightseek.
4
<PAGE>
3.02 Authority. VerticalBuyer has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of VerticalBuyer. This Agreement has
been duly executed and delivered by VerticalBuyer and constitutes the valid
and binding obligation of VerticalBuyer enforceable against VerticalBuyer
in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to creditors' rights generally, and is subject to
general principles of equity. The execution and delivery of this Agreement
by VerticalBuyer does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or default under (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
material obligation or loss of any material benefit under (i) any provision
of the certificate of incorporation or bylaws of VerticalBuyer, or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to VerticalBuyer or any of
its properties or assets. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
("Governmental Entity") is required by or with respect to VerticalBuyer or
Lightseek in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for (i)
such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state
securities laws and the securities laws of any foreign country, and (ii)
such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Material Adverse Effect on
VerticalBuyer and/or and would not prevent, or materially alter or delay
any of the transactions contemplated by this Agreement.
3.03 Financial Statements. VerticalBuyer has delivered to CSPI the financial
statements for the fiscal period ended November 30, 1999 (the "Financial
Statements") of Lightseek. The Financial Statements are complete and
correct in all material respects and were prepared in accordance with
generally accepted accounting principles applicable to United Kingdom
corporations, applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements accurately set out
and describe in all material respects the financial condition and operating
results as of the dates, and for the periods, indicated therein, subject to
normal year-end adjustments. VerticalBuyer will maintain and Lightseek will
continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
3.04 Absence of Certain Changes. Since November 30, 1999, the date of the
Financial Statements, except as otherwise disclosed in writing,
VerticalBuyer represents that Lightseek has conducted its business in the
ordinary course consistent with past practice and that VerticalBuyer has
been an inactive company except for the issuance of Shares to the owners of
Lightseek and Shares and common stock purchase warrants certain consultants
and that, as to VerticalBuyer and Lightseek, there has not occurred: (i)
any change, event or condition that has resulted in, or might reasonably be
expected to result in, a Material Adverse Effect; (ii) any acquisition,
sale or transfer of any material asset other than in the ordinary course of
business and consistent with past practice; (iii) any material change in
accounting methods or practices (including any change in depreciation or
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amortization policies or rates); (iv) any declaration, setting aside, or
payment of a dividend or other distribution, or any direct or indirect
redemption, purchase or other acquisition of any shares of capital stock
except as disclosed to CSPI; (v) any material contract entered into other
than in the ordinary course of business, and or any material amendment or
termination of, or default under, any material contract; (vi) any
undisclosed material amendment or change to the incorporation documents or
bylaws; (vii) any increase in or modification of the compensation or
benefits payable or to become payable to any directors or employees other
than in the ordinary course of business and consistent with past practice
or (viii) any negotiation or agreement to do any of the things described in
the preceding clauses (i) through (vii) (other than negotiations with CSPI
and its representatives regarding the transactions contemplated by this
Agreement or as otherwise disclosed to CSPI).
3.05 Absence of Undisclosed Liabilities. Neither VerticalBuyer nor Lightseek has
any material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (i) those set forth or
adequately provided for in the Financial Statements; (ii) those incurred in
the ordinary course of business and not required to be set forth in the
Financial Statements under generally accepted accounting principles; (iii)
those incurred in the ordinary course of business since the Financial
Statements and consistent with past practice; and (iv) those incurred in
connection with the execution of this Agreement.
3.06 Litigation. There is no private or governmental action, suit, proceeding,
claim, arbitration or investigation pending before any agency, court or
tribunal, foreign or domestic, or, to the knowledge of VerticalBuyer,
threatened against either VerticalBuyer or Lightseek or any of their
properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on VerticalBuyer
or Lightseek except as has been previously disclosed to CSPI. There is no
judgment, decree or order against VerticalBuyer or Lightseek, or, to the
knowledge of VerticalBuyer, any of its directors or officers (in their
capacities as such), that could prevent, enjoin, or materially alter or
delay any of the transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on VerticalBuyer.
3.07 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree against either VerticalBuyer or Lightseek which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current or future business practice, any
acquisition of property or the conduct of business as currently conducted
or as proposed to be conducted.
3.08 Governmental Authorization. VerticalBuyer and Lightseek have obtained each
federal, state, county, local or foreign governmental consent, license,
permit, grant, or other authorization of a Governmental Entity (i) pursuant
to which either of them currently operates or holds any interest in any of
its properties or (ii) that is required for their operation, and all of
such authorizations are in full force and effect, except where the failure
to obtain or have any such authorizations could not reasonably be expected
to have a Material Adverse Effect on either VerticalBuyer or Lightseek.
3.09 Title to Property. Lightseek has good and marketable title to all of its
respective properties, interests in properties and assets, real and
personal, reflected in the Financial Statements or acquired after the
Financial Statements. The property and equipment of Lightseek that are used
in the operations of its businesses are in all material respects in good
operating condition and repair, ordinary wear and tear excepted.
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3.10 Intellectual Property.
(a) Lightseek owns or is licensed or otherwise possesses legally
enforceable rights to use all trademarks, trade names, service marks,
copyrights, domain registrations and any applications therefor, and
tangible or intangible proprietary information or material
("Intellectual Property") that are used in the business of Lightseek
as currently conducted, except to the extent that the failure to have
such rights has not had and would not reasonably be expected to have a
Material Adverse Effect on Lightseek.
(b) Lightseek has not been sued in any suit, action or proceeding and has
not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. The conduct of its
business does not infringe any trademark, service mark, copyright,
trade secret or other proprietary right of any third party, where such
infringement would have a Material Adverse Effect on Lightseek.
3.11 Interested Party Transactions. Neither VerticalBuyer nor Lightseek is
indebted to any director, officer, employee or agent (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to either VerticalBuyer or
Lightseek except as disclosed in the Financial Statements.
3.12 Insurance. Neither VerticalBuyer nor Lightseek currently has insurance.
3.13 Compliance With Laws. To its knowledge, VerticalBuyer and Lightseek have
complied with, are not in violation of, and have not received any notices
of violation with respect to, any federal, state, local or foreign statute,
law or regulation with respect to the conduct of their business, or the
ownership or operation of their respective business, except for such
violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect.
3.14 Minute Books. VerticalBuyer will make available to CSPI a complete and
accurate summary of all meetings of directors and shareholders or actions
by written consent since the time of incorporation of VerticalBuyer, and
reflect all transactions referred to in such minutes accurately in all
material respects.
3.15 Complete Copies of Materials. VerticalBuyer has delivered or made available
true and complete copies of each agreement not in the ordinary course of
business to which VerticalBuyer or Lightseek is a party.
3.16 Brokers' and Finders' Fees. VerticalBuyer has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby
except as set forth in Exhibit 3.16.
3.17 Board Approval. This Agreement has been adopted by the Board of Directors
of VerticalBuyer in resolutions which are in full force and effect.
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3.18 Representations Complete. None of the representations or warranties made by
VerticalBuyer, or documents furnished by VerticalBuyer or Lightseek
pursuant to this Agreement or any written statement furnished to CSPI
pursuant hereto or in connection with the transactions contemplated hereby,
when all such documents are read together in their entirety, contains or
will contain at the Closing any untrue statement of a material fact, or
omits or will omit at the Closing to state any material fact necessary in
order to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading; provided, however, that
for purposes of this representation, any document attached hereto as a
"Superseding Document" (even if not actually physically attached hereto)
that provides information inconsistent with or in addition to any other
written statement furnished to CSPI in connection with the transaction
contemplated hereby, shall be deemed to supersede any other prior document
or written statement furnished to CSPI with respect to such inconsistent or
additional information.
3.19 Authorization. All acts and conditions required by law on the part of
VerticalBuyer to authorize the execution and delivery of this Agreement by
VerticalBuyer and the transactions contemplated herein and the performance
of all obligations of VerticalBuyer hereunder have been duly performed and
obtained, and this Agreement constitutes a valid and legally binding
obligation of VerticalBuyer, enforceable in accordance with its terms,
subject, as to the enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally, to general equitable principles and to limitations on the
enforceability of indemnification provisions as applied to certain types of
claims arising hereafter, if any, under the federal securities laws.
3.20 Compliance With Other Instruments. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby will not result in any violation or default of any provision of any
instrument, judgment, order, writ, decree or contract to which
VerticalBuyer or Lightseek is a party or by which it is bound, or require
any consent under or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a violation or default under
any such provision.
3.21 Governmental Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, regional, state or local governmental authority of the United
States on the part of VerticalBuyer or Lightseek is required in connection
with the consummation of the transactions contemplated by this Agreement,
except for filings, if any, required pursuant to applicable federal and
state securities laws, which filings will be made within the required
statutory period.
3.22 Litigation. There is no action, suit, proceeding, or investigation pending
or, to its knowledge, currently threatened against VerticalBuyer or
Lightseek which questions the validity of this Agreement or the right of
VerticalBuyer to enter into this Agreement or to consummate the
transactions contemplated hereby.
3.23 Authorized Shares of Common Stock and Warrants. The Shares and Warrants to
be transferred to CSPI under this Agreement will be free and clear of any
lien, pledge, security interest or other encumbrance and, upon delivery of
the securities at the Closing as provided for in this Agreement, and
assuming CSPI is acquiring the Shares and Warrants in good faith and
without notice of any adverse claim, CSPI will acquire good title thereto,
free and clear of any lien, pledge, security interest or encumbrance (other
than restrictions on transfer arising under applicable securities laws).
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3.24 Disclosure. VerticalBuyer has fully provided CSPI with all the information
in its possession that CSPI has requested in determining whether to
purchase the securities offered by VerticalBuyer. Neither Article 3 of this
Agreement nor any document attached to this Agreement nor any certificate
delivered pursuant hereto that, in any such case, has been or will be
provided by or on behalf of VerticalBuyer contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements made herein or therein not misleading in light of the
circumstances under which they were made.
3.25 Capital Structure. The capitalization of VerticalBuyer consists of
50,000,000 shares of common stock, par value $.001 each, of which
15,000,000 shares are issued and outstanding as of the date of closing and
5,000,000 shares of "blank check" preferred stock, $.001 par value each of
which none are issued. There are no other outstanding securities of
VerticalBuyer and no outstanding commitments to issue any securities,
except WE MUST FILL THIS NUMBER IN options and warrants issued to
employees, directors and consultants the terms and conditions of which are
set forth in Exhibit 3.25.
3.26 Taxes. VerticalBuyer and Lightseek have timely filed all tax returns
required to be filed and has paid all taxes shown thereon to be due. The
Financial Statements (i) fully accrue all actual and contingent liabilities
for taxes with respect to all periods through December 31, 1999 and neither
VerticalBuyer nor its subsidiary has or will incur any tax liability in
excess of the amount reflected on the Financial Statements with respect to
such periods, and (ii) properly accrue in accordance with generally
accepted accounting principles all liabilities for taxes payable after
December 31, 1999 with respect to all transactions and events occurring on
or prior to such date. No material tax liability since December 31, 1999
has been incurred by VerticalBuyer or its subsidiary other than in the
ordinary course of business and adequate provision has been made in the
Financial Statements for all taxes since that date in accordance with
generally accepted accounting principles.
3.27 Employee Matters. To its best knowledge, VerticalBuyer and its subsidiary
are in compliance in all material respects with all currently applicable
laws and regulations respecting employment, discrimination in employment,
terms and conditions of employment, wages, hours and occupational safety
and health and employment9 practices, and is not engaged in any unfair
labor practice. To its best knowledge, there are no pending claims against
VerticalBuyer under any workers compensation plan or policy or for long
term disability. All employee benefit plans, stock option plans (including
the terms and conditions of any issued and outstanding options) or other
employee stock issuance plans or rights and all employment agreements are
listed on Exhibit 3.27.
3.28 Delivery of Documents. VerticalBuyer has delivered or will deliver to CSPI
at or prior to the Closing all documents required to be delivered under
this Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CSPI
CSPI represents and warrants to VerticalBuyer as follows:
4.01 Organization, Standing and Power. CSPI is a corporation duly organized,
validly existing and in good standing under the laws of Massachusetts. CSPI
has the corporate power to own its properties and to carry on its business
as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a
Material Adverse Effect on CSPI.
4.02 Authority. CSPI has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of CSPI. This Agreement has been duly executed
and delivered by CSPI and constitutes the valid and binding obligation of
CSPI enforceable against CSPI in accordance with its terms, except that
such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to creditors' rights generally,
and is subject to general principles of equity. The execution and delivery
of this Agreement by CSPI does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration
of any material obligation or loss of any material benefit under (i) any
provision of the articles of organization or bylaws of CSPI as amended, or
(ii) any material mortgage, indenture, lease, contract or other agreement
or instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to CSPI or
any of its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to
CSPI or CSPI in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby,
except for (i) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country, (ii)
such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Material Adverse Effect on
CSPI and/or and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement and (iii) subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally, to
general equitable principles and to limitations on the enforceability of
indemnification provisions as applied to certain types of claims arising
hereafter, if any, under the federal securities laws.
4.03 Litigation. There is no action, suit, proceeding, or investigation pending
or, to its knowledge, currently threatened against CSPI or CSPI which
questions the validity of this Agreement or the right of CSPI to enter into
this Agreement or to consummate the transactions contemplated hereby.
4.04 Delivery of Documents. CSPI has delivered or will deliver to VerticalBuyer
at or prior to the Closing all documents required to be delivered under
this Agreement.
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ARTICLE 5
LEGEND REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
5.01 Removal of Legend. The Legend shall be removed and VerticalBuyer shall
issue, or shall cause to be issued, a certificate without such legend to
the holder of any security upon which it is stamped, and a certificate for
a security shall be originally issued without the Legend, if, (a) the
resale of such Security is registered under the 1933 act, (b) such holder
provides VerticalBuyer with an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable transactions and
reasonably satisfactory to VerticalBuyer and its counsel (the reasonable
cost of which shall be borne by VerticalBuyer if neither an effective
registration statement under the 1933 act or Rule 144 is available in
connection with such sale) to the effect that a public sale or transfer of
such security may be made without registration under the 1933 act pursuant
to an exemption from such registration requirements.
5.02 Transfer Agent Instructions. VerticalBuyer shall instruct its transfer
agent to issue certificates, registered in the name of CSPI or its
transferees, for the Shares in such amounts specified from time to time by
CSPI or its transferees to exercise of the Warrants.
ARTICLE 6
ELECTION OF DIRECTOR
6.01 VerticalBuyer has taken all corporate and other action necessary to
establish the size of its Board of Directors and to elect, effective upon
the Closing, Alexander Lupinetti to be one of the four directors. Vertical
Buyer agrees not to change the number of directors constituting the full
Board of Directors except in accordance with the Voting Agreement by and
between the Parties of even date herewith.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of CSPI on the one hand, and VerticalBuyer, on the other
hand, to the following conditions on or prior to the Closing:
7.01 Consents and Approvals. The Parties shall have obtained all consents and
approvals of third parties and governmental authorities, if any, required
to consummate the transactions contemplated by this Agreement.
7.02 Representations, Warranties and Agreements. All representations and
warranties made herein by CSPI and VerticalBuyer, shall be true, accurate
and correct in all respects as of the date made and as of the Closing. CSPI
and VerticalBuyer, shall have performed all obligations and agreements
undertaken by each of them herein to be performed at or prior to the
Closing.
7.03 Certificate. CSPI shall have received from VerticalBuyer and VerticalBuyer
shall have received from CSPI, a certificate, dated as of the Closing and
executed by the President or Chief Executive Office and Secretary of
VerticalBuyer and CSPI, respectively to the effect that the conditions set
forth in Article 3 or Article 4 respectively shall have been satisfied.
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7.04 No Material Adverse Changes. There shall not have occurred any material
adverse change in the financial condition, properties, assets (including
intangible assets), liabilities, business, operations or results of
operations of VerticalBuyer or Lightseek.
7.05 No Actions. Consummation of the transactions contemplated by this Agreement
shall not violate any order, decree or judgment of any court or
governmental body having jurisdiction.
7.06 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to counsel for each of the Parties, and each such
Party (or its counsel) shall have received all such counterpart originals
or certified or other copies of such documents as it may reasonably
request.
7.07 Accuracy of Documents and Information. The copies of all material
instruments, agreements, other documents and written information delivered
to any Party by any other Party or its representatives shall be complete
and correct in all material respects as of the Closing.
7.08 Execution of Agreements. The Parties will have executed the Registration
Rights Agreement and Voting Agreement in the form attached hereto as
Exhibit 2.02.
ARTICLE 8
INDEMNIFICATION
8.01 Indemnification. Each Party will indemnify and hold harmless the other
Party and its respective officers, directors, agents and employees, and
each person, if any, who controls or may control a Party within the meaning
of the 1933 act from and against any and all losses, costs, damages,
liabilities and expenses arising from claims, demands, actions, causes of
action, including, without limitation, reasonable legal fees, except for
the net of any recoveries under existing insurance policies, tax benefits
received by any Party or its affiliates as a result of such damages,
indemnities from third parties or in the case of third party claims, by any
amount actually recovered by a Party or its affiliates pursuant to
counterclaims made by any of them directly relating to the facts giving
rise to such third party claims (collectively, "Damages") arising out of
any misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by
VerticalBuyer or CSPI in this Agreement, or any exhibit or schedule to this
Agreement. Each Party and its affiliates shall act in good faith and in a
commercially reasonable manner to mitigate any damages they may suffer.
ARTICLE 9
MISCELLANEOUS
9.01 Notices. Any notice given hereunder shall be in writing and shall be deemed
effective upon the earlier of personal delivery (including personal
delivery by facsimile) or the third day after mailing by certified or
registered mail, postage prepaid, as follows:
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(a) If to CSPI:
Alexander Lupinetti
Chief Executive Officer
40 Linnell Circle
Billerica, MA 01821
with a copy to Dean F. Hanley, Esquire
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Phone: 617-832-1000
Facsimile: 617-832-7000
(b) If to VerticalBuyer:
Tim Rosen
President
c/o Donahue & Associates
83 Meadow Road West.
Trumbull, Connecticut 06611
or to such other address as any Party may have furnished in writing to the
other Party in the manner provided above.
9.02 Entire Agreement; Modifications; Waiver. This Agreement and the documents
and instruments and other agreements specifically referred to herein
constitute the final, exclusive and complete understanding of the Parties
with respect to the subject matter hereof and supersedes any and all prior
agreements, understandings and discussions with respect thereto. No
variation or modification of this Agreement and no waiver of any provision
or condition hereof, or granting of any consent contemplated hereby, shall
be valid unless in writing and signed by the Party against whom enforcement
of any such variation, modification, waiver or consent is sought. The
rights and remedies available to each Party pursuant to this Agreement and
all exhibits hereunder shall be cumulative.
9.03 Captions. The captions in this Agreement are for convenience only and shall
not be considered a part of or affect the construction or interpretation of
any provision of this Agreement.
9.04 Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall constitute an original copy hereof,
but all of which together shall constitute one agreement.
9.05 Publicity. Except for disclosure required by any law to which either Party
is subject, the timing and content of any announcements, press releases and
public statements to be made prior to the Closing concerning the
transactions contemplated hereby shall be determined solely by CSPI in
consultation with VerticalBuyer.
9.06 Successors and Assigns. No Party may, without the prior express written
consent of each other Party, assign this Agreement in whole or in part.
This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the Parties.
9.07 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of The Commonwealth of
Massachusetts without regard to its principles of conflicts of laws.
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9.08 Further Assurances. At the request of any of the Parties, and without
further consideration, the other Parties agree to execute such documents
and instruments and to do such further acts as may be necessary or
desirable to effectuate the transactions contemplated hereby, required by
law, statute, rule or regulation.
9.09 Confidentiality and Nondisclosure Agreements. All information which shall
have been furnished or disclosed by one Party to the other pursuant to this
Agreement, including without limitation, business, financial and customer
development plans, forecasts, strategies and information, shall be held in
confidence pursuant hereto and shall not be disclosed to any person other
than their respective employees, directors, legal counsel, accountants or
financial advisors, with a need to have access to such information, and
shall not make any use whatsoever of such information except to evaluate
such information internally. The confidentiality provisions set forth
herein shall survive until two years from the date hereof, unless the Party
desiring to disclose the information can document that (i) such information
is (through no improper action or inaction by such Party or any affiliate,
agent, consultant or employee) generally available to the public, or (ii)
was in its possession or known by it prior to receipt from the other Party,
or (iii) was rightfully disclosed to it by a third party, or (iv) was
independently developed by employees of such Party who have had no access
to such information.
9.10 Severability. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or provisions of this Agreement shall not
affect the validity or enforceability of the remaining portions of this
Agreement or any part thereof.
IN WITNESS WHEREOF, each Party has executed this Agreement as of the date
first above written.
CSP INC.
By: /s/ Alexander R. Lupinetti
----------------------------
Alexander R. Lupinetti,
Chief Executive Officer
VERTICALBUYER, INC.
By: /s/ Tim Rosen
----------------------
Tim Rosen,
President
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RGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March 1,
2000 (the "Agreement"), is made by and between VerticalBuyer, Inc., a Delaware
corporation ("VerticalBuyer") and CSP Inc., a Massachusetts corporation
("CSPI").
WHEREAS, in connection with the Securities Purchase and Facilities
Agreement dated March 1, 2000. between CSPI and VerticalBuyer (the "Securities
and Facilities Agreement"), VerticalBuyer has agreed, upon the terms and subject
to the conditions of said Securities and Facilities Agreement, to issue and sell
to CSPI 2,000,000 shares of VerticalBuyer's common stock, par value $0.001 per
share (the "Shares"), together with common stock purchase warrants (the
"Warrants") in three classes to purchase in the aggregate 3,000,000 additional
Shares; and
WHEREAS, in connection with the sale of the Shares to CSPI, it is
contemplated that CSPI will distribute approximately 700,000 Shares ratably to
its stockholders; and
WHEREAS, Vertical Buyer has agreed to issue 75,000 Warrants ratably to all
the holders of options to purchase CSPI common stock; and
WHEREAS, to induce CSPI to execute and deliver the Securities Purchase and
Facilities Agreement, VerticalBuyer has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws with respect to the Shares as
follows:
(a) the resale of 2,000,000 Shares privately placed to CSPI including
(b) the proposed distribution of approximately 700,000 Shares to CSPI's
stockholders
(c) the issuance and resale of 3,000,000 Shares underlying the Warrants
(d) the issuance of up to 75,000 Warrants to the option holders of CSPI
(e) the issuance of up to 75,000 Shares underlying the Warrants issued to
the option holders of CSPI
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, VerticalBuyer and CSPI hereby
agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities and
Facilities Agreement. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Registrable Securities" means the Shares and Warrants issued or to be
issued by VerticalBuyer in connection with the following transactions:
(i) the resale of 2,000,000 Shares privately placed to CSPI including
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(ii) the proposed distribution of approximately 700,000 Shares to
CSPI's stockholders;
(iii)the issuance and resale of 3,000,000 Shares underlying the
Warrants;
(iv) the issuance of up to 75,000 Warrants to the option holders of
CSPI;
(v) the issuance of up to 75,000 Shares underlying the Warrants
issued to the option holders of CSPI; and
(vi) any Shares issued as "late registration payments" as defined in
paragraph 2(c).
(b) "Registration Period" means the period between the date of this
Agreement and the earlier of (i) the date on which all of the
Registrable Securities have been sold and no further Registrable
Securities may be issued in the future, or (ii) the date on which all
the Registrable Securities (in the opinion of CSPI's counsel) may be
immediately sold without registration.
(c) "Registration Statement" means a registration statement filed with the
Securities and Exchange Commission (the "SEC") under the 1933 Act.
(d) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing the Registration
Statement in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415") and applicable rules and
regulations thereunder, and the declaration or ordering of
effectiveness of such Registration Statement by the SEC.
2. Registration.
(a) Mandatory Registration. VerticalBuyer will file the Registration
Statement on Form SB-2 (or if Form SB-2 is not then available, on such
form of registration statement as is then available to effect a
registration of all the Registrable Securities) with the SEC
registering the Registrable Securities for resale within thirty (30)
business days of the this Agreement. To the extent allowable under the
1933 Act, the Registration Statement shall include the securities
listed in paragraph 101(a) and such additional Shares as may become
issuable upon exercise of the Warrants (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions,
or (ii) by reason of changes in the exercise price of the Warrants in
accordance with the terms thereof. VerticalBuyer shall use its best
efforts to cause the Registration Statement to be declared effective
by the SEC as soon as practicable after filing and in any event no
later than the ninetieth (90th) business day following the Closing
Date (the "Required Effective Date"). Such best efforts shall include,
but not be limited to, promptly responding to all comments received
from the staff of the SEC. Should VerticalBuyer receive notification
from the SEC that the Registration Statement will receive no action or
no review from the SEC, VerticalBuyer shall cause such Registration
Statement to become effective within seven (7) business days of such
SEC notification. Once declared effective by the SEC, VerticalBuyer
shall cause the Registration Statement to remain effective throughout
the Registration Period.
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(c) Late Registration Payments. If the Registration Statement required
pursuant to paragraph 2(a) above has not been declared effective by
the Required Effective Date, VerticalBuyer will issue to CSPI
additional Shares equal to one percent (1%) of the purchased Shares
for each full month following the Required Effective Date, continuing
through the date the Registration Statement is declared effective by
the SEC. The Late Registration Share issuance will be prorated on a
daily basis for partial months and will be issued to CSPI within five
(5) business days following the effective date of the Registration
Statement.
The obligations of VerticalBuyer under this paragraph 2(d) will expire
upon the earlier of the effectiveness of the Registration Statement or
when all of the Registrable Securities may be sold by under Rule 144
under the 1933 Act without being subject to any volume restrictions.
3. Additional Obligations of VerticalBuyer. In connection with the
registration of the Registrable Securities, VerticalBuyer shall have the
following additional obligations:
(a) VerticalBuyer shall keep the Registration Statement effective pursuant
to Rule 415 under the 1933 Act at all times during the Registration
Period.
(b) The Registration Statement shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. VerticalBuyer
shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to permit sales pursuant to the
Registration Statement at all times during the Registration Period,
and, during such period, shall comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities of
VerticalBuyer covered by the Registration Statement until the
termination of the Registration Period, or, if earlier, such time as
all of such Registrable Securities which require an effective
registration statement under the 1933 Act have been disposed of.
(c) VerticalBuyer shall furnish to CSPI and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the
SEC or received by VerticalBuyer, one copy of the Registration
Statement and any amendment thereto; each preliminary prospectus and
final prospectus and each amendment or supplement thereto, each letter
written by or on behalf of VerticalBuyer to the SEC and each item of
correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement; and (ii) such number of
copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto, and such other documents as CSPI
may reasonably request in order to facilitate the disposition of the
Registrable Securities.
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(d) VerticalBuyer shall use its best efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement under
such other securities or blue sky laws of such jurisdictions as CSPI
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to maintain
the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such
jurisdictions. Notwithstanding the foregoing provision, VerticalBuyer
shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph,
subject itself to general taxation in any such jurisdiction, (iii)
file a general consent to service of process in any such jurisdiction,
(iv) provide any undertakings that cause material expense or burden to
VerticalBuyer, or (v) make any change in its charter or bylaws, which
in each case the Board of Directors of VerticalBuyer determines to be
contrary to the best interests of VerticalBuyer and its stockholders.
(e) VerticalBuyer shall notify CSPI of the happening of any event of which
VerticalBuyer has knowledge as a result of which the prospectus
included in the Registration Statement as then in effect includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (a "Suspension Event"). VerticalBuyer shall make such
notification as promptly as practicable after VerticalBuyer becomes
aware of such Suspension Event, shall promptly use its best efforts
(but in any event within five (5) days) to prepare a supplement or
amendment to the Registration Statement to correct such untrue
statement or omission, and shall deliver a number of copies of such
supplement or amendment to CSPI as CSPI may reasonably request.
VerticalBuyer shall promptly notify CSPI as soon as the use of the
Registration Statement may be resumed.
(f) VerticalBuyer shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration
Statement and, if such an order is issued, shall use its best efforts
to obtain the withdrawal of such order at the earliest possible time
and to notify CSPI of the issuance of such order and the resolution
thereof.
(g) VerticalBuyer shall cooperate with CSPI to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to
the Registration Statement and enable such certificates to be in such
denominations or amounts as the case may be, and registered in such
names as CSPI may reasonably request; and, within one (1) business day
after a Registration Statement which includes Registrable Securities
is ordered effective by the SEC, VerticalBuyer shall deliver, and
shall cause legal counsel selected by VerticalBuyer to deliver, to the
transfer agent for the Registrable Securities instructions to the
transfer agent to issue new stock certificates without a legend and an
opinion of such counsel that the Shares and Warrants have been
registered.
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(h) VerticalBuyer shall promptly prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
(i) VerticalBuyer shall comply with all applicable laws related to the
Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in
connection therewith (including, without limitation, the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated by the SEC).
(j) VerticalBuyer shall take all other reasonable actions as the CSPI may
reasonably request to expedite and facilitate disposition of the
Registrable Securities pursuant to the Registration Statement.
4. Obligations of CSPI. In connection with the registration of the Registrable
Securities, CSPI shall have the following obligations:
(a) CSPI will cooperate with VerticalBuyer as reasonably requested by
VerticalBuyer in connection with the preparation and filing of the
Registration Statement hereunder.
(b) CSPI agrees that, upon receipt of any notice from VerticalBuyer of the
happening of any event of the kind described in Section 3, CSPI will
immediately discontinue disposition of Registrable Securities pursuant
to the Registration Statement covering such Registrable Securities
until CSPI's receipt of the copies of the supplemented or amended
prospectus.
5. Expenses of Registration. All reasonable expenses incurred in connection
with registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel
for VerticalBuyer, and the reasonable fees and disbursements of one counsel
selected by CSPI, shall be borne by VerticalBuyer.
6. Indemnification.
(a) To the extent permitted by law, VerticalBuyer will indemnify and hold
harmless CSPI, its directors, its officers, each person, if any, who
controls the CSPI within the meaning of the 1933 Act or the Exchange
Act, (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively
together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened in
respect thereof, "Claims") to which any of them become subject under
the 1933 Act, the Exchange Act or otherwise, insofar as such Claims
arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein:
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
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statements therein not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as
amended or supplemented, if VerticalBuyer files any amendment thereof
or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation
or alleged violation by VerticalBuyer of the 1933 Act, the Exchange
Act or any other law, including without limitation any state
securities law or any rule or regulation thereunder (the matters in
the foregoing clauses (i) through (iii) being, collectively,
"Violations"). VerticalBuyer shall reimburse CSPI and each Indemnified
Person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this paragraph 6(a): (A) shall
not apply to a Claim arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished
in writing to VerticalBuyer by any Indemnified Person expressly for
use in connection with the preparation of the Registration Statement
or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by VerticalBuyer pursuant to
paragraph 3(c) hereof; (B) with respect to any preliminary prospectus
shall not inure to the benefit of any Indemnified Party from whom the
person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on
a timely basis in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by VerticalBuyer pursuant to
paragraph 3(c) hereof; and the Indemnified Party was promptly advised
in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Party, notwithstanding such
notice, used it (C) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written
consent of VerticalBuyer, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Indemnified Persons and shall survive the transfer of the Registrable
Securities pursuant to Section 9.
(b) In connection with any Registration Statement in which CSPI is
participating, CSPI will indemnify and hold harmless, to the same
extent and in the same manner set forth in paragraph 6(a),
VerticalBuyer, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls
VerticalBuyer within the meaning of the 1933 Act or the Exchange Act,
and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any
person who controls such stockholder within the meaning of the 1933
Act or the Exchange Act (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished to VerticalBuyer by CSPI expressly for use in
connection with such Registration Statement, and subject to paragraph
6(c), CSPI will promptly reimburse any legal or other expenses
(promptly as such expenses are incurred and due and payable)
reasonably incurred by it in connection with investigating or
defending any such Claim; provided, however, that the indemnity
agreement contained in this paragraph 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without
the prior written consent of CSPI, which consent shall not be
unreasonably withheld; provided further, however, that CSPI shall be
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liable under this Agreement (including this paragraph 6(b) and
paragraph 7) for only that amount of a Claim as does not exceed the
net proceeds actually received by CSPI as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities pursuant to Section
9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this paragraph 6(b) with
respect to any preliminary prospectus shall not inure to the benefit
of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on
a timely basis in the prospectus, as then amended or supplemented, and
the Indemnified Party failed to utilize such corrected prospectus.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made
against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof and
this indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying
parties and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that such indemnifying party shall
diligently pursue such defense; and provided, further, that if the
defendants in any such action include both the Indemnified Person or
Party and the indemnifying party, and the Indemnified Person or Party
shall have reasonably concluded that a conflict may arise between the
positions of the indemnifying party and the Indemnified Person or
Party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the
indemnifying party, then the Indemnified Person or Party shall have
the right to retain separate counsel, the fees and expenses of which
shall be paid by the indemnifying party, to assume such legal defenses
and to otherwise participate in the defense of such action on behalf
of such Indemnified Person or Party. In case an Indemnified Person or
Party shall have retained separate counsel pursuant to the proviso in
the immediately preceding sentence, the indemnifying party shall not
be liable for the expenses of more than one such separate counsel. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend
such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
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7. Contribution. If the indemnification provided for in Section 6 is for any
reason held by a court of competent jurisdiction to be unavailable to or
otherwise insufficient to hold harmless an Indemnified Person or Party in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate
amount paid or payable by such Indemnified Person or Party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred
to therein (i) in such proportion as is appropriate to reflect the relative
benefits received by VerticalBuyer, on the one hand, and CSPI, on the other
hand, from the original issuance of the common stock of VerticalBuyer
(including the common stock issued or issuable upon the exercise of
warrants) pursuant to that certain Securities Purchase and Facilities
Agreement of even date herewith, or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) but also the relative fault of VerticalBuyer, on the one hand, and
CSPI, on the other hand, in connection with the statements or omissions or
inaccuracies in the Registration Statement or any preliminary or final
prospectus therein, or in the representations and warranties herein, which
resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of
VerticalBuyer, on the one hand, and CSPI, on the other hand, shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by
VerticalBuyer, on the one hand, or CSPI, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 6, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 6 with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 7; provided, however, that no
additional notice shall be required with respect to any action for which
notice has been given under Section 6 for purposes of indemnification.
Notwithstanding the provisions of this Section 7, no person guilty of
fraudulent misrepresentation (within the meaning of paragraph 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each officer and employee of CSPI and each person, if any, who
controls CSPI within the meaning of the Securities Act and the Exchange Act
shall have the same rights to contribution as CSPI, and each director of
VerticalBuyer, each officer of VerticalBuyer who signed the Registration
Statement, and each person, if any, who controls VerticalBuyer within the
meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as VerticalBuyer.
8. Assignment of Registration Rights. The rights of CSPI hereunder, including
the right to have VerticalBuyer register the Shares, Warrants and the
Shares underlying the Warrants pursuant to this Agreement shall be
automatically assigned to transferees of all or any portion of such
securities only if such transfer shall have been made in accordance with
the applicable requirements of the Securities and Facilities Agreement.
9. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with
the written consent of VerticalBuyer and CSPI. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon CSPI and
VerticalBuyer. Notwithstanding the foregoing, no amendment or waiver shall
retroactively affect CSPI without its consent.
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10. Miscellaneous.
(a) Conflicting Instructions. A person or entity is deemed to be a holder
of Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If VerticalBuyer receives
conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable Securities,
VerticalBuyer shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable
Securities.
(b) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (with
return receipt requested) or delivered personally or by courier
(including a nationally recognized overnight delivery service) or by
facsimile transmission. Any notice so given shall be deemed effective
three days after being deposited in the U.S. Mail, or upon receipt if
delivered personally or by courier or facsimile transmission, in each
case addressed to a party at the following address or such other
address as each such Party furnishes to the other in accordance with
this paragraph 12(b):
If to VerticalBuyer:
Tim Rosen,
President
VerticalBuyer, Inc.
c/o Donahue & Associates
83 Meadow Road West
Trumbull, Connecticut 06611
If to CSPI:
Alexander Lupinetti
Chief Executive Officer
40 Linnell Circle
Billerica, MA 01821
with a copy to
Dean F. Hanley, Esquire
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Phone: 617-832-1000
Facsimile: 617-832-7000
(c) Waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(d) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of The Commonwealth
of Massachusetts without regard to its principles of conflicts of
laws, and any disputes arising hereunder will be adjudicated in
federal or state court situated therein. Each party hereto consents to
venue in Massachusetts and to the personal and subject matter
jurisdiction of said courts and, to the extent permitted by applicable
law, agrees to waive any objection as to such jurisdiction or venue,
and agrees not to assert any defense based on lack of jurisdiction or
venue.
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(e) Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(f) Entire Agreement. This Agreement, the Securities and Facilities
Agreement, and the Warrants (including all schedules and exhibits
thereto) constitute the entire agreement among the Parties with
respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein or therein. This Agreement supersedes
all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(g) Successors and Assigns. Subject to the requirements of Section 9
hereof, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the Parties.
(h) Use of Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require.
(i) Headings. The headings and subheadings in the Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement,
once executed by Party, may be delivered to the other party hereto by
facsimile transmission, and facsimile signatures shall be binding on
the parties hereto.
(k) Further Acts. Each Party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and
documents, as the other. party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and
the consummation of the transactions contemplated hereby.
(l) Consents. All consents and other determinations to be made by
transferees pursuant to this Agreement shall be made by CSPI.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first above written.
VERTICALBUYER, INC.
By: /s/Tim Rosen
-----------------------
Tim Rosen,
President
CSP INC.
By: /s/Alexander Lupinetti
----------------------
Alexander Lupinetti,
Chief Executive Officer
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VOTING AGREEMENT
Agreement (this "Agreement") made as of March 2, 2000 by and among
VerticalBuyer, Inc., a Delaware corporation (the "Company"), CSP Inc., a
Massachusetts corporation ("CSPI"), Tim Rosen ("First Stockholder") and Leslie
Kent ("Second Stockholder" and, collectively with First Stockholder, the
"Stockholders"). (The parties to this Agreement will hereinafter be referred to
as the "Parties.")
In consideration of the mutual covenants herein contained, the Parties
agree as follows:
1. Board of Directors; By-Laws. The Stockholders will vote all shares of
common stock, preferred stock or any other class of voting security of
VerticalBuyer now or hereafter owned or controlled by them (the "Shares"), and
otherwise to use their respective best efforts as stockholders of VerticalBuyer,
to elect one person designated by CSPI as a director of VerticalBuyer in any
subsequent election of directors of VerticalBuyer. The initial nominee of CSPI
to be director is Alexander Lupinetti, Chairman of the Board of Directors and
President of CSPI.
VerticalBuyer and the Stockholders agree not to take any action to remove
the person designated or nominated by CSPI as director, to change the number of
directors constituting the full Board of Directors, or to amend any provision of
the Certificate of Incorporation or By-Laws of VerticalBuyer relating to the
election and number of directors, as presently in effect, without the prior
written consent of CSPI.
2. Conduct of Business of VerticalBuyer. During the period from the date of
this Agreement and continuing until the effective date of a registration
statement filed with the Securities and Exchange Commission relating to the
Shares purchased by CSPI and the Shares underlying the warrant purchased by
CSPI, VerticalBuyer shall not do, cause or permit and shall cause its
subsidiaries not to do, cause or permit, any of the following, without the
affirmative vote of the person designated by CSPI as a director of
VerticalBuyer:
(a) Material Contracts. Enter into any material contract or commitment, or
violate, amend or otherwise modify or waive any of the terms of any of
its material contracts, other than in the ordinary course of business
consistent with past practice;
(b) Issuance of Securities. Issue, deliver or sell or authorize or propose
the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any
such shares or other convertible securities.
(c) Intellectual Property. Transfer to any person or entity any rights to
its intellectual property other than in the ordinary course of
business consistent with past practice.
(d) Exclusive Rights. Enter into or amend any material agreements pursuant
to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its
services.
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(e) Dispositions. Sell, lease, license or otherwise dispose of or encumber
any of its properties or assets which are material, individually or in
subsidiaries' business, taken as a whole, except in the ordinary
course of business consistent with past practice;
(f) Indebtedness. Incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others; (g) Leases. Enter into any
operating lease in excess of $24,000 per annum;
(h) Payment of Obligations. Pay, discharge or satisfy in an amount in
excess of $10,000 in any one case or $100,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise) arising other than in the
ordinary course of business, other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in the
financial statements of VerticalBuyer or its subsidiary, Lightseek
Limited;
(i) Capital Expenditures. Make any capital expenditures, capital additions
or capital improvements except in the ordinary course of business and
consistent with past practice;
(j) Insurance. Materially reduce the amount of any material insurance
coverage provided by insurance policies whether existing or placed
during the term of this Agreement;
(k) Termination or Waiver. Terminate or waive any right of substantial
value, other than in the ordinary course of business;
(l) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend any
employee benefit or stock purchase or option plan, or hire any new
officer level employee, or increase the salaries or wage rates of its
employees except in the ordinary course of business in accordance with
its standard past practice;
(m) Severance Arrangements. Grant any severance or termination pay (i) to
any director or officer or (ii) to any other employee except (A)
payments made pursuant to written agreements outstanding on the date
hereof or (B) grants which are made in the ordinary course of business
in accordance with its standard past practice;
(n) Lawsuits. Commence a lawsuit other than (i) for the routine collection
of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a
valuable aspect of its business;
(o) Acquisitions. Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its and its
parent's/subsidiaries' business, taken as a whole;
2
<PAGE>
(p) Taxes. Other than in the ordinary course of business, make or change
any material election in respect of taxes, adopt or change any
accounting method in respect of Taxes, file any material tax return or
any amendment to a material tax return, enter into any closing
agreement, settle any material claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period
applicable to any material claim or assessment in respect of taxes;
(r) Revaluation. Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(s) Other. Take or agree in writing or otherwise to take, any action which
would cause a material breach of its representations or warranties
contained in any agreement or prevent it from materially performing or
cause it not to materially perform its covenants thereunder.
3. Assignment; Binding Effect. Subject to termination as provided in
Section 7, this Agreement shall be binding on the Parties and their respective
legal representatives, successors and assigns and on the transferees of any
Shares now owned or hereafter acquired by them.
4. Entire Agreement; Waiver. This Agreement contains the sole and entire
understanding of the Parties with respect to its subject matter. This Agreement
may not be changed or terminated or any performance or condition waived, in
whole or in part, except by agreement in writing signed by all of the Parties.
5. Counterparts. This Agreement may be executed in more than one
counterpart, each of which shall be deemed to be an original and which,
together, shall constitute one and the same instrument.
6. Applicable Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws.
7. Legend. Each certificate for Shares shall bear a legend stating in
substance as follows:
"The rights of any holders of these shares are subject to the terms and
provisions of a Voting Agreement dated March 2, 2000 among VerticalBuyer
and certain shareholders of VerticalBuyer. Copies of such agreement may be
obtained without charge upon written request to the secretary of
VerticalBuyer."
8. Termination. This Agreement shall terminate and be of no further force
and effect upon the exercise redemption or expiration of all of the outstanding
Common Stock Purchase Warrants of VerticalBuyer issued to CSPI and dated the
date hereof providing for the purchase, subject to adjustment, of 3,000,000
shares of VerticalBuyer's Common Stock.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
VERTICALBUYER, INC.
By: /s/Tim Rosen
---------------------
Tim Rosen,
President
CSPI, INC.
By: /s/Alexander Lupinetti
------------------------
Alexander Lupinetti,
Chief Executive Officer
/s/Tim Rosen /s/Leslie Kent
--------------------- -----------------
Tim Rosen Leslie Kent
3
<PAGE>
CONSENT
We, Leslie Sufrin and Company, P. C., hereby consent to the use of our
report dated March 13, 2000, relating to the audited financial statements for
period from inception (May 13, 1999) to December 31, 1999 of Lightseek, Limited
in a registration statement on SB-2 of VerticalBuyer, to be filed with the
Securities and Exchange Commission.
March 28, 2000
/s/Leslie Sufrin and Company, P. C.
-----------------------------------
Leslie Sufrin and Company, P. C.
Exhibit 23.2
Consent of Roger L. Fidler, Esq.
CONSENT
I, Roger L. Fidler, hereby consent to the use of my opinion dated March 28,
2000, and my name under the caption "Legal Matters" in the SB-2 Registration
Statement and prospectus, and any amendments thereto, of VerticalBuyer, Inc. to
be filed with the Securities and Exchange Commission.
/s/Roger L. Fidler
---------------------
Roger L. Fidler
Dated: March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule December 31, 1999
</LEGEND>
<CIK> 0001109879
<NAME> Lightseek Limited (A United Kingdom Corporation)
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> May-13-1999
<PERIOD-END> Dec-31-1999
<CASH> 20,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,156
<PP&E> 46,382
<DEPRECIATION> (7,729)
<TOTAL-ASSETS> 47,809
<CURRENT-LIABILITIES> 71,467
<BONDS> 0
0
0
<COMMON> 1,615
<OTHER-SE> (25,273)
<TOTAL-LIABILITY-AND-EQUITY> 47,809
<SALES> 21,945
<TOTAL-REVENUES> 21,945
<CGS> 22,025
<TOTAL-COSTS> 47,218
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,273)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
