EXHIBIT 4.6
ASSET EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
This ASSET EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
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is made as of December 29, 1999, by and between VerticalNet, Inc., a
Pennsylvania corporation (the "Purchaser"), and TextileWeb, Inc., a North
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Carolina corporation (the "Company" or the "Seller") ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
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Risen, each individuals employed by the Company and being the holders of all of
the issued and outstanding capital stock of the Company (the "Shareholders", and
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together with the Seller, the "Seller Parties.")
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BACKGROUND
TextileWeb, Inc. is a North Carolina corporation dedicated to promoting the
goods and services of the textile industry via the Internet. The Company
utilizes the fictitious names TextileWeb, August ▇▇▇▇▇▇, OnlineTextileNews and
TextileShow and is engaged in the business (the "Business") of developing,
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owning and operating the Internet websites named "Textileweb,"
"Onlinetextilenews", "Textileshow" and "Nonwovensweb" with the respective domain
names ▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ and
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (each an "Active Website" and collectively the "Active
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Websites") and activities associated therewith. In addition, Seller conducts
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web-design and development business operations for certain textile and non-
textile related customers as part of the Business.
Seller desires to sell, and Purchaser desires to buy, substantially all of
the assets of Seller associated with the Business upon the terms described
below.
The parties to this Agreement intend that the transactions contemplated
hereby be treated as a reorganization within the meaning of Section 368(a)(1)(C)
of the Internal Revenue Code of 1986, as amended.
In consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Sale and Purchase.
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1.1 Sale and Purchase of Assets. Subject to the terms and conditions
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set forth in this Agreement, Seller hereby sells, assigns, transfers and
delivers to Purchaser, and Purchaser hereby purchases, acquires and takes
assignment and delivery of, all of the right, title and interest of Seller in
and to all of the assets, properties and rights of any kind owned by Seller used
in connection with or related to the Business, of every type and description,
real, personal and mixed, tangible and intangible, wherever located and whether
or not reflected on the books and records maintained by Seller in connection
with the Business, excluding those assets, properties and rights which are
specifically excluded pursuant to Section 1.2 hereof, free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever, except for the payment of the Assumed
Liabilities and performance of the Assumed Obligations as hereinafter defined
(collectively the "Purchased Assets"). Except as otherwise provided in Section
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1.2, the Purchased Assets include, without limitation, all of the right, title
and interest of Seller in or to the following:
(a) any and all rights (including any and all rights to Intellectual
Property (as defined in Section 3.14 hereof)) of Seller to the domain names,
sites and content (including, without limitation, text and graphics) of the
websites owned by or registered to Seller (the "Websites");
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(b) any and all rights of Seller to software programs, modules,
routines, data, text or graphics files, source or object codes and other
components of the Websites used in operation of the Websites, or in the process
of being developed, by or on behalf of Seller for use in the Business;
(c) any and all rights of Seller to the domain names of the Websites,
the trade names, trade dress, trademarks and service marks used on the Websites
and the goodwill associated therewith;
(d) any and all rights of Seller to any other Intellectual Property
(as defined in Section 3.14 hereof) used in the conduct of the Business;
(e) all furniture, fixtures, equipment, machinery and other tangible
personal property used or held for use in the conduct of the Business at the
locations at which the Business is conducted or at suppliers' premises or
customers' premises on consignment, or otherwise used or held for use by Seller
in the conduct of the Business, including any of the foregoing purchased subject
to any conditional sales or title retention agreement in favor of any other
person;
(f) to the extent assignable and subject to any required consents,
all leases or subleases, if any, of tangible personal property or real property
used by Seller in the conduct of the Business as to which Seller is the lessor
or sublessor or is the lessee or sublessee, together with any options to
purchase or sell the underlying property (the "Business Leases");
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(g) any and all rights of Seller in and under all arrangements
(written or oral) to provide advertising for third parties on the Active
Websites pursuant to which there are unbilled, partially billed or unfulfilled
obligations (the "Advertising Commitments");
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(h) any and all rights of Seller in and under all arrangements
(written or oral) to provide web-design and development business operations to
third parties pursuant to which there are unbilled, partially billed or
unfulfilled obligations (the "Web-Design Commitments");
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(i) any and all rights of Seller in and under all contracts,
agreements and arrangements (written or oral) to which Seller is a party and
which are utilized in the conduct of the
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Business (the "Business Contracts"), including but not limited to the Business
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Leases, the Advertising Commitments and the Web Design Commitments;
(j) any and all rights of Seller to all information and records and
customer and/or visitor files maintained by Seller (in electronic or paper
format) used or held for use in the conduct of the Business including, without
limitation, principal contacts, E-mail and street addresses, telephone numbers,
personal information, and purchasing history of customers or visitors;
(k) any and all rights of Seller to cash or any other payment
received in connection with the Business on or after the Closing Date;
(l) any and all rights of Seller to accounts receivable, and all
notes, bonds and other evidences of indebtedness of and rights to receive
payments arising out of sales occurring in the conduct of the Business and the
security agreements related thereto, including any rights of Seller with respect
to any third party collection proceedings or any other actions or proceedings
which have been commenced in connection therewith (the "Accounts Receivable");
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(m) any and all rights of Seller to prepaid expenses relating to the
Business;
(n) to the extent assignable and subject to any required consents,
all government permits, licenses, franchises, approvals and authorizations
(including applications therefor and any credits arising therefrom) utilized by
Seller in the conduct of the Business (the "Business Permits"); and
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(o) any and all rights of Seller under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
in connection with products sold to or services provided to Seller for the
Business.
1.2 Excluded Assets. Notwithstanding any provision of this Agreement to
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the contrary, Purchaser shall not acquire and there shall be excluded from the
Purchased Assets, Seller's interest in each of the following (the "Excluded
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Assets"):
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(a) any and all rights of Seller to cash received in the conduct of
the Business prior to the Closing Date, including all cash on hand or in banks,
cash equivalents, marketable and non-marketable securities and other investments
and all rights in any funds of any nature wherever maintained or held;
(b) all rights of Seller under this Agreement and the documents and
other papers delivered to Seller by Purchaser pursuant to this Agreement;
(c) the corporate seals, charter documents (including, but not
limited to the certificate or articles of incorporation), minute books, stock
books, tax returns, books of account or other records having to do with the
corporate organization of the Seller;
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(d) Seller's rights and interests in any liability, casualty, health,
life or other insurance policies;
(e) claims and rights of Seller to federal, state and local tax
refunds; and
(f) the property described on Schedule 1.2.
1.3 Assumed Liabilities and Obligations. At the Closing, except as
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specified in Section 1.4, Purchaser shall only assume certain identified
liabilities of the Company or the Business, in an amount not to exceed $285,000
(the "Assumed Liabilities") as set forth on Schedule 1.3 and Purchaser shall
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assume, and agree to perform, fulfill and discharge, all obligations of the
Seller required to be performed after the Closing (excluding payment
obligations to third parties for goods or services the performance or delivery
of which occurs prior to the Closing) under any of the Business Contracts except
where (i) such obligations have arisen in contravention of this Agreement or
(ii) such obligations arise or have arisen out of any claim, lawsuit,
investigation, proceeding, arbitration or other dispute relating to an act or
omission taken or occurring prior to Closing (the "Assumed Obligations" and
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along with the Assumed Liabilities, the "Assumed Liabilities and Obligations").
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Purchaser shall promptly pay the Assumed Liabilities and shall timely perform
the Assumed Obligations.
1.4 No Other Liabilities and Obligations Assumed. Purchaser shall not and
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does not hereby assume any liability or obligation of Seller, known or unknown,
contingent or otherwise, asserted or unasserted, other than as specifically set
forth in Section 1.3. Subject to Section 1.3 hereof, nothing contained herein
shall cause Purchaser to assume (a) any liabilities or obligations arising out
of the conduct of the Business prior to the Closing, whether known or unknown on
the Closing Date; (b) any liabilities or obligations arising out of any
provision of any agreement, contract, commitment or lease of Seller, other than
any liability or obligation under Business Leases, the Advertising Commitments,
the Web-Design Commitments or the other Business Contracts to be performed after
the Closing; (c) any federal, state or local income or other tax (other than any
sales or use tax payable with respect to the acquisition of assets contemplated
herein, for which Purchaser agrees to be responsible): (i) payable with respect
to the business, assets, properties or operations of Seller, or (ii) incident to
or arising as a consequence of the negotiation or consummation by Seller of this
Agreement and the transactions contemplated hereby; (d) any liability or
obligation under or in connection with any assets not included in the Purchased
Assets; (e) any employment-related liability or obligation arising prior to or
as a result of the Closing to any employees, agents or independent contractors
of Seller, or under any benefit arrangement with respect thereto; or (f) any
liability or obligation of Seller arising or incurred in connection with the
negotiation, preparation and execution of this Agreement and the transactions
contemplated hereby and fees and expenses of counsel, accountants and other
experts. The parties to this Agreement acknowledge and agree that Purchaser
shall not have responsibility to comply with COBRA obligations arising from the
Closing with respect to former Seller employees as provided in Prop.
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Treasury Regulation Section 54.4980B-9 and 54.4980B-10, since Seller does not
have a statutory obligation under COBRA.
1.5 Consideration.
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(a) Purchase Price. (i) The aggregate consideration to be paid in
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the form of cash and stock by Purchaser to the Seller in exchange for the
Purchased Assets shall be (x) an earnout payment based on 50% of the net profits
from the non-textile related web design business for a period of two years
commencing December 31, 1999 (the "Earnout") which is to be split equally
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between the Shareholders as a liquidating distribution from the Seller (the
"Pro-Rata Earnout") and (y) 38,300 shares of Common Stock of the Purchaser (the
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"Stock Consideration", which together with the Earnout shall constitute the
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"Purchase Price").
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(ii) Payment of Earnout. Within a reasonable time (but in no
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event later than sixty (60) days) after the fiscal years ending December 31,
2000 and December 31, 2001, Purchaser shall deliver the Pro-Rata Earnout to each
Shareholder by wire transfer of immediately available funds to such account as
each Shareholder shall designate. Furthermore, within thirty (30) days after the
Closing, the parties shall agree on the other terms of the Earnout, which terms
shall be reasonable and customary, and shall include, without limitation, terms
as to (i) a limitation on the indirect costs allocated to the revenues of the
non-textile related web design business for purposes of the Earnout, (ii) the
resources to be devoted by Purchaser to the non-textile related web design
business during the Earnout period, (iii) access of the Shareholders to the
Purchaser's books and records used to determine the Earnout, and (iv) management
of the non-textile related web design business by ▇▇▇▇ ▇. ▇▇▇▇▇▇ so long as he
is employed by the Purchaser. The foregoing specified terms shall not be
construed to limit other certain requests of either party in agreeing on the
terms of the Earnout.
(iii) Delivery of Stock Consideration. As soon as possible after
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the Closing Date, Purchaser shall cause to be delivered to each Shareholder a
certificate issued in the Shareholder's name for one-half of the Stock
Consideration. The parties acknowledge and agree that the Stock Consideration
is being received by the Shareholders as a liquidating distribution from the
Seller.
(b) Freeware. Seller and Purchaser hereby agree that the
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consideration paid by Purchaser hereunder shall not be applied to, and is not in
consideration for, any freeware acquired by Purchaser under the terms of this
Agreement.
2. Closing. The closing of the purchase and sale of the Purchased Assets (the
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"Closing") shall take place simultaneously with the execution of this Agreement.
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The date on which the Closing occurs shall be called the "Closing Date." The
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Closing shall be consummated by facsimile transmission. The parties shall (x)
transmit facsimile copies of all executed documents required to be executed
pursuant to this Agreement and (y) mail via overnight courier four (4) executed
originals
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of each document to the offices of counsel for each of the respective parties.
On the Closing Date, subject to the terms and conditions herein contained, the
following shall occur:
2.1 Deliveries by Seller Parties at the Closing. On the Closing Date, the
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Seller Parties shall deliver, or cause to be delivered, to Purchaser:
(a) a ▇▇▇▇ of Sale, Assignment and Assumption dated as of even date
herewith and in a form satisfactory to Purchaser, duly executed by the Seller;
(b) Employment Agreements, dated as of even date herewith and in a
form satisfactory to Purchaser, duly executed by ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
Risen (each an "Employment Agreement" and collectively the "Employment
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Agreements");
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(c) Lock-Up Agreements, dated as of even date herewith and in a form
satisfactory to Purchaser, duly executed by ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. Risen
(each a "Lock-Up Agreement" and collectively the "Lock-Up Agreements");
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(d) a copy of the executed consents specified in Schedule 3.3 hereto;
(e) copies of the most recent statements for the bank accounts and
similar accounts held in connection with the Business;
(f) The disclosure schedules (the "Schedules") to the Agreement; and
(g) such other documentation reasonably requested by Purchaser, in a
form reasonably satisfactory to Purchaser and its counsel, as shall be necessary
and effective to transfer and assign to, and vest in, Purchaser all of Seller's
right, title and interest in and to the Purchased Assets, and simultaneously
with such delivery, all steps will be taken as may be required to put Purchaser
in actual possession and operating control of the Purchased Assets.
2.2 Deliveries by Purchaser at the Closing. On the Closing Date, or as
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otherwise provided herein, Purchaser shall deliver, or cause to be delivered to
Seller:
(a) evidence of irrevocable instructions to the Company's transfer
agent to deliver the Stock Consideration to Seller's counsel on behalf of ▇▇▇▇
▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. Risen in accordance with Section 1.5(a)(iii);
(b) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement duly
executed by Purchaser; and
(c) the Employment Agreements, each duly executed by Purchaser.
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3. Representations and Warranties of Seller Parties. The Seller Parties,
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jointly and severally, hereby represent, warrant and covenant to the Purchaser
as follows:
3.1 Organization. TextileWeb, Inc. is a North Carolina corporation and
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utilizes the fictitious names TextileWeb, August ▇▇▇▇▇▇, OnlineTextileNews and
TextileShow.
3.2 Power and Authority. Seller has full right, power, lawful authority
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and legal capacity to execute and deliver this Agreement and the ▇▇▇▇ of Sale,
Assignment and Assumption Agreement (collectively, the "Seller Transaction
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Agreements") and to consummate and perform the transactions contemplated hereby
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and thereby. The Seller Transaction Agreements have been, and any other
agreements, documents and instruments required to be delivered by Seller in
accordance with the provisions hereof have been or will be, duly executed and
delivered by or on behalf of Seller and constitute the legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms, except as enforceability may be limited by laws of general
application relating to bankruptcy, reorganization, moratorium, insolvency and
debtors' relief and similar laws affecting the enforcement of creditors' rights,
and by general principles of equity.
3.3 Conflicts; Consents. Neither the execution and delivery of the Seller
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Transaction Agreements by Seller nor the Seller's consummation and performance
of the transactions contemplated thereby (a) will conflict with or violate any
agreement to which Seller is a party or by which Seller is bound or any federal,
state, local or other governmental law or ordinance or (b) will require the
authorization, approval or consent by, or any notice to or filing with, any
third party, except for (i) those authorizations, approvals and consents which
have already been granted or obtained and all of which are set forth on Schedule
3.3 attached hereto and (ii) such authorizations, approvals and consents which,
if not granted or obtained, would not in the aggregate have a material adverse
effect on the condition of the Purchased Assets or the Business.
3.4 Title. Seller has good, valid and marketable title to, or valid
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licenses to use, all of the Purchased Assets, free and clear of all liens,
pledges, mortgages, security interests, claims, liabilities, charges or
encumbrances of any nature whatsoever, except for the payment of the Assumed
Liabilities and performance of the Assumed Obligations. With respect to the
Purchased Assets leased by Seller, if any, Seller is in material compliance with
such leases.
3.5 Financial Statements. Seller has delivered to Purchaser unaudited
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financial records (including without limitation, the balance sheet, income
statement and statement of cash flows) of the Business (i) for the year ended
December 31, 1998, and (ii) for the nine-month period ended September 30, 1999
(collectively, the "Financial Records"). The Financial Records present fairly
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the revenues of the Business, as applicable, for the periods indicated and were
prepared on an income tax basis.
3.6 No Material Changes. Since September 30, 1999 there has not been (a)
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any material adverse change in the Purchased Assets or the operations or
condition (financial, traffic or otherwise) of the Business or of Seller; or (b)
any actual or threatened trouble or disruption of Seller's relations
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with the Business' agents, customers or suppliers. Since September 30, 1999,
Seller has conducted the Business only in the ordinary course consistent with
past practice, has not incurred any material liabilities, and has not entered
into any transaction, contract or arrangement, and/or made any payment or
distribution that reasonably can be expected to have a material adverse impact
on the Business.
3.7 Server Log Files. Seller has delivered to Purchaser true, correct and
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complete copies of the log files of the web server computer (the "Server") to be
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transferred from Seller to Purchaser pursuant to this Agreement.
3.8 Advertising and Web-Design Commitments.
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(a) Attached hereto as Schedule 3.8 is a true, correct and complete
list of all Advertising Commitments as of the date hereof, including the name of
the advertising party, any amounts unbilled to or unpaid by such party and the
term of the obligation to provide advertising on the applicable Active Website.
(b) Attached hereto as Schedule 3.8 is a true, correct and complete
list of all Web-Design Commitments, and included in such schedule with respect
to each such commitment is the name of the party for which such web design was
or is being created, any amounts unbilled to or unpaid by such party and a
description of and the term of any outstanding obligations with respect to such
commitment as of the date hereof.
3.9 Customers. Attached hereto as Schedule 3.9 is a true, correct and
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complete list of all advertising and/or web-design customers of the Business.
Seller currently maintains good working relationships with all of the customers
and suppliers of the Business. No current customer or supplier of the Business
has given Seller notice terminating, canceling or threatening to terminate or
cancel any contract, commitment or relationship with Seller.
3.10 Tangible Property. Attached hereto as Schedule 3.10 is a true,
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correct and complete list of all tangible personal property, including without
limitation equipment, machinery, and furniture, in each case owned or leased by
Seller and material to the Business (collectively, the "Tangible Property")
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together with a description of all leases or subleases of Tangible Property to
which Seller is the lessor, sublessor, lessee or sublessee and all options to
purchase or sell the underlying property. Except as separately identified on
Schedule 3.10, no approval or consent of any person is needed so that the
interest of Seller in the Tangible Property shall continue to be in full force
and effect and enforceable by Purchaser following the transactions contemplated
by this Agreement.
3.11 Condition of Assets. All Purchased Assets constituting Tangible
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Property (i) are in good operating condition and repair (subject only to
ordinary wear and tear), (ii) are usable in the ordinary course of the Business
consistent with past practice and (iii) are in the possession or under the
control of Seller.
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3.12 Contracts. Seller is not party to any contracts, agreements or
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commitments in connection with the Business or the Purchased Assets other than
the Advertising Commitments, the Web-Design Commitments and the Business
Contracts. Attached hereto as Schedule 3.12 is a true, correct and complete
list of all Business Leases, Advertising and Web-Design Commitments, and any
other material Business Contracts in effect as of the date hereof that are in
writing, other than any that constitute Excluded Assets. Except as otherwise
indicated on Schedule 3.12, true and complete copies of all such listed Business
Contracts that are in writing have been delivered or made available to Purchaser
and each such listed Business Contract is a valid and binding obligation in full
force and effect in accordance with its respective terms with respect to Seller
(as applicable) and is a valid and binding obligation in full force and effect
in accordance with its respective terms with respect to any other party thereto,
except as enforceability may be limited by laws of general application relating
to bankruptcy, reorganization, moratorium, insolvency and debtors' relief and
similar laws affecting the enforcement of creditors' rights, and by general
principles of equity. Seller is not in material default under any of such
listed Business Contracts and, to the Seller's best knowledge and belief
("Seller's Knowledge"), and to the Shareholders best knowledge and belief, no
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third party is in material default under any of the Business Contracts.
3.13 Legal Proceedings; Compliance with Law. There are no disputes,
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claims, actions, suits or proceedings, arbitrations or investigations pending
or, to Seller's Knowledge after due inquiry, threatened against or affecting the
Business or the Purchased Assets. Seller does not have any knowledge of any
state of facts that might reasonably form the basis of any claim, liability or
litigation against Seller affecting the Business or the Purchased Assets. The
conduct of the Business by Seller, and Seller's use of the Purchased Assets, are
in material compliance with all applicable federal, state, local or other
governmental laws, ordinances, codes, rules and regulations. Seller owns or
possesses in the operation of the Business all franchises, licenses, permits,
consents, approvals, rights, waivers and other authorizations, governmental or
otherwise, which are necessary for Seller to conduct Seller's business as now
conducted; Seller is not in default, nor has Seller received any notice of any
claim or default thereunder, or any notice of any other claim or proceeding or
threatened proceeding relating thereto; and neither the execution or delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
require any notice or consent thereunder or have any material adverse effect
thereon.
3.14 Intellectual Property. Attached hereto as Schedule 3.14 is a true,
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correct and complete list of all license agreements, registered copyrighted
materials, trademarks, trade names, domain names, service marks and all patents,
and all applications therefor, used or held for use by Seller in the conduct of
the Business (including without limitation a list of the domain names of all
Websites). (i) Seller owns (or has adequate rights to use or transfer pursuant
to license, sublicense, agreement or permission) all patents, trademarks, trade
names, service marks, logos, designs (including those acquired by assignment),
domain names, websites and website content, goodwill, customer lists or other
information regarding customers, copyrights (including those acquired by
assignment), software, computer code, data, trade rets or know-how and
applications and registrations of any of the foregoing (collectively,
"Intellectual Property") used by Seller in the
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Business or transferred pursuant to this Agreement free and clear of any lien,
mortgage, security interest, pledge, restriction, defect of title or other
claim, charge or encumbrance other than the payment of the Assumed Liabilities
or the performance of the Assumed Obligations; (ii) in connection with the
operation of the Business, to Seller's Knowledge, Seller does not infringe upon
or unlawfully or wrongfully use any material Intellectual Property owned or
claimed by any other person or entity or otherwise use any material that
violates any right of publicity, right of privacy or any other proprietary
rights or defames, slanders or libels any individual or entity; (iii) the Seller
shall own or shall have the lawful right to use all Intellectual Property that
is used in the operation of the Business in the ordinary course or otherwise;
(iv) the content of any and all websites, whether created by Seller for Seller
or for others or for which Seller directly or indirectly provided web hosting
services at any time prior to the Closing Date, was and continues to be lawful
provided that the foregoing representations shall be limited to Seller's
Knowledge as to any content supplied by others and not Seller; (v) Seller is not
in default under, and has not received any notice of any claim of infringement
or any other claim or proceeding relating to any of the Intellectual Property;
and (vi) no other person (other than licensors in situations where Seller is the
licensee) owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, in any of the Intellectual Property, or in any
application therefor, which Seller owns, possesses or uses in Seller's
operations as now or heretofore conducted.
3.15 Employee Relations. Seller is not a party to, involved in or, to the
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Seller's Knowledge, threatened by, any labor or employment dispute, unfair labor
practice charge, employment discrimination charge or other employment or labor
related claims.
3.16 Real Estate. The leases with ▇▇▇▇▇ Equity, Inc. ("Landlord") for
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office suites 202 and 219 at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇, as
referenced in Schedule 3.16 hereto, are the only leases, licenses or other
agreements relating to the use and occupancy of real property (the "Leases") to
which the Company is a party, or to which the Purchaser shall otherwise be
subject as purchaser of the Business. All of the lease agreements, addenda,
amendments (including, without limitation, letter agreements) and other
agreements comprising a part of the Leases are identified in Schedule 3.16, and
Seller has heretofore delivered to Purchaser true, correct and complete copies
of each of the Leases. Other than as set forth in Schedule 3.16, neither of the
Leases has been amended as of this date. The Company is in full possession of
the entire premises demised under the Leases, and no portion of such premises
have been subleased, licensed or underlet by the Company in any manner. The
actual security deposit heretofore paid and the actual rents (basic and
additional) currently paid by Purchaser under each of the Leases is as reflected
on Schedule 3.16, and as of this date, rent has been paid through December 31,
1999, with he parties agreeing to apportion the Company's rental obligations at
Closing as of 5:00 p.m. that day. To Seller's Knowledge, neither the Landlord,
nor its agent, have declared the Company to be in default of its obligations
under either of the Leases, and no other default exists thereunder by either
party hereto, nor does there exist any fact or circumstance which, with the
passage of time or the delivery of notice, or both, might ripen into a default
or an event of default under either of the Leases. Without limitation of the
foregoing, the Company is neither owed by the Landlord nor owes the Landlord any
sum of money, construction obligation or services not heretofore paid or
performed.
-10-
The Company has not been notified of any election by its Landlord purporting to
elect to relocate the Company to other premises, and the Company has not
heretofore exercised any option to expand its premises or to accept additional
premises made available by the Landlord.
3.17 Operational Elements. The Purchased Assets include any and all
--------------------
rights (whether by ownership or license) for software programs, modules,
routines, data, text or graphic files, source or object codes and other
components of the Websites which are used in the operation of the Websites
(except for the Excluded Assets) and such operational elements shall include all
written or electronic documentation which is in the possession of Seller.
3.18 Consents and Approvals of Governmental Authorities. No consent,
--------------------------------------------------
approval or authorization of, or declaration, filing or registration with, any
court or other governmental or regulatory authority, agency, commission, or
other entity, domestic or foreign is required to be made or obtained by Seller
in connection with the execution, delivery and performance of this Agreement by
Seller or the consummation of the sale of the Purchased Assets to Purchaser.
3.19 Permits. Attached hereto as Schedule 3.19 is a true, correct and
-------
complete list of the Business Permits. All Business Permits are in full force
and effect and in good standing. Seller has not received notice of any claim of
revocation of any Business Permits and knows of no events which might given rise
to such a claim.
3.20 Undisclosed Liabilities. None of the Purchased Assets are subject to
-----------------------
any liability, indebtedness, obligation or claim of any type, whether accrued,
absolute, contingent, matured or unmatured ("Liabilities"), except those
-----------
Liabilities arising in the ordinary course of business consistent with past
practice and except for the payment of the Assumed Liabilities and the
performance of the Assumed Obligations.
3.21 Tax Returns.
-----------
(a) Seller has filed all Tax Returns that it was required to file,
for any period or portion thereof ending on or before the Closing Date. All
Taxes due as of the Closing Date with respect to the Business which could result
in any lien or encumbrance on the Purchased Assets, have been fully paid by
Seller and all Taxes due after the Closing Date with respect to the Business for
any period or portion thereof ending on or before the Closing Date, which could
result in any lien or encumbrance on the Purchased Assets, shall be fully paid
by Seller after the Closing Date. All such Tax Returns were correct and complete
in all respects. All Taxes owed by Seller (whether or not shown on any Tax
Return) have been paid. No claim has ever been made by an authority in a
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no liens for Taxes except
for liens for Taxes not yet due and payable.
(b) Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
-11-
(c) As used in this Agreement, the term "Tax" and "Taxes" includes
all federal, state, local and foreign income, profits, franchise, gross
receipts, environmental, customs duty, capital stock, severance, stamp, payroll,
sales, employment, unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts and any interest in respect of such penalties and
additions, and the term "Tax Returns" includes all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating to
Taxes.
3.22 Transactions with Affiliates. Except as set forth on Schedule 3.22
----------------------------
attached hereto, neither Seller nor any affiliate of Seller nor any member of
Seller's immediate family, owns or has a controlling ownership interest in any
corporation or other entity that is a party to any agreement, commitment or
other arrangement with Seller in connection with the Business or the Purchased
Assets. All disclosed transactions, if any, between Seller and an affiliate
thereof have been on substantially the same terms and conditions as similar
transactions between non-affiliated parties and are properly recorded on the
books and records maintained by Seller in connection with the Business.
3.23 Entire Business. Except for the Excluded Assets, the sale of the
---------------
Purchased Assets to be sold by Seller to Purchaser pursuant to this Agreement
shall effectively convey to Purchaser the entire business of, and all of the
tangible and intangible property used by, Seller (whether owned, leased or held
under license by Seller or by others) in connection with the conduct of the
Business as heretofore conducted by Seller. There are no material facilities,
services, assets or properties shared with any other person which are used by
Seller in the conduct of the Business.
3.24 Disclosure. There is no fact known to Seller which might materially
----------
and adversely affect the Business or the Purchased Assets which has not been
disclosed to Purchaser in this Agreement or a certificate, statement or other
document delivered by Seller.
3.25 Year 2000 Readinesss. "Year 2000 Ready" shall mean that the Seller's
--------------------
services and products (a) are designed (or have been modified) to be used prior
to, on and after January 1, 2000; (b) operate without error arising from the
creation, recognition, acceptance, calculation, display, storage, retrieval,
accessing, comparison, sorting, manipulation, processing or other use of dates
or date-based, date-dependent or date-related data, including but not limited to
century recognition, day-of-the-week recognition, leap years, date values and
interfaces of date functionalities; and (c) are not adversely affected by the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000 and into the twenty-
first century. Third party components included in the Seller's services and
products, if any, are subject only to the manufacturer's or licensor's Year 2000
warranty, if any. VerticalNet will be subrogated to Seller's rights under such
warranties to the extent that subrogation is available pursuant to the terms of
the applicable warranty. With respect to all material third party products,
programs, or services, provided to Seller, or for Seller's benefit, to enable
Seller to perform its obligations to VerticalNet under this Agreement, Seller
has obtained written representations from such third parties in the form
-12-
attached as Schedule 3.25. If Seller has actual or constructive knowledge that
such product, program, or service may not be Year 2000 Ready, Seller will not
utilize such third party's product, program, or service to perform its
obligations to VerticalNet under this Agreement.
4. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to the Seller Parties as follows:
4.1 Organization and Good Standing. Purchaser is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Purchaser has full corporate power and authority
to conduct its business as now conducted and to own and operate the assets and
properties now owned and operated by it.
4.2 Power and Authority. Purchaser has the corporate power and authority
-------------------
to execute and deliver this Agreement, the ▇▇▇▇ of Sale, Assignment and
Assumption Agreement and the Employment Agreements (collectively, the "Purchaser
---------
Transaction Agreements") and to consummate and perform the transactions
----------------------
contemplated hereby and thereby. The execution, delivery and performance by
Purchaser of the Purchaser Transaction Agreements and any other agreements,
documents and instruments required to be delivered by Purchaser in accordance
with the provisions hereof have been duly authorized by all necessary corporate
action. The Purchaser Transaction Agreements have been duly executed and
delivered by or on behalf of Purchaser and constitute the legal, valid and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with their respective terms, except as enforceability may be limited by laws of
general application relating to bankruptcy, reorganization, moratorium,
insolvency and debtors' relief and similar laws affecting the enforcement of
creditors' rights, and by general principles of equity.
4.3 Conflicts; Consents. The execution, delivery and performance of the
-------------------
Purchaser Transaction Agreements by Purchaser will not (i) violate or conflict
with the Articles of Incorporation, bylaws or other constitutional documents of
Purchaser; (ii) conflict with, or result in the breach or termination of, or
constitute a default under (whether with notice or lapse of time or both), or
accelerate or permit the acceleration of the performance required by, any
indenture, mortgage, lien, lease, agreement, commitment or other instrument or
any order, judgment or decree, to which Purchaser is a party or by which it or
its properties are bound; or (iii) constitute a violation of any law,
regulation, order, writ, judgment, injunction or decree applicable to Purchaser,
other than violations, conflicts, breaches, terminations, accelerations and
defaults specified in the foregoing clauses (ii) and (iii) which could not
reasonably be expected to have a material adverse effect on Purchaser's ability
to perform its obligations under any of the Purchaser Transaction Agreements.
No consent, approval or authorization of any governmental authority is required
on the part of Purchaser in connection with the execution, delivery and
performance of the Purchaser Transaction Agreements.
4.4 Valid Issuance of Common Stock of the Purchaser. The shares of Common
-----------------------------------------------
Stock of the Purchaser which are being issued as the Stock Consideration, when
issued, sold and delivered
-13-
in accordance with the terms hereof, shall be duly and validly issued, fully
paid and nonassessable and, assuming the accuracy of the representations of
Seller in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Stock Consideration will constitute
voting stock within the meaning of Section 368(a)(1)(C) of the Internal Revenue
Code of 1986, as amended.
4.5 SEC Documents. The Annual Report on Form 10-K for the year ended
-------------
December 31, 1998, the Quarterly Report on Form 10-Q for the period ended
September 30, 1999 and the Form 8-K filed on November 19, 1999 filed by
Purchaser with the Securities and Exchange Commission (the "SEC"), including all
---
exhibits thereto (collectively, the "SEC Documents"), complied in all material
-------------
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
--------------
amended, as in effect on the dates so filed. None of the SEC Documents (as of
their respective filing dates) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. Purchaser has heretofore furnished
to Seller copies of the SEC Documents.
4.6 Disclaimer.
----------
PURCHASER HAS NOT MADE ANY REPRESENTATION OR WARRANTY
RELATING TO PURCHASER, THE BUSINESS OF PURCHASER, THE COMMON
STOCK OF THE PURCHASER, OR OTHERWISE IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SCHEDULES
HERETO AND THE DOCUMENTS TO BE DELIVERED PURSUANT TO SECTION
2.2 HEREOF. IT IS UNDERSTOOD THAT ANY ESTIMATES, PROJECTIONS
OR OTHER PREDICTIONS, OR ANY OTHER DATA NOT EXPRESSLY
INCLUDED IN THIS AGREEMENT, THE SCHEDULES HERETO OR THE
DOCUMENTS DELIVERED PURSUANT TO SECTION 2.2 HEREOF, ARE NOT
AND SHALL NOT BE DEEMED TO BE OR TO INCLUDE REPRESENTATIONS
OR WARRANTIES OF PURCHASER. EXCEPT AS SET FORTH HEREIN, NO
PERSON HAS BEEN AUTHORIZED BY PURCHASER TO MAKE ANY
REPRESENTATION OR WARRANTY RELATING TO PURCHASER, THE
BUSINESS OF PURCHASER , THE COMMON STOCK OF THE PURCHASER,
OR OTHERWISE, IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, AND IF MADE, SUCH REPRESENTATION OR
WARRANTY MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY PURCHASER.
5. Other Agreements.
----------------
-14-
5.1 Best Efforts. Subject to the respective rights and obligations of
------------
Seller and Purchaser under this Agreement, each party shall use its best efforts
to cause the transactions contemplated by this Agreement to be consummated in
accordance with Section 2 hereof.
5.2 Assignment of Contracts. If any required consent to the assignment of
-----------------------
any of the Business Contracts is not obtained or if an attempted assignment
thereof would be ineffective, Seller and Purchaser shall cooperate to provide
Purchaser with the benefits and obligations thereunder in accordance with such
agreement until such consent or effective assignment can be obtained or until a
replacement contract is in place. To the extent the assignment of any of the
Business Contracts is not obtained, Seller shall, to the extent legally
permissible, terminate such contract at the request of Purchaser.
5.3 Changing Trade Names. Seller shall take all steps necessary to change
--------------------
any trade names pursuant to which it conducted the business, to a name
dissimilar to the names by which the Business is known.
5.4 Bank Accounts; Cash. Seller agrees and covenants that any bank
-------------------
accounts or similar accounts held in connection with the Business in Seller's
name or in any other name as of the Closing Date shall be closed within sixty
business days of the Closing Date. Any cash or other payments received by
Seller after the Closing (except for the payments described on Schedule 1.2
hereto) in connection with the Business shall be directed to Purchaser as
Purchaser may direct. Seller shall provide to Purchaser copies of any and all
statements and all other correspondence with respect to such accounts received
on or after the Closing within five business days of receipt by Seller.
5.5 Transition of the Business. Purchaser and Seller shall use
--------------------------
commercially reasonable efforts to cooperate in an orderly transition of the
Business and transfer of the Purchased Assets to Purchaser. Without limiting
the generality of the foregoing, Seller will cooperate with Purchaser in
migrating the contents and functionality of the Active Websites to such computer
systems as Purchaser shall direct.
5.6 Assignment of Intellectual Property. Seller shall, upon Purchaser's
-----------------------------------
request, take any and all actions necessary to transfer to Purchaser any and all
rights of Seller to the URLs, sites and contents of the Websites, including but
not limited to taking any and all actions necessary to effect the assignment of
the domain names for the Websites to Purchaser.
5.7 Software Licensing Agreements. Until the transition of the Business
-----------------------------
has been accomplished to the satisfaction of Purchaser or 90 calendar days after
the Closing Date, whichever occurs first, Seller hereby agrees (i) not to
terminate any and all software licensing agreements used by Seller in the
Business under which Seller is the licensee, and (ii) to maintain the existing
content and functionality of the Active Websites. Any costs associated with the
foregoing incurred on or after the Closing Date shall be borne by Purchaser.
-15-
5.8 Customers. Seller agrees and acknowledges that effective as of the
---------
Closing users accessing the Active Websites and any and all other customers of
the Business shall be considered customers of Purchaser and that Purchaser shall
have the right to contact such customers in any manner and for any reason as
Purchaser in its sole discretion deems appropriate.
5.9 Purchaser Common Stock Options. Purchaser has reserved 25,000 shares
------------------------------
of the Common Stock of the Purchaser for grants of options (the "Purchaser
---------
Options") to Shareholders after the Closing Date, of which 12,500 shares of
-------
Common Stock of the Purchaser shall be for grants of options to ▇▇▇▇ ▇. ▇▇▇▇▇▇
and 12,500 shares of Common Stock of the Purchaser shall be for grants of
options to ▇▇▇▇ ▇. Risen. The Purchaser Options shall be granted under
Purchaser's 1999 Equity Compensation Plan (the "Plan") and in accordance with
----
Purchaser's stock option policies. All Purchaser Options shall be granted with
an exercise price equal to the closing price of the Common Stock of the
Purchaser on the date of grant (or if such day is not a trading day, the last
trading day prior to the date of grant). For the purposes of this Section 5.9,
the closing price of Common Stock of the Purchaser on a trading day shall be the
day's last trade price as reported by the Nasdaq National Market. The Purchaser
Options shall vest in accordance with Purchaser's customary four-year vesting
schedule.
5.10 Tax-Free Reorganization. The parties to this Agreement intend that
-----------------------
the transactions provided for in this Agreement shall constitute a
reorganization as defined in Section 368(a )(1)(C) of the Internal Revenue Code
of 1986, as amended, for income tax purposes. Notwithstanding anything to the
contrary in this Agreement nor in any other instrument executed pursuant to this
Agreement, the parties shall not take or make any action that would prevent such
qualification. Each of the parties shall complete all relevant tax returns
consistent with such qualification and shall not take any positions inconsistent
with such qualification.
5.11 Liquidation of Seller. Seller shall take all steps necessary to
---------------------
liquidate simultaneously or within the time period thereafter required pursuant
to Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended.
5.12 Agreement to Offer Employment. Purchaser shall have extended offers
-----------------------------
of employment, including all standard benefits offered by the Purchaser, to
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇. Furthermore,
Purchaser shall have reserved an aggregate of 10,000 shares of Common Stock of
the Purchaser for grants of options to such individuals, and will grant such
options upon the later of acceptance of employment or the Closing Date with an
exercise price equal to the closing price of the Common Stock of the Purchaser
on the date of grant (or if such day is not a trading day, the last trading day
prior to the date of grant). For the purposes of this Section 5.12, the closing
price of Common Stock of the Purchaser on a trading day shall be the day's last
trade price as reported by the Nasdaq National Market. The Purchaser Options
shall vest in accordance with Purchaser's customary four-year vesting schedule.
6. Covenants of Purchaser.
----------------------
-16-
6.1 Monetization of Securities. Purchaser shall not prohibit the
--------------------------
monetization of one-third of the Stock Consideration in the aggregate by the
Shareholders. The foregoing rights shall be effective upon the Closing.
6.2 Registration Rights. Should the Shareholders choose not to monetize
-------------------
one-third of the Stock Consideration in the aggregate as provided in 6.1(a),
then the following rights shall apply. For the purposes of the foregoing
sentence, monetization shall not be deemed to include the incurrence of
indebtedness secured by the stock.
(a) Purchaser shall prepare and use its best efforts, on or prior to
February 28, 2000 (the "Required Filing Date") to file with the Commission a
registration statement with respect to the resale of an aggregate of one-third
of the Stock Consideration (the "Shares") by the Shareholders or their permitted
assignees (the "Required Registration Statement") and thereafter shall cause
such registration statement to be declared effective under the Securities Act as
promptly as practicable but in no event later than March 31, 2000 (the "Required
Effective Date"). Purchaser shall file a notification form for the listing of
additional shares to cover the listing of the Shares on the Nasdaq National
Market, or such other market or exchange, if any, on which the Common Stock
shall trade. Purchaser shall use its best efforts to cause the Required
Registration Statement to remain effective for a period of one year. Purchaser
acknowledges that the Shareholders are relying on Purchaser's commitment to
cause the Required Registration Statement to become effective not later than the
Required Filing Date, and agrees that if for any reason the Required
Registration Statement is not declared effective by such date (as it may be
extended as herein provided), even if Purchaser is using its best efforts to
cause such effectiveness to be declared, then the Shareholders shall be entitled
to recover damages for any consequential loss incurred. If the Required
Registration Statement shall not become effective by the Required Effective
Date, at the sole option and request of the Shareholders, in lieu of the
Required Registration Statement, the Purchaser will pay the processing costs
associated with monetization of the Shares, such costs not to exceed $15,000
(the "Processing Costs"). Should Shareholders not request Purchaser to pay such
Processing Costs, the commitment of the Purchaser to cause the Required
Registration Statement to become effective shall not be otherwise changed.
(b) If Purchaser proposes to file a registration statement with
respect to the Common Stock prior to the filing of the Required Registration
Statement, Purchaser shall give prompt notice to the Shareholders and will
include in such registration (the "Piggyback Registration") subject to the
allocation provisions discussed in Section 6.2(d) and 6.2(e), all Shares with
respect to which Purchaser has received written request for inclusion within
five (5) Business Days after such notice is given by Purchaser; provided,
however, that the Shareholders shall have no Piggyback Registration rights in
connection with a registration statement filed in connection with Purchaser's 5
1/4% Convertible Subordinated Debentures (the "Convertible Debentures"). No
Purchaser registration statement shall be declared effective unless and until
the Required Registration Statement shall have been declared effective, except
for the registration statement for
-17-
the Convertible Debentures or if the Required Registration Statement is not
being declared effective due to a comment from the Commission that relates only
to the Shareholders.
(c) Purchaser will pay the expenses related to registration of the
Shares; provided, however, the Shareholders shall pay any underwriting
commissions related to the registration of the Shares.
(d) If a Piggyback Registration is an underwritten primary
registration on behalf of Purchaser and the managing underwriter advises
Purchaser in writing that marketing factors require a limitation on the number
of Shares to be offered and sold, there shall be included in the offering only
that number of Shares, if any, that such managing underwriter reasonably
believes, in its sole discretion, will not jeopardize the success of the
offering.
(e) If a Piggyback Registration is initiated as an underwritten
secondary registration on behalf of the holders of the Common Stock, and the
managing underwriters advise Purchaser in writing that marketing factors require
a limitation on the number of Shares to be offered and sold, Purchaser will
allocate the securities to be included as follows: pro rata on the basis of the
number of shares of Common Stock owned among (i) any other Person selling in the
registration and (ii) the Shareholders.
(f) If a Piggyback Registration is underwritten, the Shareholders
shall not be entitled to select the investment bank(s) or manager(s) nor shall
the Shareholders be entitled to make decisions regarding the underwriting
arrangements for the offering.
(g) If, prior to the Required Filing Date, Purchaser files a
registration statement with the Commission covering shares of its Common Stock
underlying the Convertible Debentures, Purchaser shall, within five (5) Business
Days of such filing, file the Required Registration Statement.
(h) Purchaser shall have no obligations under this Section 6.2 until
the Closing Date. If Purchaser files a registration statement covering shares of
its Common Stock underlying the Convertible Debentures prior to the Closing,
Purchaser, shall, within five (5) Business Days after the Closing, file a
registration statement covering the Shares.
7. Securities Act and Restrictions on Purchaser Stock.
--------------------------------------------------
7.1 Purchase Entirely for Own Account. The Seller Parties acknowledge and
---------------------------------
agree that the shares of Common Stock of the Purchaser to be received by
Shareholders as a liquidating distribution from the Seller will be acquired for
investment for each Shareholder's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Shareholders have no present intention of selling, granting any participation
in, or otherwise distributing the same, but subject to the ability of the
Shareholders to distribute a Shareholder's
-18-
assets (including the Stock Consideration) to the Shareholder's affiliates (as
such term is defined in Section 144 of the Securities Act).
7.2 Investment Experience. The Shareholders represent and warrant that
---------------------
the Shareholders can bear the economic risk of an investment in Common Stock of
the Purchaser acquired pursuant to this Agreement and have such knowledge and
experience in financial or business matters that the Shareholders are capable to
protect the Shareholders' own interests in connection with the acquisition of
Common Stock of the Purchaser.
7.3 Information Supplied. The Shareholders represent and warrant that the
--------------------
Shareholders have had an adequate opportunity to ask questions and receive
answers from the officers of Purchaser concerning the terms and conditions of
the transaction contemplated by this Agreement and the shares of Common Stock of
the Purchaser to be issued in connection therewith. The Shareholders represent
and warrant that the Shareholders have asked any and all questions that the
Shareholders may have in the nature described in the preceding sentence and that
all such questions have been answered to the Shareholder's satisfaction. The
Shareholders represent and warrant that the Shareholders have reviewed the SEC
Documents and that the Shareholders have had adequate opportunity to ask
questions of and has received answers to the Shareholder's satisfaction from the
officers of Purchaser concerning the matters described therein.
7.4 Restricted Securities. The Shareholders understand that the shares of
---------------------
Common Stock of the Purchaser to be received by the Shareholders are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from Purchaser in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may not be resold without registration under the Securities Act,
except in certain limited circumstances. In this connection, the Shareholder
represent that Shareholders are familiar with Rule 144 under the Securities Act,
as presently in effect, and understands the resale limitations imposed thereby
and by the Securities Act.
7.5 Further Limitations on Disposition. Without in any way limiting the
----------------------------------
representations set forth above and subject to the terms and conditions set
forth in the Lock-Up Agreements, the Shareholders further agree not to make any
disposition of all or any portion of the shares representing the Stock
Consideration except to the Shareholder's affiliates unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) The Shareholders shall have notified Purchaser of the proposed
disposition and shall have furnished Purchaser with a detailed statement of the
circumstances surrounding the proposed disposition, and if reasonably requested
by Purchaser, the Shareholders shall have furnished Purchaser with an opinion of
counsel, reasonably satisfactory to Purchaser, that such disposition will not
require registration of such shares under the Securities Act. It is agreed that
-19-
Purchaser will not require opinions of counsel for transactions made pursuant to
Rule 144 by the Shareholders except in unusual circumstances.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
by a Shareholder (i) to an affiliate of the Shareholder, or the transfer by
gift, will or intestate succession to the Shareholder's spouse or lineal
descendants or ancestors, if the transferee agrees in writing to be subject to
the terms of this Section 7 to the same extent as if he or she were a
Shareholder, or (ii) at any time after the provisions of subparagraph (k) of
Rule 144 are applicable to the Shareholders.
7.6 Legends. It is understood that the certificates evidencing the Stock
-------
Consideration may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES OR BLUE SKY LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES AND BLUE SKY LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF THE
SECURITIES ACT."
7.7 Reporting Requirements. Purchaser covenants and agrees that it shall
----------------------
remain current with respect to all SEC reporting requirements to which Purchaser
is subject.
-20-
8. Indemnification.
---------------
8.1 Survival. All of the representations, warranties, covenants and
--------
obligations contained in this Agreement or in any instrument or document
delivered pursuant to this Agreement shall survive the execution of this
Agreement and the Closing, notwithstanding any investigation heretofore or
hereafter made by or on behalf of any party hereto; provided, however, that all
-------- -------
representations and warranties contained in this Agreement, and the obligations
of Seller Parties and Purchaser to indemnify each of the other parties for
breaches thereof as set forth in this Section 8, shall survive and continue for,
and all indemnification claims with respect thereto shall be made within, two
years following the Closing Date, except for (i) the indemnification obligations
related to Section 8.2(a) and 8.3(a) which shall survive until expiration of the
applicable statute of limitations, and (ii) the representations, warranties and
related indemnification obligations for which notice of an indemnification claim
shall have been received as of the end of the applicable period referred to in
this Section 8.1, which shall survive with respect to such indemnification claim
until the final disposition thereof.
8.2 Indemnification by Seller Parties. Seller Parties shall reimburse and
---------------------------------
indemnify and hold Purchaser and each of its directors, officers, shareholders,
employees, representatives and agents (collectively, the "Purchaser Parties")
-----------------
harmless against and in respect of any and all damage, loss, liability,
deficiency, settlement payments, costs, levies, expenses or obligations,
whether or not the result of a third party claim, net of any insurance
recoveries (collectively, "Damages"), in connection with, resulting from or
-------
relating to:
(a) any and all liabilities or obligations of any nature whatsoever
of or relating to claims for federal, state, local, foreign or other taxes
assessed against Purchaser, the Business or the Purchased Assets, which arise
out of or are related to Seller's operation or conduct of the Business prior to
the Closing, and not specifically assumed by Purchaser hereunder.
(b) except for the Assumed Liabilities and Obligations, any and all
liabilities or obligations of any nature whatsoever of or relating to Seller, or
relating to or arising out of the Purchased Assets prior to the Closing Date,
Seller's operation of the Business prior to the Closing Date or the actions of
Seller's employees, representatives or agents;
(c) any misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of Seller Parties under this Agreement;
(d) any and all actions, suits, claims, allegations, proceedings,
investigations, audits, demands, assessments, fines, judgments, settlements,
levies, costs and other expenses (including without limitation reasonable audit
and legal fees) incident to any of the foregoing;
(e) any claim that any content provided by Seller for use on any of
Purchaser's websites constitutes a defamation or invasion of the right of
privacy or publicity, or infringement of the copyright, trademark or other
intellectual property right, of any third party; and
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(f) any and all actions, suits, claims or liabilities in connection
with the Accordant Agreement for any work, software (including object and source
code), work product, concepts, specifications or documentation created or
performed prior to the Closing.
8.3 Indemnification by Purchaser. Purchaser shall reimburse and indemnify
----------------------------
and hold the Seller Parties and each of its directors, officers, shareholders,
employees, representatives and agents harmless against and in respect of any
Damages in connection with, resulting from or relating to:
(a) any and all liabilities or obligations of any nature whatsoever
of or relating to claims for federal, state, local, foreign or other taxes
assessed against Seller which arise out of or are related to Purchaser's
operation or conduct of the Business after the Closing (excluding any claims
with respect to tax filings made after the Closing relating to the period prior
to the Closing);
(b) any and all liabilities or obligations of any nature whatsoever
of or relating to the Assumed Liabilities and Obligations or to the Business
(except for those liabilities and obligations of or relating to Seller or the
Business existing as of the Closing Date not included among the Assumed
Liabilities and Obligations) arising out of Purchaser's operation of the
Business after the Closing;
(c) any misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of Purchaser under this Agreement;
(d) any and all actions, suits, claims, allegations, proceedings,
investigations, audits, demands, assessments, fines, judgments, settlements,
levies, costs and other expenses (including without limitation reasonable audit
and legal fees) incident to the foregoing; and
(e) any and all sales or use tax imposed upon Seller under state law
as a consequence of the acquisition contemplated herein.
8.4 Procedure for Indemnification. If any claim is made against a party
-----------------------------
(an "Indemnified Party") that, if sustained, would give rise to a liability of
-----------------
another party (the "Indemnifying Party") under this Agreement, the Indemnified
------------------
Party shall promptly, and in any case within seven (7) calendar days, cause
notice of the claim to be delivered to the Indemnifying Party along with all of
the facts, information or materials relating to such claim of which the
Indemnified Party is aware and shall afford the Indemnifying Party and its
counsel, at the Indemnifying Party's sole expense, the opportunity to defend or
settle the claim.
(a) The Indemnifying Party shall have thirty (30) calendar days after
delivery thereof to elect, in writing to the Indemnified Party, to defend or
settle the claim, exercising reasonable business judgment, at its own expense.
Until written notice electing to defend or settle any claim that, if sustained,
would give rise to a liability under this Agreement, the Indemnified Party may
take, at the expense of the Indemnifying Party, any action it reasonably
believes necessary
-22-
to preserve its rights with respect to such claim, after promptly notifying the
Indemnifying Party of its intention to take such action and the Indemnifying
Party does not elect to take such other action.
(b) If the Indemnifying Party shall so elect to defend or settle the
claim, the Indemnifying Party may not settle such claim without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld; provided that, if the Indemnified Party does not consent
--------
to such a settlement, the Indemnifying Party's liability to indemnify the
Indemnified Party for such claim shall be limited to the expenses and costs
reasonably necessary to preserve its rights to such claim (other than any costs
of counsel retained by the Indemnified Party solely to monitor the Indemnifying
Party's obligations hereunder) that the Indemnified Party has incurred up to the
time of the proposed settlement plus the amount of the proposed settlement. The
Indemnified Party agrees to use commercially reasonable efforts to cooperate
with the Indemnifying Party in defending any claim, at the Indemnifying Party's
expense.
(c) If the Indemnifying Party shall fail to so elect to defend or
settle such claim (exercising reasonable business judgment) at its own expense,
within thirty (30) calendar days of delivery of notice of the claim, or
otherwise so fail to defend or settle the claim, the Indemnified Party shall
have the right, but not the obligation, to undertake the defense of and to
settle (exercising reasonable business judgment) the claim on behalf, for the
account and at the risk, of the so failing party. The Indemnified Party shall
use commercially reasonable efforts to settle any such claim at commercially
reasonable amounts determined in good faith by the Indemnified Party.
(d) In the event the Indemnified Party should have a claim against
the Indemnifying Party that does not involve a claim or demand by a third party,
the Indemnified Party shall promptly cause notice of such claim to be delivered
to the Indemnifying Party. The Indemnifying Party shall have fifteen (15)
calendar days after delivery thereof to elect, in writing to the Indemnified
Party, to settle the claim at its own expense. If the Indemnifying Party (i)
does not notify the Indemnified Party within fifteen (15) calendar days after
the Indemnified Party's notice that it disputes such claim or (ii) notifies the
Indemnified Party that it does not dispute such claim, the amount of such claim
shall be conclusively deemed as a liability of the Indemnifying Party. If the
Indemnifying Party notifies the Indemnified Party within the 15-day period that
it disputes such claim, the Indemnifying Party and the Indemnified Party shall
attempt in good faith for a period of twenty (20) calendar days to settle any
such dispute.
8.5 Limitations on Indemnification. No Indemnifying Party shall be
------------------------------
obligated to make any payment to an Indemnified Party pursuant to this Section 8
until such time as all claims for indemnification made by such Indemnified Party
pursuant to this Section 8 exceed $20,000 in the aggregate, at which point the
Indemnifying Party shall be obligated to make payment for all claims of such
Indemnified Party pursuant to this Section 8, but only to the extent such
claims, in the aggregate, exceed such initial $20,000 of claims; provided,
--------
however, that in no event shall an Indemnifying Party be liable under this
-------
Section 8 for an amount which is in excess of $4,000,000, and provided further
that in no event shall the personal liability of each Shareholder under this
Section 8 or otherwise with respect to this Agreement, exceed $2,000,000 each.
Notwithstanding
-23-
anything to the contrary in this Agreement and except for willful misconduct,
with respect to any domain names other than ▇▇▇▇▇▇▇▇▇▇.▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Seller makes no
representations, warranties or covenants other than that it is assigning to
Purchaser all such rights the Seller has in the domain names (other than those
constituting Excluded Assets). Seller Parties shall have no liability or other
responsibility for Purchaser's use of or other actions or omissions with respect
to any such domain names after the Closing.
8.6 Other Remedies. The indemnity of this Section 8 shall be the
--------------
exclusive remedy of any party for a breach, misrepresentation, nonfulfillment,
or default in the performance of the representations, warranties, covenants, or
agreements of this Agreement or any certificate, exhibit, or schedule
contemplated hereby, except in the event of actual fraud or fraud in the
inducement.
9. Miscellaneous.
-------------
9.1 Broker's Fees. Each of the parties hereto (a) represents and warrants
-------------
that it, he or she (as the case may be) has not taken and will not take any
action that would cause any other party hereto to have any obligation or
liability to any person for a finder's or broker's fee except as may be agreed
to in writing and (b) agrees to indemnify the other parties hereto for breach of
the foregoing representation and warranty.
9.2 Expenses. Each party hereto shall pay its, his or her (as the case may
--------
be) own expenses, including without limitation the reasonable fees and expenses
of its, his or her counsel, incurred in connection with this Agreement and the
transactions contemplated hereby.
9.3 Bulk Sales Compliance. Purchaser hereby waives compliance by Seller
---------------------
with the provisions of the Bulk Sales Law of any state which may be applicable
to this transaction. In consideration of such waiver, Seller Parties agree to
defend and indemnify Purchaser against and hold it harmless from any and all
loss, liability, claims, damage or expense (including reasonable attorneys'
fees) arising out of or resulting from such noncompliance, provided that such
loss, liability, claim, damage or expense was not caused by Purchaser's conduct
of the Business or failure to pay the Assumed Liabilities or perform the Assumed
Obligations.
9.4 Contents of Agreement; Amendment; Parties in Interest; Assignment;
-----------------------------------------------------------------
Etc. This Agreement, which includes all schedules and exhibits hereto, sets
----
forth the entire understanding of the parties hereto with respect to the subject
matter hereof. There are no restrictions, promises, representations,
warranties, covenants or undertakings other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties, including, without limitation, that certain
letter of intent bearing a November 30, 1999 date (the h"Letter of Intent")
----------------
entered into by Seller Parties and Purchaser which is hereby rendered null and
void ab initio; provided, however, that Section 4 of the Letter of Intent shall
-- ------ -------- -------
survive and continue in full force and effect. This Agreement may be amended,
modified or supplemented only by written instrument duly executed by each of the
parties hereto. All representations, warranties, covenants,
-24-
terms and conditions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto. No party hereto shall
assign this Agreement or any right, benefit or obligation hereunder to any other
party without obtaining the prior written consent of the other party; provided,
--------
however, that Purchaser may assign its rights and benefits hereunder, including
-------
without limitation the benefit of any representation, warranty or covenant, to
any affiliated entity and shall provide Seller with written notice thereof;
provided further, that no such assignment shall release Purchaser from its
-------- -------
obligations hereunder. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
9.5 Notices. All notices and other communications hereunder shall be in
-------
writing (including wire, telefax or similar writing) and shall be delivered,
addressed, or telefaxed as follows:
If to Purchaser:
VerticalNet, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a required copy to (which copy shall not constitute notice):
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to Seller:
TextileWeb, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
-25-
with a required copy to (which copy shall not constitute notice):
Brooks, Pierce, McLendon, Humphrey, and ▇▇▇▇▇▇▇, L.L.P.
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FOR HAND DELIVERY ONLY:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: 336.378.1001
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 9.5 (or in accordance with the latest
unrevoked written direction from such party); (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 9.5
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
9.6 Severability. The invalidity of any provision of this Agreement or
------------
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
9.7 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN
-------------
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO
ITS PROVISIONS CONCERNING CONFLICT OF LAWS.
9.8 Public Announcements. Seller shall not make any public statements,
--------------------
including without limitation, any press releases, with respect to this Agreement
and the transactions contemplated hereby without the prior consent of Purchaser,
except as may be required by law.
9.9 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be considered an original and all of which
together shall constitute the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts.
9.10 Further Assurances. Each party hereto agrees to execute any and all
------------------
documents, and to perform such other acts, to the extent permitted by law, that
may be reasonably necessary or expedient to further the purposes of this
Agreement or to further assure the benefits intended to be conferred hereby.
-26-
9.11 Incorporation of Exhibits and Schedules. The exhibits and schedules
---------------------------------------
identified in this Agreement are incorporated herein by reference and made a
part hereof. The term "Agreement" shall include all such exhibits, schedules,
---------
certificates, and writings.
9.12 Rights of Third Parties. Nothing in this Agreement shall be construed
-----------------------
as giving any person, firm, corporation, or other entity, other than the parties
who are signatory hereto and their respective successors and permitted assigns,
any right, remedy, or claim under or in respect of this Agreement or any
provision hereof.
* * *
-27-
IN WITNESS WHEREOF, this Asset Exchange Agreement and Plan of
Reorganization has been executed by the parties hereto as of the day and year
first written above.
PURCHASER:
VERTICALNET, INC., a Pennsylvania corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
COMPANY:
TEXTILEWEB, INC., a North Carolina
corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
SHAREHOLDERS:
__________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇
__________________________________________
▇▇▇▇ ▇. RISEN
S-1
Schedule 1.2
------------
I-1
Schedule 1.3
------------
I-2
Schedule 3.3
------------
I-3
Schedule 3.8
------------
I-4
Schedule 3.9
------------
I-5
Schedule 3.10
-------------
I-6
Schedule 3.12
-------------
I-7
Schedule 3.14
-------------
I-8
Schedule 3.16
-------------
I-9
Schedule 3.19
-------------
I-10
Schedule 3.22
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I-11
Schedule 3.25
-------------
I-12
