-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UEzJV0pYVfUrBCY8egV/8oBdPlqxa5dyRdPulJBRHatYkd30MwYcbU/FQKtU8bm3 X2yyfeyiUgPtLQQ0I2h+kA== 0000893220-01-000195.txt : 20010223 0000893220-01-000195.hdr.sgml : 20010223 ACCESSION NUMBER: 0000893220-01-000195 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010131 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERTICALNET INC CENTRAL INDEX KEY: 0001043946 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 232815834 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-25269 FILM NUMBER: 1548153 BUSINESS ADDRESS: STREET 1: 700 DRESHER RD CITY: HORSHAM STATE: PA ZIP: 19044 BUSINESS PHONE: 2153286100 MAIL ADDRESS: STREET 1: 700 DRESHER RD CITY: HORSHAM STATE: PA ZIP: 19044 8-K 1 w45621e8-k.txt FORM 8-K VERTICALNET, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 31, 2001 -------- VerticalNet, Inc. - -------------------------------------------------------------------------------- (Exact name of Registrant as Specified in Charter) Pennsylvania 000-25269 23-2815834 - ---------------------------------------- ------------------------------------- ------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 700 Dresher Road, Horsham, PA 19044 - ------------------------------------------------------------------------------ ------------------------------------- (Address of principal executive offices) Zip Code
Registrant's telephone, including area code: 215-328-6100 ------------ (Former name and former address, if changed since last report) - -------------------------------------------------------------------------------- 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On January 31, 2001, the Registrant completed its previously announced sale of NECX.com LLC ("NECX"), a wholly-owned subsidiary of the Registrant, to Converge, Inc., an independent marketplace formerly known as eHITEX that serves the high-tech supply-chain community ("Converge"). Under the Membership Interest Purchase Agreement, dated as of December 19, 2000, by and among Converge, NECX and the Registrant, as amended by Amendment No. 1 to Membership Interest Purchase Agreement, dated January 31, 2001, by and among Converge, NECX, the Registrant and Converge International Ltd., an international business company incorporated in the British Virgin Islands and a wholly-owned subsidiary of Converge (the "Purchase Agreement"), NECX transferred certain foreign intellectual property assets to Converge International Ltd. and, immediately thereafter, the Registrant assigned all of its membership interests in NECX to Converge. In consideration for these transactions, the Registrant received 10,371,319 shares of Converge's Series B convertible preferred stock and 1,094,751 shares of Converge's non-voting common stock. In addition, the Purchase Agreement provided for the Registrant to receive $60 million of cash at closing, subject to adjustment based on a comparison of NECX's net worth and working capital as of October 31, 2000 and as of the closing date. Based on a preliminary calculation of NECX's closing date net worth and working capital, at closing the Registrant paid $6.5 million of cash to Converge due to the Registrant's retention of cash through intercompany accounts and NECX's results of operations between October 31, 2000 and the closing date. This cash payment is subject to further adjustment based on a final calculation of NECX's closing date net worth and working capital following a post-closing audit. Converge has agreed to increase the size of its board of directors to at least seven members by June 19, 2001, after which time the Registrant shall have the right to nominate its chief executive officer (or another executive officer reasonably satisfactory to Converge) to serve as a director of Converge. The Registrant and its wholly-owned subsidiary, VerticalNet Solutions LLC, have previously entered into a separate three-year software licensing and professional services agreement with Converge. Copies of the amendment to the Purchase Agreement and the press release issued by the Registrant on February 1, 2001 concerning the sale of NECX are attached hereto as Exhibits 2.2 and 99.1, respectively. A copy of the Purchase Agreement was previously filed on January 17, 2001 as Exhibit 2.1 to the Registrant's report on Form 8-K, dated December 19, 2000, and is incorporated herein by reference. ITEM 5. OTHER EVENTS On January 22, 2001, the Registrant completed its previously announced sale of $15 million of the Registrant's common stock to Sumitomo Corporation. A copy of the press release issued by the Registrant on February 1, 2001 concerning the closing of the aforementioned transaction is attached hereto as Exhibit 99.1. 2 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) None (b) Pro Forma Financial Information. Basis of Presentation Unaudited Pro Forma Condensed Consolidated Balance Sheet Unaudited Pro Forma Consolidated Statement of Operations Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (c) Exhibits. 2.1 Membership Interest Purchase Agreement, dated as of December 19, 2000, by and among Converge, Inc., NECX.com LLC and VerticalNet, Inc.(1) 2.2 Amendment No. 1 to Membership Interest Purchase Agreement, dated January 31, 2001, by and among Converge, Inc., NECX.com LLC, VerticalNet, Inc. and Converge International Ltd. 99.1 Press Release dated February 1, 2001 - --------------- (1) Filed on January 17, 2001 as an exhibit to the Registrant's report on Form 8-K, dated December 19, 2000. 3 4 VERTICALNET, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION The accompanying unaudited pro forma condensed consolidated balance sheet of VerticalNet, Inc. ("VerticalNet" or the "Company") as of September 30, 2000 and the related unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2000 give effect to the sale of NECX.com LLC ("NECX"), as if the transaction had occurred as of September 30, 2000, in the case of the unaudited pro forma condensed consolidated balance sheet, and as of January 1, 2000, in the case of the unaudited pro forma consolidated statement of operations. The sale of NECX will be treated as a nonmonetary exchange pursuant to the guidance in Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary Transactions," and EITF Issue 00-05, "Determining Whether a Nonmonetary Transaction is an Exchange of Similar Productive Assets." Accordingly, the Company will use the fair value of NECX, as determined by an independent appraisal, to record its investment in Converge and will use this amount as consideration in determining the loss on the disposition. The investment in Converge will be accounted for under the cost method of accounting for investments under the guidance in Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock." A pro forma consolidated statement of operations for the year ended December 31, 1999 has not been presented because NECX was acquired in December 1999 and the pro forma impact is immaterial. The unaudited pro forma condensed consolidated balance sheet also gives effect to the January 22, 2001 purchase of $15.0 million of the Company's common stock by Sumitomo Corporation. The unaudited pro forma condensed consolidated financial statements have been prepared by the management of the Company and should be read in conjunction with the Company's historical consolidated financial statements, which have been previously filed in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000. The unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been if the transactions had occurred on the dates assumed, nor is it indicative of the Company's future consolidated results of operations or consolidated financial position. 4 5 VERTICALNET, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2000
VERTICALNET PRO FORMA ADJUSTMENTS (1) ----------- -------------------------- Dollars in thousands Assets Current assets: Cash and cash equivalents $ 87,580 $ (11,804)(a) Short-term investments 36,928 -- Accounts receivable, net of allowance for doubtful accounts 50,133 (27,406)(a) Inventory 22,023 (20,374)(a) Prepaid expenses and other assets 43,568 (1,870)(a) ---------- --------- Total current assets 240,232 (61,454) ---------- --------- Property and equipment, net 48,998 (17,712)(a) Goodwill and other intangibles, net of accumulated amortization 658,968 (219,496)(a) Long-term investments 81,264 (9,446)(a) Other assets 54,225 215,000 (b) ---------- --------- Total assets $1,083,687 $ (93,108) ========== ========= Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses $ 45,937 $ (21,115)(a) 6,000 (c) Deferred revenues 57,181 -- Other current liabilities 4,908 -- ---------- --------- Total current liabilities 108,026 (15,115) ---------- --------- Long-term debt, net of current portion 1,322 -- Other long-term liabilities 52,398 -- Convertible subordinated notes 21,705 -- ---------- --------- Total liabilities 183,451 (15,115) ---------- --------- Shareholders' equity 900,236 (77,993)(d) ---------- --------- Total liabilities and shareholders' equity $1,083,687 $ (93,108) ========== =========
PRO FORMA ADJUSTED TOTAL SUMITOMO TRANSACTION (2) TOTAL ----- ------------------------ ----- Dollars in thousands Assets Current assets: Cash and cash equivalents $ 75,776 $15,000 $ 90,776 Short-term investments 36,928 -- 36,928 Accounts receivable, net of allowance for doubtful accounts 22,727 -- 22,727 Inventory 1,649 -- 1,649 Prepaid expenses and other assets 41,698 -- 41,698 -------- ------- ---------- Total current assets 178,778 15,000 193,778 -------- ------- ---------- Property and equipment, net 31,286 -- 31,286 Goodwill and other intangibles, net of accumulated amortization 439,472 -- 439,472 Long-term investments 71,818 -- 71,818 Other assets 269,225 -- 269,225 -------- ------- ---------- Total assets $990,579 $15,000 $1,005,579 ======== ======= ========== Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses $ 30,822 $ -- $ 30,822 Deferred revenues 57,181 -- 57,181 Other current liabilities 4,908 -- 4,908 -------- ------- ---------- Total current liabilities 92,911 -- 92,911 -------- ------- ---------- Long-term debt, net of current portion 1,322 -- 1,322 Other long-term liabilities 52,398 -- 52,398 Convertible subordinated notes 21,705 -- 21,705 -------- ------- ---------- Total liabilities 168,336 -- 168,336 -------- ------- ---------- Shareholders' equity 822,243 15,000 837,243 -------- ------- ---------- Total liabilities and shareholders' equity $990,579 $15,000 $1,005,579 ======== ======= ==========
The accompanying notes are an integral part of these statements. 5 6 VERTICALNET, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
PRO FORMA PRO FORMA VERTICALNET ADJUSTMENTS TOTAL ----------- ----------- ----- Dollars in Thousands REVENUES Exchange transaction sales $ 496,770 $(496,770) (e) $ -- Cost of exchange transaction sales 413,791 (413,791) (e) -- --------- --------- --------- Net exchange revenues 82,979 (82,979) -- Advertising and e-commerce revenues 71,763 -- 71,763 --------- --------- --------- Combined revenues 154,742 (82,979) 71,763 OTHER COSTS AND EXPENSES: Editorial and operational 28,801 -- 28,801 Product development 22,100 -- 22,100 Sales and marketing 93,770 (38,937) (e) 54,833 General and administrative 61,556 (24,561) (e) 36,995 In-process research and development charge 10,000 -- 10,000 Amortization of goodwill and other intangibles 125,567 (27,818) (e) 97,749 --------- --------- --------- Operating loss (187,052) 8,337 (178,715) --------- --------- --------- Other income, net 68,954 (868) (e) 68,086 --------- --------- --------- Net loss (118,098) 7,469 (110,629) Preferred dividends (2,972) -- $ (2,972) --------- --------- --------- Loss attributable to common shareholders $(121,070) $ 7,469 $(113,601) --------- --------- --------- Basic and diluted net loss per common share $ (1.49) $ (1.39) ========= ========= Weighted average common shares outstanding used in basic and diluted per share calculation 81,508 81,508 ========= =========
The accompanying notes are an integral part of these statements. 6 7 VERTICALNET, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. On January 31, 2001, VerticalNet completed the sale of NECX to Converge pursuant to the Membership Interest Purchase Agreement dated December 19, 2000, as amended on January 31, 2001. VerticalNet will account for NECX as a discontinued operation. In consideration for the transaction, VerticalNet received an equity interest in Converge comprised of 10,371,319 shares of Series B convertible preferred stock and 1,094,751 shares of non-voting common stock. VerticalNet was also entitled to receive $60 million of cash at closing, subject to adjustment based on a comparison of NECX's net worth and working capital as of October 31, 2000 and as of the closing date. Based on a preliminary calculation on the closing date, VerticalNet paid $6.5 million of cash to Converge. This cash payment is subject to further adjustment based on a final calculation of NECX's closing date net worth and working capital following a post-closing audit. This cash adjustment has not been included in the September 30, 2000 pro forma condensed consolidated balance sheet since the calculation takes into consideration changes in NECX's net worth and working capital subsequent to October 31, 2000. Pro forma adjustments to the unaudited condensed consolidated balance sheet: (a) To record the sale of NECX. (b) To record the fair value of VerticalNet's interest in Converge. (c) To record the estimated costs of the transaction. (d) To record the estimated pro forma loss on the disposal of NECX as of September 30, 2000, calculated as follows: Investment in Converge $ 215,000 Net assets of NECX (286,993) Estimated transaction costs (6,000) --------- Loss on disposition $ (77,993) ========= Pro forma adjustments to the unaudited consolidated statement of operations: (e) To record the elimination of NECX's activity for the nine months ended September 30, 2000. A loss on the disposal of NECX has not been included in the pro forma consolidated financial statements. However, as of the January 31, 2001 closing date, the estimated loss on disposition is approximately $74.0 million. The estimated loss is subject to final post-closing adjustments. 2. On January 22, 2001, VerticalNet completed its previously announced sale of $15.0 million of VerticalNet's common stock to Sumitomo Corporation. 7 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. VERTICALNET, INC. Date: February 15, 2001 By: /s/ Gene S. Godick ------------------- Name: Gene S. Godick Title: Executive Vice President & Chief Financial Officer 8 9 EXHIBIT INDEX Exhibit No. Description of Exhibit - ----------- ---------------------- 2.1 Membership Interest Purchase Agreement, dated as of December 19, 2000, by and among Converge, Inc., NECX.com LLC and VerticalNet, Inc.(1) 2.2 Amendment No. 1 to Membership Interest Purchase Agreement, dated January 31, 2001, by and among Converge, Inc., NECX.com LLC, VerticalNet, Inc. and Converge International Ltd. 99.1 Press Release dated February 1, 2001 - --------------- (1) Filed on January 17, 2001 as an exhibit to the Registrant's report on Form 8-K, dated December 19, 2000. EX-2.2 2 w45621ex2-2.txt AMENDMENT NO.1 TO MEMBERSHIP INTEREST PURCHASE 1 EXHIBIT 2.2 AMENDMENT NO. 1 TO MEMBERSHIP INTEREST PURCHASE AGREEMENT This AMENDMENT NO. 1 TO MEMBERSHIP INTEREST PURCHASE AGREEMENT is dated as of January 31, 2001 (this "AMENDMENT"), by and among Converge, Inc., a Delaware corporation ("CONVERGE"), NECX.com LLC, a Delaware limited liability company (the "COMPANY"), VerticalNet, Inc., a Pennsylvania corporation ("VERTICALNET" and, together with Converge and the Company, the "PARTIES"), and Converge International Ltd., an international business company incorporated in the British Virgin Islands and wholly owned subsidiary of Converge ("CIL"). WHEREAS, the Parties are each a party to that certain Membership Interest Purchase Agreement dated December 19, 2000, by and among Converge, the Company, and VerticalNet (the "AGREEMENT"); and WHEREAS, Converge desires to cause its wholly owned subsidiary, CIL, to acquire from the Company all the Company's direct ownership rights and direct licenses in, to, and under the Proprietary Rights and Software Products outside of the United States of America, whether such ownership rights and licenses are owned by or licensed to the Company prior to the Closing or acquired by or licensed to the Company pursuant to the Agreement at or after the Closing, including the assets listed in Sections 4 and 5 of Schedule 4.22(a)(i) of APPENDIX II to the Agreement; and WHEREAS, the Parties desire to amend the Agreement pursuant to Sections 12.3 and 12.7 of the Agreement, upon the terms and conditions contained in this Amendment; and WHEREAS, the Parties desire to join CIL to the Agreement as set forth herein and CIL wishes to accept and adopt the provisions of the Agreement; and WHEREAS, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, for the covenants and agreements set forth in the Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties and CIL hereby agree as follows: 1. JOINDER BY CIL. CIL hereby irrevocably agrees that, upon execution of this Amendment, CIL shall join in the execution and delivery of the Agreement and shall be bound by and a party to the Agreement in accordance with its provisions. Furthermore, CIL hereby agrees to perform all of its duties and obligations under the Agreement from and after the date hereof. From and after the date of this Amendment, CIL shall be considered a Party for the purposes of the Agreement. 2. AMENDMENTS TO THE AGREEMENT. The Agreement shall be amended as set forth below: (a) Section 2.5 of the Agreement is deleted in its entirety. (b) Section 2.6 of the Agreement is stricken in its entirety. (c) The following Sections are hereby added to Article 2 of the Agreement: 2.7 Assignment of Offshore Assets. Immediately prior to the Closing, (i) to the extent that the Company then directly owns or has a direct license for Offshore Assets, the Company shall transfer, sell, assign, and convey beneficial ownership of 2 such Offshore Assets to CIL, and (ii) to the extent that the Company expects to acquire direct ownership of or a direct license for Offshore Assets at the Closing pursuant to the Agreement, the Company shall on or after the Closing, as the case may be, transfer, sell, assign, and convey beneficial ownership of all of such Offshore Assets to CIL. The Company and VerticalNet have no other obligations or liabilities regarding the transfer of the Offshore Assets other than as set forth in this Sections 2.7 and 12.14. 2.8 Consideration for Offshore Assets. In consideration for the conveyance of the Offshore Assets pursuant to Section 2.7, CIL shall deliver to the Company 3,439,821 shares of Converge's Series B Preferred Stock (the "CIL SHARES"). The Stock Consideration issuable by Converge pursuant to Section 2.4 shall be reduced by the number of shares of Series B Preferred Stock issued under this Section 2.8. Immediately prior to the Closing, CIL shall deliver to the Company (a) the share certificates evidencing the CIL Shares together with stock powers endorsed in blank sufficient to vest in the Company all right and title to the CIL Shares, free and clear of any Encumbrances and (b) an opinion of counsel to CIL reasonably satisfactory in form and substance to VerticalNet. 2.9 Transfer of Consideration to VerticalNet. Notwithstanding anything herein to the contrary, the Company shall transfer the CIL Shares to VNI immediately prior to the Closing. Any actions taken by the Company pursuant to Sections 2.7 and 2.8 and this Section 2.9 shall not be deemed to be a violation of any provision of this Agreement by either the Company or VerticalNet. 2.10 Converge Actions. Any actions taken by Converge pursuant to Sections 2.7, 2.8 and 2.9, including the issuance of the CIL Shares to CIL, shall not be deemed to violate any provision of this Agreement by Converge. (d) Sections 3.1(a) and 3.1(b) shall be deleted in their entirety and the following Sections are hereby inserted: (a) "CLOSING DATE NET BOOK VALUE" shall be an amount equal to (i) the sum of the Company's total member's capital and intercompany debt, each as of the Closing Date, plus (ii) the sum of the Company's goodwill amortization expense, other intangible amortization expense and depreciation expense during the period beginning November 1, 2000 and ending on the Closing Date. (b) "CLOSING DATE NET WORKING CAPITAL" shall be an amount equal to the sum of (i) the Company's current assets, less current liabilities (excluding intercompany debt), each as of the Closing Date, plus (ii) the Company's cumulative capital expenditures during the period beginning November 1, 2000 and ending on the Closing Date. (e) The following Section 3.1(e) shall be added at the end of Section 3.1: (e) Any amounts paid or payable (i) to PNC Capital Markets, Inc., by the Company as amendment fees in connection with the engagement letter dated January 29, 2001 by and between PNC Capital Markets, Inc., and the Company or (ii) for bona fide expenses incurred by the Company (or VerticalNet on behalf of the Company) in connection with the transactions contemplated hereby, shall be 2 3 excluded from such calculation and shall not adversely affect VerticalNet or the amount of Cash Consideration to be received by it. (f) The following Section 3.3A is hereby added to the Agreement immediately following Section 3.3: 3.3A Closing Date Adjustment of Cash Consideration. (a) On the Closing Date, the Vice President -- Finance of the Company shall deliver separate schedules setting forth the calculation of the (i) Closing Date Net Working Capital, estimated as of the day immediately preceding the Closing Date (the "ESTIMATED CLOSING DATE NET WORKING CAPITAL") and (ii) the Closing Date Net Book Value, estimated as of the day immediately preceding the Closing Date (the "ESTIMATED CLOSING DATE NET BOOK VALUE"). (b) If either (i) the Balance Sheet Date Net Working Capital exceeds the Estimated Closing Date Net Working Capital or (ii) the Balance Sheet Date Net Book Value exceeds the Estimated Closing Date Net Book Value, then the Cash Consideration to be paid at Closing under Section 2.4 hereof shall be decreased on a dollar-for-dollar basis by an amount (the "ESTIMATED DEFICIENCY") equal to the greater of (i) the difference between the Balance Sheet Date Net Working Capital and the Estimated Closing Date Net Working Capital, or (ii) the difference between the Balance Sheet Date Net Book Value and the Estimated Closing Date Net Book Value. If the Estimated Deficiency exceeds the Cash Consideration, then VerticalNet shall pay Converge an amount equal to such excess in immediately available funds on the Closing Date (the "DEFICIENCY PAYMENT"). (g) Section 3.4(b) is deleted in its entirety and the following is hereby added: (b) Within 15 Business Days of Converge's receipt of the Audited Closing Date Consolidated Balance Sheet and the Closing Schedules, the following payments shall be paid by wire transfer of immediately available funds: (i) If the Deficiency is greater than the Estimated Deficiency, then VerticalNet shall pay to Converge an amount equal to the difference between the Deficiency and the Estimated Deficiency; or (ii) If the Deficiency is less than the Estimated Deficiency, then Converge shall pay to VerticalNet an amount equal to the difference between the Estimated Deficiency and the Deficiency; provided, however, that in no event shall Converge be obligated to make a payment in excess of the sum of the Cash Consideration and the Deficiency Payment. provided, however, that if any disagreement with respect to the Audited Closing Date Consolidated Balance Sheet or the Closing Schedules remains unresolved as of the date of payment under this Section 3.4(b), then any amounts to be paid to either VerticalNet or Converge under this Section 3.4(b) shall not be made until the final resolution of such disagreement between the Parties in accordance with Section 3.3 above, at which time any payments shall be made in accordance with such final resolution. (h) Section 6.5 of the Agreement shall be amended in its entirety to read as follows: 3 4 6.5 CIL. (a) Organization. CIL is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, with all requisite power and authority to conduct its business as it is presently being conducted, and to own or lease, as applicable, the assets owned or leased by it. (b) Capitalization of CIL (i) Authorized Capitalization. As of January 31, 2001, CIL has authorized 50,000 shares of common stock, par value US$1.00 all of which are issued and outstanding and owned of record by Converge. As of the date of this Agreement, CIL has no other equity securities authorized, issued or outstanding. There are no outstanding options, warrants, convertible securities or rights of any kind to purchase or otherwise acquire any shares of capital stock or other securities of CIL. No shares of capital stock of CIL are reserved for issuance. (ii) Valid Issuances. The CIL Shares will be validly issued, and when delivered to the Company shall be fully paid and non-assessable and not subject to any preemptive rights or rights of first refusal that have not been properly waived, or restriction on transfer (other than applicable federal or state securities laws) created by statute, CIL's Memorandum and Articles of Association, or any Contract. The CIL Shares that have been issued by Converge to CIL before the Closing Date have been granted or issued in compliance with all federal and state corporate and securities laws and when transferred to the Company shall have been transferred in compliance with all federal, state or other corporate securities laws. (iii) Other Transactions. There is no outstanding vote, plan or pending proposal of any merger or consolidation of CIL with or into any other entity. (iv) Agreements. There are no Contracts among any Persons which affect or relate to the voting or giving of written consents with respect to any security of CIL. (c) Authorization. CIL has all necessary corporate power and authority to enter into this Agreement and any Ancillary Agreements to which it is a party, and has taken, or will take all action prior to the Closing necessary to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. This Agreement has been duly executed and delivered by CIL, and this Agreement is, and upon execution and delivery each of the Ancillary Agreements to which CIL is a party will be, a valid and binding obligation of CIL enforceable against CIL in accordance with its terms, subject to the Enforceability Exceptions. (d) Liabilities. Except as set forth in Section 6.5(d) of APPENDIX III, CIL has no Liabilities. (e) Conflicts. Neither the execution, delivery or performance of this Agreement or any Ancillary Agreement, the consummation of the transactions 4 5 contemplated hereby or thereby, nor compliance by CIL with any of the applicable provisions hereof or thereof, will violate (i) or conflict with any provision of the governing documents of CIL, (ii) conflict with, or result in a Default under, or result in the creation of any Encumbrance, other than Permitted Encumbrances, upon any of the CIL's Assets under, any Contract to which CIL is a party or by which CIL is bound or (c) any material Regulation or Court Order applicable to CIL. (f) Officers and Directors. Section 6.5(f) of APPENDIX III contains a true, correct and complete list of all the officers and directors of CIL. (g) Subsidiaries, Etc. Other than the CIL Shares, as of the date hereof, CIL does not own, directly or indirectly, any interest or investment (whether equity or debt) in any Person. (i) Section 7.3(a) of the Agreement is stricken in its entirety and replaced with the following: (a) transfer or assign to the Company, or shall cause its Affiliates to transfer to the Company, ownership, free and clear of any Encumbrances, other than Permitted Encumbrances, of all of the Proprietary Rights listed in Section 4.22(a)(i), 4.22(a)(ii), 4.22(a)(iii), 4.22(a)(iv), 4.22(a)(vi), and 4.22(d) of APPENDIX II to the extent necessary to provide the Company with all of VerticalNet's right, title and interest set forth in the listed Proprietary Rights; (j) Section 7.7 of the Agreement is stricken in its entirety and replaced with the following: 7.7 Board of Directors. On or before June 19, 2001, Converge shall use its best efforts to obtain all necessary approvals needed to adopt the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws in substantially the form attached hereto as EXHIBIT F and EXHIBIT G, respectively. Irrespective of whether the Amended and Restated Certificate of Incorporation and/or Amended and Restated Bylaws are adopted in substantially the form attached hereto as EXHIBIT F and EXHIBIT G, on or before June 19, 2001, Converge shall nevertheless take such action as VerticalNet may reasonably deem appropriate to increase the number of Converge's directors to seven. (k) Section 10.1(f) of the Agreement is stricken in its entirety and replaced with the following: (f) evidence of the release of any intercompany indebtedness owed to VerticalNet by the Company; evidence that the intercompany account balance, immediately following Closing, will be $0; and evidence that the intercompany indebtedness owed to the Company by VerticalNet was discharged by payment of immediately available funds and not by means of a bookkeeping entry or conversion of indebtedness to equity. (l) The last sentence of Section 11.3(a) of the Agreement is stricken in its entirety and replaced with the following: Notwithstanding the foregoing, the maximum amount of Damages claimed by the Converge Indemnified Parties, in the aggregate, shall not exceed $26 million. 5 6 (m) The last sentence of Section 11.3(b) of the Agreement is stricken in its entirety and replaced with the following sentence: Notwithstanding the foregoing, the maximum amount of Damages claimed by the VerticalNet Indemnified Parties, in the aggregate, shall not exceed $26 million. (n) A new Section 11.4 shall be added to the Agreement which shall read in its entirety as follows: 11.4 Indemnification for CIL Restructuring. Converge shall indemnify and hold harmless (on an after-Tax basis using an assumed Tax rate of 40%) all of the VerticalNet Indemnified Parties from and against all Damages that any such VerticalNet Indemnified Party may sustain, suffer or incur and that result from, arise out of or relate to any (a) of the transactions relating to CIL, including those transactions contemplated in Sections 2.7, 2.8 and 2.9 or (b) breach of the representations and warranties contained in Section 6.5. Notwithstanding anything herein to the contrary, the indemnification obligations of Converge contained in this Section 11.4 shall be from dollar one and shall not be subject to any of the limitations contained in Section 11.3(a). (o) A new Section 12.14 shall be added to the Agreement that shall read in its entirety as follows: 12.14. Post-Closing Covenant. After the Closing, VerticalNet shall use its commercially reasonable efforts to assist Converge as reasonably requested by Converge to (a) obtain record title in the trademarks set forth in Schedule 4.22(e) of APPENDIX II, and (b) record title to the Offshore Assets as may be necessary; provided, however, that in performing this covenant VerticalNet shall not be obligated to expend any cash whatsoever. (p) APPENDIX I of the Agreement shall be amended to add the following definitions: (i) "CIL" shall mean Converge International Ltd., an international business company incorporated in the British Virgin Islands. (ii) "OFFSHORE ASSETS" shall mean all the Company's direct ownership rights and direct licenses in, to, and under the Proprietary Rights and Software Products outside of the United States of America, whether such ownership rights and licenses are owned by or licensed to the Company prior to the Closing or acquired by or licensed to the Company pursuant to the Agreement at or after the Closing, including the assets listed in Sections 4 and 5 of Schedule 4.22(a)(i) of APPENDIX II. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND VERTICALNET. VerticalNet and the Company hereby represent and warrant to Converge and CIL that, as of the date hereof, each of the Company and VerticalNet have all necessary corporate power and authority, as applicable, to enter into this Amendment. This Amendment has been duly executed and delivered by each of the Company and VerticalNet, and this Amendment is a valid and binding obligation of each of the Company and VerticalNet enforceable against each of the Company and VerticalNet in accordance with its terms, subject to the Enforceability Exceptions. 6 7 4. REPRESENTATIONS AND WARRANTIES OF CIL. CIL hereby represents and warrants to the Company and VerticalNet that it has all necessary corporate power and authority to enter into this Amendment. This Amendment has been duly executed and delivered by CIL, and this Amendment is a valid and binding obligation of CIL enforceable against CIL in accordance with its terms, subject to the Enforceability Exceptions. 5. REPRESENTATIONS AND WARRANTIES OF CONVERGE. Converge hereby represents and warrants to the Company and VerticalNet that it has all necessary corporate power and authority to enter into this Amendment. This Amendment has been duly executed and delivered by Converge, and this Amendment is a valid and binding obligation of Converge enforceable against Converge in accordance with its terms, subject to the Enforceability Exceptions. 6. ACKNOWLEDGEMENTS AND FURTHER AMENDMENTS. All terms of the Agreement not amended by this Amendment shall remain in full force and effect. The Agreement shall be amended such that Exhibit A and Exhibit B hereto shall be deemed to be Exhibit F and G, respectively, to the Agreement. 7. CHOICE OF LAW. This Amendment shall be construed and interpreted and the rights of the Parties determined in accordance with the laws of the State of Delaware, without regard to its conflicts of laws provisions. 8. REPRESENTATION BY COUNSEL. Each Party hereby acknowledges with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Amendment in its entirety and have had it fully explained to them by such Party's respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Amendment and has executed this Amendment free from coercion, duress or undue influence. 9. ENTIRE AMENDMENT; AMENDMENTS AND WAIVERS. This Amendment, together with the Agreement, the Ancillary Agreements and all exhibits and schedules hereto and thereto, constitute the entire agreement among the Parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written. 10. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each such counterpart shall be deemed an original, and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. 11. CONFLICTS. In the event of any discrepancy between the provisions of this Amendment and any provision of the Agreement, then such provisions of the Agreement shall control. [Signature pages to follow] 7 8 IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly executed on its behalf by its representative thereunto duly authorized, as of the day and year first above written. VERTICALNET, INC., a Pennsylvania corporation By: /s/ James A. Mirage ---------------------------------------- James A. Mirage Vice President - Mergers & Acquisitions CONVERGE, INC., a Delaware corporation By: /s/ Wendy Caswell ---------------------------------------- Wendy Caswell Vice President and Treasurer NECX.COM LLC, a Delaware limited liability company By: /s/ Bruce L. Haskin ---------------------------------------- Bruce L. Haskin Vice President, Finance and Assistant Treasurer CONVERGE INTERNATIONAL LTD., a British Virgin Islands corporation By: /s/ Wendy Caswell ---------------------------------------- Wendy Caswell Director EX-99.1 3 w45621ex99-1.txt PRESS RELEASE DATED FEBRUARY 1, 2001 1 EXHIBIT 99.1 [VERTICALNET LOGO] [CONVERGE LOGO] FOR IMMEDIATE RELEASE INVESTOR RELATIONS CONTACT: PRESS CONTACTS: Muriel Lange Nyssa Tussing Carla Schlemminger VerticalNet, Inc. VerticalNet Niehaus Ryan Wong, Inc. 215-315-3367 215-315-3710 (650) 827-7023 Mlange@verticalnet.com ntussing@verticalnet.com carla@nrwpr.com LEADING HIGH TECHNOLOGY CONSORTIUM CONVERGE, INC. COMPLETES ACQUISITION OF NECX FROM VERTICALNET, INC. CUPERTINO, Calif., and HORSHAM, Pa., - February 1, 2001 - Converge, Inc. (formerly known as eHITEX), the leading high technology marketplace, and VerticalNet, Inc., the Internet's leading e-business enabler, announced completion of the definitive agreement for Converge to acquire NECX, a wholly owned subsidiary of VerticalNet. As a result of the acquisition agreement, VerticalNet received 19.9 percent of the currently outstanding equity in Converge and a right to a seat on its Board. In addition, VerticalNet will retain $60 million in cash through intercompany accounts, subject to a net equity and working capital test. In connection with the transaction, VerticalNet transferred to Converge NECX's 50 percent ownership interest in Electronic Commodity Exchange Asia Pte. Ltd. ("NECX Asia"), and Sumitomo and its affiliate Sumitronics Asia Holding Pte Ltd. also transferred to Converge its 50 percent ownership interest in NECX Asia. VerticalNet also announced that it completed on January 22 the previously announced issuance of $15 million of VerticalNet common stock to Sumitomo Corporation. ABOUT CONVERGE, INC. Converge (http://www.converge.com), is the independent online marketplace where high-technology industry buyers and sellers connect, collaborate and transact to increase supply-chain efficiencies. Converge (formerly known as eHITEX) received $100 million in funding in June, 2000 from its founders: Agilent Technologies (NYSE: A), AMD (NYSE: AMD), Canon (NYSE: CAJ), Compaq (NYSE: CPQ), Gateway (NYSE: GTW), Hitachi (NYSE: HIT), Hewlett-Packard (NYSE: HWP), NEC (NASDAQ: NIPNY), Quantum (NYSE: DSS), Samsung Electronics (OTC: SSNIF), SCI Systems (NYSE: SCI), Solectron (NYSE: SLR), Synnex (privately held), Tatung (TAI: 2371.TW) and Western Digital (NYSE: WDC). For more information about Converge, please call (877) 693-5694 or (310) 231-6958 (outside US), or send inquiry via email to: info@converge.com mailto:info@converge.com 2 ABOUT VERTICALNET, INC. VerticalNet, Inc. (www.verticalnet.com) provides end-to-end e-commerce solutions targeted at distinct business segments through three strategic business units: VerticalNet Markets includes 58 industry-specific web sites designed as online vertical trading communities and provides hosted e-commerce and community capabilities for corporate divisions and mid-size businesses; VerticalNet Exchanges focuses on direct material open and spot markets; VerticalNet Solutions builds digital marketplaces for global 2000 customers, consortia and neutral Net market makers. VerticalNet International leverages the Company's three strategic business units to create global Internet B2B marketplaces, offering products and services internationally and partnering with companies that have strong local presence and domain expertise. ABOUT NECX Based in Peabody, MA, NECX established the first and largest open-market trading exchange for the purchase and sale of electronic components, computer products and networking equipment. NECX provides a high degree of market liquidity by aggregating supply and demand from thousands of component, original equipment and contract manufacturers; as well as distributors and resellers. The Exchange provides comprehensive services such as procurement and inventory management, trading, financial settlement, as well as global logistics and quality assurance. In addition to its domestic operations, NECX has Asia-Pacific operations in Singapore and European operations in Galway, Ireland and Stockholm, Sweden. This announcement contains forward-looking statements that involve risks and uncertainties, as well as statements that are preceded by, followed by or include the words "believes," "plans," "intends," "expects," "anticipates," or similar expressions. For such statements, VerticalNet claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. Factors that could cause actual results to differ from those contained in the forward-looking statements include matters relating to technology, performance and operation; rapid technological and market changes; potential intellectual property and licensing issues; as well as those factors set forth in the Company's Annual Report on form 10-K for the year ended December 31, 1999 and the Company's Quarterly Report on form 10-Q for the quarter ended September 30, 2000, both of which have been filed with the SEC. VerticalNet and NECX are registered trademarks and/or trademarks of Vertical Tech LLC in the United States and/or other countries. -----END PRIVACY-ENHANCED MESSAGE-----