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Exhibit 2.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
dated as of December 19, 2000,
by and among
Converge, Inc.,
a Delaware corporation,
▇▇▇▇.▇▇▇ LLC,
a Delaware limited liability corporation,
and
VerticalNet, Inc.,
a Pennsylvania corporation.
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT is dated as of December 19,
2000 (the "AGREEMENT"), by and among Converge, Inc., a Delaware corporation
("CONVERGE"), ▇▇▇▇.▇▇▇ LLC, a Delaware limited liability company (the
"COMPANY"), and VerticalNet, Inc., a Pennsylvania corporation ("VERTICALNET" and
together with Converge and the Company, the "PARTIES").
In consideration of the mutual covenants and agreements herein
contained, 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 hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Defined Terms. Capitalized terms used, but not otherwise defined,
in this Agreement shall have the respective meanings set forth in APPENDIX I.
1.2 Interpretation Provisions.
(a) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, appendix,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The terms "include" and
"including" are not limiting and mean "including without limitation."
(b) References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto unless
otherwise stated in such reference.
(c) References to the "Company" include a reference to (i) in the case
of Sections 4.7(a), 4.8(a), 4.20, 4.21 and, 4.23, all of the Company's
wholly-owned Subsidiaries and (ii) in the case of Sections 4.1, 4.6, 4.14(b)
(only to the Company's knowledge), 4.28 and 4.30, all of the Company's
Subsidiaries, in each case except as otherwise noted.
(d) References to statutes shall include all regulations promulgated
thereunder, and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation unless otherwise stated in such reference.
(e) The captions and headings in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(f) The Parties participated jointly in the negotiation and drafting of
this Agreement and the language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent. If an ambiguity
or question of intent or interpretation arises, then
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this Agreement will accordingly be construed as drafted jointly by the Parties,
and no presumption or burden of proof will arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
(g) The appendices, schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully incorporated into the body
of the Agreement.
ARTICLE 2.
THE TRANSFER
2.1 The Closing. Unless this Agreement shall have been terminated
pursuant to Section 12.1, and pending the satisfaction (or to the extent
permitted, the waiver) of the conditions set forth in Article 8 and Article 9,
the closing of the transactions contemplated by this Agreement (the "CLOSING")
shall take place at the offices of either ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in
Philadelphia, Pennsylvania or Pillsbury Winthrop in San Francisco, California,
as agreed by the Parties, as promptly as practicable (and in any event within 10
Business Days) after the date on which there has been a satisfaction or waiver
of the conditions to the obligations set forth in Articles 8 and 9; provided,
however, that if the Parties have not received the Consents necessary for the
satisfaction of Sections 8.5 and 9.2, such date shall automatically be extended
without any further action by any of the Parties until the date that is five
Business Days after the date on which such Consents are received, but in any
event not later than May 15, 2001 (the "TERMINATION DATE") or at such other
time, date or place as Converge and VerticalNet may mutually agree in writing.
The date on which the Closing shall occur is referred to herein as the "CLOSING
DATE." The Closing shall be effective at 11:59 p.m. on the Closing Date.
2.2 Restated Certificate and Investors Agreement. Converge shall adopt
and file with the Secretary of State of Delaware, on or before the Closing Date,
the Third Restated Certificate of Incorporation in substantially the form
attached hereto as EXHIBIT A (the "RESTATED CERTIFICATE") setting forth, among
other things, the preferences and rights for the Series B Preferred Stock. On or
before the Closing Date, VerticalNet, Converge and the requisite majority of the
stockholders of Converge, as specified by Section 7.8 of the Investors
Agreement, shall enter into the amended and restated Investors Agreement, in
substantially the form attached hereto as EXHIBIT A-1, which shall then be
binding upon all the stockholders of Converge.
2.3 Assignment of Company Membership Interest. Subject to the terms and
conditions of this Agreement, VerticalNet shall assign to Converge all of its
Company Membership Interest in return for the consideration set forth in Section
2.4.
2.4 Consideration for Company Membership Interest. As consideration for
the assignment of all of its Company Membership Interest to Converge pursuant to
Section 2.3 and the assumption by Converge of all liabilities, obligations and
duties of VerticalNet under the Operating Agreement, other than those set forth
in Section 14 of the Operating Agreement, Converge shall issue to a wholly-owned
subsidiary of VerticalNet the Stock Consideration and pay to VerticalNet the
Cash Consideration. In consideration of the foregoing and in addition to the
other covenants and agreements set forth herein, upon the Closing, VerticalNet
hereby
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releases the Company from any indemnification obligation or liability it may
have pursuant to Section 14 of the Operating Agreement; provided that the
foregoing release shall be effective only upon the consummation of the Closing.
2.5 Holdback. Converge shall withhold an amount in cash equal to 5% of
the Cash Consideration (the "HOLDBACK AMOUNT") to be distributed in accordance
with Article 3.
2.6 Allocation. The Purchase Price shall be allocated among the Assets
in accordance with Schedule 2.6. Neither VerticalNet nor Converge will take a
position on any income tax return, before any governmental agency charged with
the collection of any income tax, or in any judicial proceeding that is in any
way inconsistent with the terms of Schedule 2.6, and Converge and VerticalNet
shall file Form 8594 with the US Internal Revenue Service in a manner consistent
with the allocation as determined in accordance with this Schedule 2.6.
2.7 Taking of Necessary Action; Further Action. Each Party will take
all such reasonable lawful action as may be necessary or appropriate in order to
effect the transactions contemplated by this Agreement in accordance with this
Agreement as promptly as practicable. If, at any time after the Closing Date,
any such further action is necessary or desirable to carry out the purposes of
this Agreement or to vest Converge with full right, title and possession to all
the property, rights, privileges, powers and franchises of the Company, the
officers and directors or managers of each Party immediately prior to the
Closing Date are fully authorized in the name of their respective corporation or
limited liability company to take, and will take, all such lawful and necessary
action.
ARTICLE 3.
POST CLOSING ADJUSTMENT
3.1. Definitions. For the purposes of this Article 3, the following
definitions shall apply:
(a) "CLOSING DATE NET BOOK VALUE" shall be an amount, calculated as set
forth in the Closing Schedules, 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, calculated
as set forth in the Closing Schedules, 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.
(c) "BALANCE SHEET DATE NET BOOK VALUE" shall be an amount, calculated
as set forth on Schedule 3.1(c), equal to the sum of the Company's
total member's capital and intercompany debt, each as of the
Balance Sheet Date.
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(d) "BALANCE SHEET DATE NET WORKING CAPITAL" shall be an amount,
calculated as set forth on Schedule 3.1(d), equal to the sum of the
Company's current assets, less current liabilities (excluding
intercompany debt), each as of the Balance Sheet Date.
3.2. Post-Closing Audit. Converge shall cause Converge's auditors to
conduct an audit of the Company to the extent necessary to determine whether any
adjustment to the Cash Consideration would be required pursuant to Section 3.4
below (the "POST-CLOSING AUDIT"), which audit shall be completed within 60 days
after the Closing Date. Converge's auditors shall have reasonable access to, and
the right to review, the Books and Records of the Company necessary for
conducting the Post-Closing Audit. Upon completion of the Post-Closing Audit,
Converge's auditors shall deliver an audited consolidated balance sheet of the
Company as of the Closing Date (the "AUDITED CLOSING DATE CONSOLIDATED BALANCE
SHEET") to Converge and VerticalNet. Separate Closing schedules setting forth
the calculation of the Closing Date Net Working Capital and Closing Date Net
Book Value (the "CLOSING SCHEDULES"), shall be prepared by Converge's Director
of Finance and delivered to VerticalNet in conjunction with the audited results.
Converge shall cause Converge's auditors to give VerticalNet and VerticalNet's
auditors reasonable access to the work papers of Converge's auditors related to
the Post-Closing Audit.
3.3 Disputes. The Audited Closing Date Balance Sheet and the Closing
Schedules shall be deemed final and binding upon VerticalNet for the purposes of
determining whether any adjustment of the Cash Consideration would be required
pursuant to Section 3.4 below unless VerticalNet shall have delivered, within 10
Business Days following VerticalNet's receipt of the Audited Closing Date
Consolidated Balance Sheet and the Closing Schedules, a written notice (the
"DISPUTE NOTICE") to Converge. The Dispute Notice shall set forth the items in
the Audited Closing Date Consolidated Balance Sheet and the Closing Schedules
that either VerticalNet or VerticalNet's auditors dispute as not being in
accordance with the requirements of this Agreement or as having computational
errors, specifying in reasonable detail the nature and extent of any such
disagreement, including the amount of any proposed decrease in the Deficiency
(defined in Section 3.4 below) that would result if such disagreement were
resolved in VerticalNet's favor. VerticalNet and Converge shall negotiate in
good faith to resolve any such disagreement. If, after a period of 10 Business
Days, VerticalNet and Converge shall not have resolved such disagreement,
Converge and VerticalNet shall engage ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or, if such firm
refuses to accept such engagement on terms reasonably acceptable to Converge and
VerticalNet, another independent, nationally recognized auditing firm reasonably
acceptable to Converge and VerticalNet (the "INDEPENDENT AUDITOR"). Converge and
VerticalNet shall engage the Independent Auditor to decide such disagreement
within 60 days from its engagement. The decision of the Independent Auditor
shall be final and binding upon the Parties, and a declaratory judgment by a
court of competent jurisdiction may be entered in accordance therewith. The fees
and expenses of the Independent Auditor shall be borne equally by Converge and
VerticalNet.
3.4 Adjustment.
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(a) If either (i) the Balance Sheet Date Net Working Capital exceeds
the Closing Date Net Working Capital or (ii) the Balance Sheet Date Net Book
Value exceeds the Closing Date Net Book Value, then the Cash Consideration shall
be decreased on a dollar-for-dollar basis by an amount (the "DEFICIENCY") equal
to the greater of (i) the difference between the Balance Sheet Date Net Working
Capital and the Closing Date Net Working Capital, or (ii) the difference between
the Balance Sheet Date Net Book Value and the Closing Date Net Book Value. No
increase in the Cash Consideration shall be made.
(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 Holdback Amount,
then Converge shall retain the entire Holdback Amount and VerticalNet
shall pay to Converge an amount equal to the difference between the
Deficiency and the Holdback Amount;
(ii) If the Deficiency is less than the Holdback Amount, then
Converge shall retain an amount equal to the Deficiency from the
Holdback Amount and pay to VerticalNet an amount equal to the
difference between the Holdback Amount and the Deficiency; or
(iii) If there is no Deficiency, then Converge shall pay to
VerticalNet the entire Holdback Amount;
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 a portion of any amounts
to be paid to VerticalNet equal to the amount of any proposed decrease in the
Deficiency set forth in the Dispute Notice shall continue to be held by Converge
until the final resolution of such disagreement between the Parties in
accordance with Section 3.4 above.
3.5 Exclusive Remedy. To the extent that any fact or circumstance shall
have resulted in a decrease in the Cash Consideration, the actual decrease
resulting from of such fact or circumstance shall not provide the basis for a
claim of indemnification under Article 11.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND VERTICALNET
As an inducement for Converge to enter into this Agreement, each of the
Company and VerticalNet hereby makes, as of the date hereof and, except as
otherwise noted, as of the Closing Date, the following representations and
warranties to Converge, except as otherwise set forth in the written disclosure
schedule (the "COMPANY SCHEDULE OF EXCEPTIONS") delivered to Converge on the
date hereof, a copy of which is attached hereto as APPENDIX II, or as with
respect to matters that relate to VerticalNet, any facts that have been
disclosed by VerticalNet in any
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document filed with the SEC. The Company Schedule of Exceptions shall have
sections that are numbered to correspond to the various sections of this Article
4 setting forth certain exceptions to the representations and warranties
contained in this Article 4 and certain other information called for by this
Agreement. Unless otherwise specified, no disclosure made in any particular
section of the Company Schedule of Exceptions shall be deemed made in any other
section of the Company Schedule of Exceptions unless expressly made therein (by
cross-reference or otherwise) or the Company Schedule of Exceptions otherwise
contains disclosure which from reasonable reading of such disclosure it is
reasonably clear the exception applies to another section.
4.1 Organization. Each of VerticalNet and the Company 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. The Company is duly qualified to
do business as a foreign entity and is in good standing in each jurisdiction in
which such qualification is necessary under applicable law as a result of the
conduct of its Business or the ownership of its properties except where the
failure to be so qualified would not have a Company Material Adverse Effect.
Each jurisdiction in which the Company is qualified to do business as a foreign
entity is set forth in Section 4.1 of APPENDIX II.
4.2 Capitalization of the Company.
(a) Capitalization. As of the date of this Agreement, no Person other
than VerticalNet has a Company Membership Interest.
(b) No Other Securities. Except pursuant to Section 2.3, there are no
outstanding options, warrants, convertible securities or rights of any kind to
purchase or otherwise acquire any Company Membership Interest.
(c) Valid Acquisition of Company Membership Interest. VerticalNet's
Company Membership Interest was acquired in consideration for a contribution to
the capital of the Company, and is not subject to any preemptive rights created
by the Operating Agreement or any other Contract.
4.3 Authorization. Each of VerticalNet and the Company has all
necessary corporate or company power and authority, as applicable, to enter into
this Agreement and the Ancillary Agreements to which such Party is a party, and
has taken or will take prior to the Closing all corporate or company action, as
applicable, 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 each of VerticalNet and the Company, and
this Agreement is, and upon execution and delivery each of the Ancillary
Agreements to which such Party is a party will be, a valid and binding
obligation of such Party, enforceable against such Party in accordance with its
terms, subject to the Enforceability Exceptions.
4.4 Officers and Managers. Section 4.4 of APPENDIX II contains a true,
correct and complete list of all the officers and managers of the Company.
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4.5 Bank Accounts. Section 4.5 of APPENDIX II contains a list of all of
the Company's bank accounts, lock-box accounts, safe deposit boxes and Persons
authorized to draw thereon or have access thereto.
4.6 Subsidiaries, Etc.. Section 4.6 of APPENDIX II contains a list of
each of the Company's Subsidiaries, including such Subsidiary's name,
jurisdiction of organization, type of entity, to the Company's knowledge
outstanding ownership interests and the owner thereof, and the percentage
ownership that the Company holds in such Subsidiary. There are no irrevocable
proxies with respect to the Company's ownership interests in such Subsidiaries;
and all of such ownership interests so owned by the Company are validly issued,
fully paid and nonassessable and are owned by it free and clear of any
Encumbrance with respect thereto. There are no outstanding options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any ownership interest in any of the wholly-owned Subsidiaries. Except as set
forth in Section 4.6 of APPENDIX II, the Company does not own, directly or
indirectly, any investment in (i) any general partnership or joint venture or
(ii) any entity in which the Company holds a majority of the voting power.
Except as set forth in Section 4.6 of APPENDIX II, 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 any of the
Company's Subsidiaries.
4.7 Real Property.
(a) General. Except as set forth in Section 4.7(a) of APPENDIX II, the
Company leases all real property necessary for the conduct of its Business as
presently conducted. The Company has not since December 16, 1999 owned, does not
now own and has not entered into any agreement to acquire any real property.
(b) Leased Real Property. Section 4.7(b) of APPENDIX II sets forth all
Leases pursuant to which Facilities are leased by the Company (as lessee), true
and correct copies of which have been made available to Converge. Except as set
forth in Section 4.7(b) of APPENDIX II, the Company has good and valid leasehold
title to all leased property described in such Leases (the "LEASED PROPERTY"),
free and clear of any and all Encumbrances other than any Permitted Encumbrances
which would not permit the termination of the Lease therefor by the lessor as a
result of such Encumbrance. With respect to each such parcel of Leased Property,
to the Company's knowledge, there are no pending or threatened Actions relating
to the Company's leasehold interests in such Leased Property or any portion
thereof, (i) neither the Company nor, to the Company's knowledge, any third
party has entered into any sublease, assignment, license, option, right,
concession or other agreement or arrangement, written or oral, granting to any
person the right to use or occupy such Leased Property or any portion thereof or
interest therein, except in connection with a Permitted Encumbrance or in the
ordinary course of business, and (ii) neither the Company nor VerticalNet has
received written notice of any pending or threatened special assessment relating
to such Leased Property.
With respect to each Lease listed in Section 4.7(b) of APPENDIX II (i)
there has been no material Default under any such Lease by the Company or, to
the Company's knowledge, by any other party to such Lease, (ii) no action has
been taken by the Company, and to the Company's knowledge, no event has occurred
which, with notice or lapse of time or both, would permit
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termination, modification or acceleration by a party thereto other than the
Company without the consent of the Company under any such Lease, (iii) to the
Company's knowledge, no party has repudiated in writing to the Company any term
thereof or threatened in writing to the Company to terminate, cancel or not
renew any such Lease and (iv) except with respect to Permitted Encumbrances, the
Company has not assigned, transferred, conveyed, mortgaged or encumbered any
interest therein or in any Leased Property subject thereto (or any portion
thereof).
4.8 Personal Property.
(a) General. The Company owns or leases all personal property Assets
necessary for the conduct of its Business as presently conducted and the
personal property Assets (taken as a whole) are in such operating condition and
repair (subject to normal wear and tear) as is necessary for the conduct of its
Business as presently conducted.
(b) Owned Personal Property. Except as set forth in Section 4.8(b) of
APPENDIX II, the Company has good and marketable title to all personal property
Assets owned by it that are necessary for the conduct of the Business as
presently conducted, free and clear of any and all Encumbrances, other than
Permitted Encumbrances. With respect to each such item of personal property
necessary for the conduct of its Business (i) there are no Leases granting to
any Person the right of use of any portion of such item of personal property,
(ii) there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than the
Company or its employees, agents or representatives) who are in possession of or
who are using any such item of personal property.
(c) Leased Personal Property. The Company has good and valid leasehold
title to all personal property Assets leased by it from third parties that are
necessary for the conduct of its Business as presently conducted, free and clear
of any and all Encumbrances, other than Permitted Encumbrances which would not
permit the termination of the Lease therefor by the lessor as a result of such
Encumbrances. Section 4.8(c) of APPENDIX II sets forth all Leases for personal
property involving annual payments in excess of $50,000, true and correct copies
of which have been made available to Converge.
With respect to each Lease listed in Section 4.8(c) of APPENDIX II, (i)
there has been no material Default under such Lease by the Company or, to the
Company's knowledge, by any other party to the Lease, (ii) no action has been
taken by the Company, and to the Company's knowledge, no event has occurred
which, with notice or lapse of time or both, would permit termination,
modification or acceleration by a party thereto other than by the Company
without the consent of the Company under any such Lease that is material to the
Company, (iii) to the Company's knowledge, no party has repudiated in writing to
the Company any term thereof or threatened in writing to the Company to
terminate, cancel or not renew any such Lease that is material to the Company
and (iv) except with respect to Permitted Encumbrances, the Company has not
assigned, transferred, conveyed, mortgaged or encumbered any interest therein or
in any leased property subject thereto (or any portion thereof).
4.9 Environmental Matters.
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(a) Compliance. To the Company's knowledge, the Company is in
compliance with all Environmental Laws, including all Permits required
thereunder to conduct its Business as currently being conducted or as currently
proposed to be conducted except to the extent where the Company's failure to
comply with such laws could not reasonably be expected to have a Company
Material Adverse Effect. All such material Permits are listed in Section 4.9(a)
of APPENDIX II. Neither the Company nor VerticalNet has received any written
notice to the effect that, nor does the Company have knowledge that, (i) it is
not in compliance in any material respect with, or is in violation in any
material respect of, any such Environmental Laws or Permits required thereunder
or (ii) any currently existing circumstances are reasonably likely to result in
a failure of the Company to comply in any material respect with, or a material
violation by the Company of, any such Environmental Laws or Permits required
thereunder.
(b) Environmental Claims. There are no existing or, to the Company's
knowledge, potential Environmental Claims against the Company except to the
extent that any such Environmental Claims could not reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor VerticalNet has
received any written notification, and to the Company's knowledge there is not
any allegation of any actual or potential responsibility for, or any inquiry or
investigation regarding, any disposal, Release or threatened Release at any
location of any Hazardous Substance generated or transported by the Company.
(c) Hazardous Substances. To the Company's knowledge, no underground
tank or other underground storage receptacle for Hazardous Substances is
currently located on the Facilities, and there have been no Releases of
Hazardous Substances in quantities exceeding the reportable quantities as
defined under Environmental Laws on, upon or into the Facilities subject to the
Leases identified on Schedule 4.7(a) of APPENDIX II other than those authorized
by Environmental Laws including the Permits required thereunder.
(d) Environmental Indemnities and Releases. Except as set forth in
Section 4.9(d) of APPENDIX II, and except as would not reasonably be expected to
have a Company Material Adverse Effect, to the Company's knowledge, (i) the
Company is not a party, whether as a direct signatory or as successor, assign or
third-party beneficiary, or otherwise bound, to any Lease or other Contract
(excluding insurance policies disclosed in Section 4.24 of APPENDIX II) under
which the Company is obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant, restriction
or other undertaking concerning Environmental Conditions and (ii) the Company
has not Released any other Person from any claim under any Environmental Law or
waived any rights concerning any Environmental Condition.
4.10 Contracts.
(a) Disclosure. Section 4.10(a) of APPENDIX II sets forth a complete
and accurate list of all of the Contracts (the "MATERIAL CONTRACTS") of the
following categories:
(i) Contracts not made in the ordinary course of business;
(ii) License agreements or royalty agreements, whether the
Company is the licensor or, to the extent payments by the Company
thereunder could reasonably be
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expected to exceed $100,000, licensee thereunder (excluding licenses to
use commercial off the shelf software and the License Agreement);
(iii) Confidentiality and non-disclosure agreements (whether
the Company is the beneficiary or the obligated party thereunder) with
one or more of the following companies identified by Converge: E2Open,
Inc. and eChip, Inc.;
(iv) Contracts or commitments involving future expenditures or
Liabilities, actual or potential, after the date hereof in excess of
$500,000 per annum for Contracts in the ordinary course of business or
in excess of $100,000 for Contracts outside of the ordinary course of
business or otherwise material to the Business or the Assets;
(v) Contracts or commitments relating to commission
arrangements other than in the ordinary course of business with others
that are material to the Business;
(vi) Employment contracts, severance agreements, "stay-bonus"
agreements and similar arrangements, in each such case those currently
in effect, with current and past executive officers or directors of the
Company and sales managers responsible for the accounts of the top 20
customers of the Company.
(vii) Agreements (A) where the purpose of such agreement is to
indemnify the other parties thereto against any type of loss, (B) for
the purchase of a business (be it by purchase of all, or substantially
all of the assets of an entity, or by merger, consolidation, stock
purchase or otherwise) containing an undertaking to indemnify the other
parties thereto against any type of loss or (C) that are Material
Contracts containing an indemnification obligation and, in each such
case, where any such obligation could reasonably be expected to exceed
$100,000.
(viii) Promissory notes, loans, agreements, indentures,
inter-company accounts, evidences of indebtedness, letters of credit,
guarantees, or other instruments relating to an obligation to pay money
in excess of $100,000 in the aggregate, whether the Company shall be
the borrower, lender or guarantor thereunder (excluding trade accounts
payable).
(ix) Contracts containing covenants limiting the freedom of
the Company, or any executive officer, director, or Subsidiary of the
Company, to engage in any line of business or compete with any Person
that relates directly or indirectly to the Business;
(x) Any Contract with the federal, state or local government
or any agency or department thereof;
(xi) Any Contract with a Related Party other than Contracts
with employees or consultants; and
(xii) Any other Contract under which the consequences of a
default or termination would reasonably be expected to have a Material
Adverse Effect on the Company, individually.
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Complete and accurate copies of all of the Contracts listed in Section
4.10(a) of APPENDIX II have been made available to Converge.
(b) Absence of Defaults. Except as set forth in Section 4.10(b) of
APPENDIX II, all of the Material Contracts are valid, binding and enforceable on
or by the Company in accordance with their terms, subject to the Enforceability
Exceptions. The Company has fulfilled, or taken all action necessary to enable
it to fulfill when due or has received a waiver of, all of its material
obligations under each of such Material Contracts. To the Company's knowledge,
all parties to all Material Contracts have complied in all material respects
with the provisions thereof, no party is in material Default thereunder and no
written notice of any claim of Default has been given to the Company.
4.11 No Conflict or Violation; Consents.
(a) Except as set forth in Section 4.11 of APPENDIX II, and except as
would not result in a Company Material Adverse Effect, neither the execution,
delivery or performance of this Agreement or any Ancillary Agreement, the
consummation of the transactions contemplated hereby or thereby, nor compliance
by the Company or VerticalNet with any of the applicable provisions hereof or
thereof, will (a) violate or conflict with any provision of the governing
documents of the Company or VerticalNet, (b) violate, conflict with, or result
in a Default under, or result in the creation of any Encumbrance, other than
Permitted Encumbrances, upon any of the material Company's Assets under, any
material Contract to which the Company is a party or by which the Company is
bound or (c) violate any material Regulation or Court Order applicable to the
Company or VerticalNet.
(b) Section 4.11 of APPENDIX II contains a list of all material
Consents relating to the Business of the Company which are required to be given
to or obtained by the Company from any Person in connection with the
consummation of the transactions contemplated by this Agreement or any
Agreement. Except as set forth in Section 4.11 of APPENDIX II, no material
written notices to, material declaration or filing of, or registration with, or
material Consents of, any Persons are necessary to be made or obtained by the
Company or VerticalNet in connection with the execution, delivery or performance
of this Agreement or any Ancillary Agreement to which it is a party.
4.12 Permits. Section 4.12 of APPENDIX II sets forth a complete list of
all material Permits which are required under any applicable Regulation in its
operation of the Business or in its ownership of the Assets, all of which are as
of the date hereof, and will be as of the Closing Date, in full force and
effect. The Company has, and at all times since December 16, 1999 has had, all
material Permits required under any applicable Regulation in its operation of
the Business or in its ownership of the Assets, and owns or possesses such
Permits free and clear of all Encumbrances other than Permitted Encumbrances.
The Company is not in Default, nor has the Company received any written notice
of any claim of Default, with respect to any such Permit. Except as otherwise
governed by law, all such Permits are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
This Section 4.12 does not apply to Permits required under Environmental Laws.
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4.13 Financial Statements; Books and Records.
(a) General. The Financial Statements are complete and in accordance
with the Company's Books and Records and fairly present in all material respects
the financial condition, results of operations and cash flows of the Company as
of the dates and for the periods indicated thereby, and have been prepared in
accordance with GAAP consistently applied throughout the periods covered thereby
(except as otherwise expressly indicated in the notes to the Financial
Statements and, in the case of interim financial statements, for (i) the lack of
footnotes and (ii) year-end audit adjustments that are not material).
(b) Internal Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i) in all
material respects, transactions are executed with management's authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain accountability for its
Assets, (iii) in all material respects, access to its Assets is permitted only
in accordance with management's authorization and (iv) in all material respects,
the recorded accountability for its Assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(c) Books and Records. The Books and Records, in reasonable detail,
accurately and fairly reflect in all material respects the activities of the
Company and the Business and have been made available to Converge for its
inspection.
(d) All Accounts Recorded. The Company has not engaged in any material
transaction, maintained any bank account or used any material corporate funds
except for transactions, bank accounts or funds which have been and are
reflected in the normally maintained Books and Records.
(e) Records. The membership records and records of proceedings of the
Company that have been made available to Converge reflect in all material
respects all minutes of meetings, resolutions and other material actions and
proceedings of its members and managers and all committees thereof, all
contributions of capital in consideration of a Company Membership Interest and
contains true, correct and complete copies of the Certificate of Formation and
the Operating Agreement and all amendments thereto through the date hereof.
4.14 Absence of Certain Changes or Events. Except as set forth in
Section 4.14 of APPENDIX II and as contemplated by this Agreement and the
Ancillary Agreements, since the Balance Sheet Date, with respect to the Company,
there has not been any:
(a) Company Material Adverse Change;
(b) failure to operate the Business in the ordinary course so as to use
commercially reasonable efforts to preserve the continued services of the
Company's employees and the goodwill of material suppliers, customers and others
having material business relations with the Company;
(c) resignation or termination of any officer, director, manager or any
employee whose service is material to the Company's ability to carry on the
Business, or any increase in
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the rate of compensation payable or to become payable to any officer, director
or manager or Representative of the Company or Employee of the Company whose
service is material to the Company's ability to carry on the Business (other
than in connection with general, regularly-scheduled reviews and pay increases
in the ordinary course of business), including a material increase in (i) the
making of any loan to, (ii) the payment, grant or accrual of any bonus,
incentive compensation, service award to, or (iii) other similar benefit to, any
such Person, or the addition to, modification of, or contribution to any
Employee Plan of the Company;
(d) sale, assignment, license, transfer or Encumbrance of any of the
Company's material Assets, tangible or intangible, other than sales,
assignments, licenses, transfers or Encumbrances in the ordinary course of
business and consistent with past practice or Permitted Encumbrances;
(e) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for any such Contracts entered into, modified,
terminated, extended or renewed in the ordinary course of business and
consistent with past practice;
(f) actual or, to the Company's knowledge, threatened termination of
any material customer account or group of accounts of the Company by such
Customer or actual or, to the Company's knowledge, threatened material reduction
in purchases or royalties payable by any such customer or occurrence of any
event that is likely to result in any such termination or reduction;
(g) disposition or lapsing of any Proprietary Rights of the Company, in
whole or in part, or, to Company's knowledge, any disclosure of any trade
secret, process or know-how to any Person not a Representative of the Company
other than in the ordinary course of business;
(h) change in accounting methods, practices or assumptions by the
Company other than as required by any newly applicable accounting standards or
as required by law;
(i) revaluation by the Company of any of the Assets, including writing
off or establishing reserves with respect to goods, notes or accounts receivable
(other than for which adequate reserves have been previously established);
(j) damage, destruction or loss (whether or not covered by insurance)
that results in or is reasonably likely to result in a Company Material Adverse
Effect.
(k) any distribution to any member of the Company;
(l) acceptance of any contribution of capital or any agreement to
accept any contribution of capital, other than from VerticalNet, in exchange for
a Company Membership Interest or issuance of any other securities or any
securities convertible into a Company Membership Interest;
(m) amendment of the Operating Agreement;
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(n) capital expenditure or execution of any Lease or any incurring of
liability therefor by the Company, involving payments or obligations in excess
of $100,000 per annum or $500,000 in the aggregate during any one year period;
(o) failure to pay any material obligation of the Company when due;
(p) cancellation of any indebtedness in excess of $25,000 or waiver of
any rights of substantial value to the Company, except in the ordinary course of
business and consistent with past practice;
(q) indebtedness incurred by the Company for borrowed money or any
commitment to borrow money entered into by the Company, or any loans made or
agreed to be made by the Company in excess of $50,000, except in the ordinary
course of business and consistent with past practice;
(r) [RESERVED];
(s) [RESERVED];
(t) liability in excess of $100,000 incurred by the Company except in
the ordinary course of business and consistent with past practice;
(u) payment, discharge or satisfaction of any Liabilities of the
Company other than the payment, discharge or satisfaction reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business and consistent with past practice;
(v) acquisition or sale of any equity interest in any other Person; or
(w) agreement by the Company or VerticalNet directly or indirectly to
do any of the foregoing.
4.15 Liabilities. Except as set forth in Section 4.15 of APPENDIX II,
the Company has no Liabilities which may reasonably be expected to result in a
Company Material Adverse Effect except (i) Liabilities which are properly
accrued for in accordance with GAAP in the Financial Statements, (ii)
Liabilities incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date and (iii) Liabilities arising under the
Material Contracts (other than obligations which are required to be reflected on
a balance sheet prepared in accordance with GAAP and Liabilities relating to
breach of contract) or Liabilities which are not required to be disclosed on
such Appendix and which have arisen or been incurred in the ordinary course of
business. Except as set forth in Section 4.10(a) of APPENDIX II, none of the
Liabilities described in this Section 4.15 relates to any claim, suit,
litigation, proceeding or investigation known to the Company (collectively,
"ACTIONS") or breach of Contract, breach of warranty, tort, infringement or
violation of any Regulation or arose out of any action, order, writ, injunction,
judgment or decree outstanding.
4.16 Earn-Out Liabilities. The Company has no obligation to issue
equity or pay cash for any earn-out or other purchase price payments or purchase
price adjustments, or both, ("EARN-OUT LIABILITIES") with respect to any past
mergers or acquisitions.
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4.17 Litigation. Except as set forth in Sections 4.17 or 4.19(g) of
APPENDIX II, there is no Action, pending or, threatened in writing (i) against,
relating to or affecting the Company, any of the material Assets or the
Company's officers and directors, in any of their capacity as such, (ii) which
seeks to enjoin or obtain damages in respect of the transactions contemplated
hereby or by the Ancillary Agreements or (iii) or anticipated which could
reasonably be expected to prevent the Company or VerticalNet from consummating
the transactions contemplated hereby. Except as set forth in Section 4.17 or
4.19(g) of APPENDIX II, none of the Actions, if adversely determined against the
Company, its directors or officers, or any other Person could reasonably be
expected to result in a loss to the Company, individually in excess of $25,000.
To the Company's knowledge, there is no basis for any Action, which (a) if
adversely determined against the Company or (b) if adversely determined against
any officer or director, that could reasonably be expected to cause the Company
to incur an obligation to indemnify such officer or director under the Operating
Agreement or by statute, that could, in each such case, be reasonably expected
to result in a loss to the Company in excess of $25,000. There are presently no
outstanding Court Orders that would impose upon the Company any material
obligation in law or in equity. Section 4.17 of APPENDIX II contains a complete
and accurate description of all Actions since December 16, 1999 to which the
Company or any predecessor of the Company has been a party or, to the Company's
knowledge, which otherwise relate to any of the material Assets of the Company
or the Company's officers or directors as such, or any such Actions which were
settled prior to the institution of formal proceedings. This section does not
apply to any Environmental Claims.
4.18 Labor Matters.
(a) General. The Company is not a party to any collective bargaining
agreement with respect to its Employees with any labor organization, group or
association and to the Company's knowledge has not experienced any attempt by
organized labor or its representatives to make the Company conform to demands of
organized labor relating to its Employees or to enter into a binding agreement
with organized labor that would cover the Employees of the Company. There is no
unfair labor practice charge or complaint against the Company pending before the
National Labor Relations Board (or its equivalent in any applicable
jurisdiction) or any other governmental agency arising out of the Company's
activities, there is no labor strike or labor disturbance pending or, to the
Company's knowledge, threatened against the Company nor has the Company received
notice that any grievance is currently being asserted against it; and the
Company has not experienced a work stoppage. There are no material controversies
pending or, to the Company's knowledge, threatened between the Company and its
Employees.
(b) Compliance. The Company is in material compliance with all
applicable Regulations respecting employment practices, terms and conditions of
employment, wages and hours, equal employment opportunity. Except as set forth
in Section 4.18 (b) of APPENDIX II, to the Company's knowledge, the Company is
not liable for any claims for any material amount of past due wages. Except as
set forth in Section 4.18 (b) of APPENDIX II, the Company is not liable for any
penalties for failure to comply with any of the foregoing.
(c) Severance Obligations. Except as set forth in Section 4.18(c) of
APPENDIX II, the Company is not a party to any severance agreement, "stay-bonus"
agreement or similar arrangement, in each such case those currently in effect,
with any current or past executive
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officers or directors of the Company or sales managers responsible for the
accounts of the top 20 customers of the Company that will result in any
obligation (absolute or contingent) of Converge or the Company to make any
payment in excess of $25,000 to any such persons following termination of
employment or upon consummation of the transactions contemplated by this
Agreement (whether or not employment is continued for any specified period after
the Closing Date). Except as set forth in Section 4.18(c) of APPENDIX II,
neither the execution and delivery of this Agreement or any Ancillary Agreement
nor the consummation of the transactions contemplated hereby or thereby will
result in the acceleration or vesting of any other rights of any Person to
benefits under any Employee Plans.
4.19 Employee Benefit Plans. Section 4.19 of APPENDIX II contains a
complete list of Employee Plans which cover or have covered employees of the
Company or any predecessor (with respect to their relationship with the Company
or any predecessor). To the extent they exist, true and complete copies of each
of the following documents have been made available by the Company to Converge:
(i) each Employee Plan document (and, if applicable, related trust agreements,
annuity contracts or other funding instruments) which covers or has covered
employees of the Company (with respect to their relationship with the Company)
and all amendments thereto, all summary plan descriptions, summary of material
modifications (as defined in ERISA) and all written interpretations and
descriptions thereof which the Company generally has distributed to participants
therein, (ii) a complete description of any Employee Plan which is not in
writing, (iii) the most recent determination letter issued by the Internal
Revenue Service and any opinion letter issued by the Department of Labor with
respect to each Employee Plan, (iv) for the three most recent plan years, Annual
Reports on Form 5500 Series required to be filed with any governmental agency
for each Pension Plan or Welfare Plan which covers or has covered employees of
the Company (with respect to their relationship with the Company) and the annual
reports, as described in Section 103 of ERISA and (v) a description setting
forth the amount of any Liability of the Company as of the Closing Date for
payments more than 30 calendar days past due with respect to any Welfare Plan.
(a) Pension Plans.
(i) Each Pension Plan and each related trust agreement or
funding instrument which covers or has covered employees or former
employees of the Company (with respect to their relationship with the
Company) which has been operated as a plan that is intended to be
qualified under Section 401(a) of the Code (A) has received a favorable
determination letter from the Internal Revenue Service stating that
such Pension Plan and each related trust is qualified and tax-exempt
under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a) or still has a remaining period of time under
applicable Treasury Regulations or IRS pronouncements in which to apply
for such letter and to make any amendments necessary to obtain a
favorable determination and (B) each Pension Plan has been so qualified
during the period from its adoption to date, and nothing has occurred
that is reasonably likely to adversely affect such qualification.
(ii) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has
covered employees or former employees of the Company (with respect to
their relationship with the Company) currently complies in all material
respects and has been maintained in compliance in all material respects
with
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its terms and, both as to form and in operation, with the requirements
prescribed by any and all statutes, orders, rules and regulations which
are applicable to such plans, including ERISA and the Code.
(b) Defined Benefit Plans; Multiemployer Plans. Neither the Company nor
any ERISA Affiliate sponsor, maintain or contribute to, and have never
sponsored, maintained or contributed to, or had any liability with respect to
any employee benefit plan subject to Section 302 of ERISA, Section 412 of the
Code or Title IV of ERISA, nor have they any current or contingent obligation to
contribute to any Multiemployer Plan.
(c) Welfare Plans.
(i) Except as set forth in Section 4.19(d)(i) of APPENDIX II,
each Welfare Plan which covers or has covered employees or former
employees of the Company (with respect to their relationship with the
Company) complies in all material respects with its terms and, both as
to form and operation, with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such
Welfare Plan, including ERISA and the Code.
(ii) Except as set forth in Section 4.19(d)(ii) of APPENDIX
II, each Welfare Plan that is a group health plan (within the meaning
of Section 4980B(g)(2) of the Code) complies in all material respects
in all material respects, and in each and every case has materially
complied, with all of the applicable requirements of Section 4980B of
the Code and Parts 6 and 7 of Title I, Subtitle B of ERISA.
(iii) Except as set forth in Section 4.19(d)(iii) of APPENDIX
II, no Welfare Plan provides any health, life or other welfare coverage
to employees of the Company beyond termination of their employment with
the Company by reason of retirement or otherwise, other than coverage
as may be required under Section 4980B of the Code or Part 6 of ERISA,
or otherwise as a result of applicable laws.
(iv) Neither the Company nor any ERISA Affiliate has, at any
time, maintained, contributed to or had any obligation to maintain or
contribute to any Welfare Plan that is a "multiemployer plan," as
defined in Section (3)(37) of ERISA.
(d) Benefit Arrangements. To the knowledge of the Company, each Benefit
Arrangement which covers or has covered employees or former employees of the
Company (with respect to their relationship to the Company) presently complies
and has been maintained in compliance in all material respects (x) with its
terms and (y) with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations.
(e) Deductibility of Payments. There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company (with
respect to such employee's relationship with the Company) that, individually or
collectively, requires the payment by the Company of any amount (i) that is not
deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
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(f) Prohibited Transactions. There have not been any "prohibited
transactions," as such term is defined under Section 4975 of the Code or Section
406 of ERISA, involving any Welfare Plan or Pension Plan that could subject the
Company to any material penalty or tax imposed under the Code or ERISA.
(g) Litigation. There are no pending, or to the knowledge of the
Company, any threatened claims by or on behalf of any such Employee Plans, or by
or on behalf any individual participants or beneficiaries of any such Employee
Plans, alleging any breach of fiduciary duty on the part of the Company or any
of its officers, directors or employees under ERISA, or claiming material
benefit payments (other than those made in the ordinary operation of such
plans), nor is there, to the knowledge of the Company, any basis for such claim.
Except as set forth in Section 4.19(g) of APPENDIX II, the Employee Plans are
not the subject of any pending (or to the knowledge of the Company, any
threatened) investigation or audit by the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty Corporation.
(h) No Amendments. Except as may otherwise be agreed pursuant to
Section 7.1(a), neither the Company nor any ERISA Affiliate has announced to
employees, former employees, consultants or directors or managers, an intention
to create, or has otherwise created, a legally binding commitment to adopt any
additional Employee Plan which is intended to cover employees or former
employees of the Company (with respect to their relationship with the Company)
or to amend or modify any existing Employee Plan which covers or has had covered
employees or former employees of the Company or any of its Subsidiaries (with
respect to their relationship with the Company or any of its Subsidiaries)
except as required by law.
(i) Insurance Contracts. No Employee Plan (other than a "MULTIEMPLOYER
PLAN," as defined in Section 3(37) of ERISA) holds as an asset of any Employee
Plan any interest in any annuity contract, guaranteed investment contract or any
other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship or rehabilitation proceedings.
(j) No Acceleration or Creation of Rights. Except as set forth in
Section 4.19(j) of APPENDIX II, neither the execution and delivery of this
Agreement or the Ancillary Agreements by the Company nor the consummation of the
transactions contemplated hereby or thereby will result in the acceleration or
creation of any rights of any person to benefits under any Employee Plan
(including the acceleration of the vesting or exercisability of any stock
options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any employment severance,
parachute or change in control agreement).
(k) No Other Material Liability. To the knowledge of the Company, no
event has occurred in connection with which the Company, any ERISA Affiliate or
any Employee Plan, directly or indirectly, could be subject to any material
liability (i) under any regulation relating to any Employee Plan or (ii)
pursuant to any obligation of the Company to indemnify any Person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
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4.20 Transactions with Related Parties. Except for agreements disclosed
in Section 4.18(c), Section 4.19 and Section 4.20 of APPENDIX II, no Related
Party has (a) borrowed or loaned money or other property to or from the Company
which has not been repaid or returned, (b) any Contract with, or other claims,
express or implied, of any kind whatsoever against, the Company, except with
respect to those as a member of the Company, or (c) any interest in any property
worth more than $10,000 and used by the Company.
4.21 Compliance with Law. The Company has conducted its Business in
compliance with all applicable Regulations and Court Orders applicable to the
Company except as could not reasonably be expected to cause a Company Material
Adverse Effect. The Company has not received any written notice to the effect
that the Company is not in compliance in any material respect with any such
Regulations or Court Orders.
4.22 Intellectual Property.
(a) General. Section 4.22 of APPENDIX II sets forth with respect to
Proprietary Rights that are material to and owned by, or used in the Business
of, the Company (including in each case the record owner thereof): (i) for each
trademark, tradename or service ▇▇▇▇, whether or not registered, the application
serial number or registration number, the countries in which the name or ▇▇▇▇ is
used, (ii) for each copyright for which registration has been sought, whether or
not registered, the date of creation and first publication of the work and the
number and date of registration for each country in which a copyright has been
registered, (iii) for each patent which has been issued or invention for which a
patent application has been filed, whether or not issued, the number and date of
the patent application (as the case may be) for each country in which a patent
application has been made or a patent has been issued, (iv) for each mask work
(if any), whether or not registered, the date of first commercial exploitation
and if registered, the registration number and date of registration, (v) a
summary description of all Trade Secrets that are material to the Business and
(vi) all such Proprietary Rights in the form of licenses.
(b) Adequacy. Except as set forth in Section 4.22(b) of APPENDIX II,
the Proprietary Rights of the Company are all those necessary for the conduct of
the Business as presently conducted, including the design, development and sale
of all products or services currently under or in production.
(c) Royalties and Licenses. Except as set forth in Section 4.22(c) of
APPENDIX II, the Company has no obligation to compensate any Person for the use
of any of its Proprietary Rights, the Company is not subject to any license of
Proprietary Rights other than shrink-wrap licenses nor has the Company granted
to any Person any license, option or other rights to use in any manner any of
its Proprietary Rights, whether requiring the payment of royalties or not.
(d) Software.
(i) Section 4.22(d) of APPENDIX II contains a complete list of
all the Software Products. To the Company's knowledge, each Component
performs substantially in accordance with the specifications,
documentation and other written material used in connection with the
sale, license, distribution, marketing or use thereof
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and is free of defects in programming and operation except such defects
as would not materially and adversely affect the use of such Component
for its intended purposes.
(ii) Except as specified in Section 4.22(d) of APPENDIX II,
all right, title and interest in and to each Component is owned by the
Company, free and clear of all Encumbrances. No government funding was
utilized in the development of any of the Software Products. The sale,
license, distribution, marketing or use of each Component or
off-the-shelf-software by the Company does not violate any rights of
any other Person, and the Company has not received any communication
alleging such a violation. Except as specified in Section 4.22(d) of
APPENDIX II to the Company's knowledge, the Company does not have any
obligation to compensate any Person for the sale, license,
distribution, marketing or use of the Components. Other than as set
forth in Section 4.22(d) of APPENDIX II, the Company has not granted to
any other Person any license, option or other right in or to any of the
Software Products, except for non-exclusive, end-user licenses (the
"END-USER LICENSES") granted by the Company pursuant to license
agreements.
(iii) To the Company's knowledge, the Company does not have
any obligation owing to any Person to maintain, modify, improve or
upgrade any of the Components, except for any such obligation set forth
in an End-User License or under a customer-specific services agreement.
(iv) The Company has used commercially reasonable efforts to
keep secret and has not intentionally disclosed the source codes for
the Software Products to any Person other than to those Persons
identified in Section 4.22(d) of APPENDIX II.
(v) Except as disclosed in Section 4.22(d) of APPENDIX II, to
the Company's knowledge, no Software Product contains any "backdoor" or
concealed access or any "software locks" or similar devises which, upon
the occurrence of a certain event, the passage of a certain amount of
time or the taking of any action (or failure to take any action) by or
on behalf of the Company, will cause any Component used in the
operation of the Business to be destroyed, erased, damage, otherwise
rendered inoperable or inaccessible. Except as set forth in Section
4.22(d) of APPENDIX II, and to the Company's knowledge, no Component of
any system used in the Business is subject to export restriction under
Federal Export Control Regulations.
(vi) Section 4.22(d) of APPENDIX II lists all Contracts
between or among the Company, any employee thereof and a third party
that imparts or that imparted an obligation of noncompetition, secrecy,
confidentiality or non-disclosure upon the Company, any employee
thereof or any third party with respect to any Software Product. Except
as described in Section 4.22(d) of APPENDIX II, the Company has no
knowledge that the Company or any employee thereof either is or was
under any obligation of noncompetition, secrecy, confidentiality or
non-disclosure to any third party with respect to any Software Product.
(vii) To the Company's knowledge, any customized software
included in the Assets, together with all know-how and processes used
in connection therewith, functions
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substantially as intended, is in machine-readable form, and includes
all computer programs, materials, tapes, know-how, object and source
codes and procedures used by the Company.
(e) Ownership. Except as set forth in Section 4.22(e) of APPENDIX II,
the Company owns free and clear of any Encumbrances all Proprietary Rights
material to and owned by or used in the Business of the Company, and such
Proprietary Rights will not cease to be valid rights of the Company by reason of
the execution, delivery and performance of this Agreement or the Ancillary
Agreements or the consummation of the transactions contemplated hereby or
thereby.
(f) Absence of Claims. Except as set forth in Section 4.22(f) of
APPENDIX II, the Company and VerticalNet (i) have not received any notice
alleging, or otherwise have knowledge of facts that might give rise to,
invalidity or unenforceability with respect to any of the Proprietary Rights of
the Company and (ii) have not received any notice of alleged infringement of any
rights of others due to any activity by the Company. To the Company's knowledge,
the Company's use of its Proprietary Rights in its past and current products and
services does not infringe upon or otherwise violate the valid rights of any
third party anywhere in the world. No other Person (i) has notified the Company
or VerticalNet that it is claiming any ownership of or right to use any of the
Company's Proprietary Rights or (ii) to the Company's knowledge, is infringing
upon any such Proprietary Rights in any way.
(g) Protection of Confidential Proprietary Rights. The Company has
taken all reasonable steps necessary (including entering into appropriate
confidentiality and nondisclosure agreements with officers, directors,
subcontractors, Employees, licensees and customers in connection with the Assets
or the Business) to safeguard and maintain the secrecy and confidentiality of
the trade secrets, know-how and other confidential information that are material
to the Business. To the Company's knowledge, there has been no breach of any
such confidentiality or nondisclosure agreement by any party thereto.
(h) Entirety of Proprietary Rights Previously Transferred from the
Company. All Proprietary Rights previously transferred from the Company to Vert
Tech LLC are limited to (i) United States and foreign trademarks, service marks,
trade dress, logos, trade names and corporate names and the goodwill associated
therewith and registrations and applications for the registration thereof and
(ii) URL and domain name registrations. All such Proprietary Rights are included
in Section 4.22(a)(i) of APPENDIX II and Schedule 7.3(c).
(i) Entirety of Proprietary Rights Owned by the Company. With the
exception of the Proprietary Rights included in Section 4.22(a)(i) of APPENDIX
II and Schedule 7.3(c), all Proprietary Rights material to and owned by, or used
in the Business of, the Company, as that Business is presently conducted,
including the design, development and sale of all products or services currently
under development or in production, are included in Sections 4.22(a)(ii),
4.22(a)(iii), 4.22(a)(v) and 4.22(d) of APPENDIX II.
(j) Trade Secret Confidentiality. Converge agrees to maintain the Trade
Secrets listed in Section 4.22(a)(v) of APPENDIX II in confidence until the
Closing Date, or in the event the
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Closing does not occur, for the period of two years from the date of disclosure
of the Trade Secrets listed in Section 4.22(a)(v).
4.23 Tax Matters.
(a) Filing of Tax Returns. The Company has timely filed with the
appropriate taxing authorities all material Tax Returns required to be filed
through the date hereof. The Tax Returns filed are complete and accurate in all
material respects. Except as set forth in Section 4.23 of APPENDIX II, the
Company has not requested any extension of time within which to file any Tax
Return. The Company has made available to Converge complete and accurate copies
of federal, state and local Tax Returns of the Company for the years ended
December 31, 1999, 1998 and 1997 which were required to be filed by the Company.
(b) Status for Tax Purposes. Neither the Company, VerticalNet nor any
Affiliates have made any affirmative election under Treasury Regulation Section
301.7701-3(c), or any corresponding state or local income or franchise tax
provisions, to treat the Company as an association taxable as a corporation. The
Company is entitled to be treated as a "disregarded entity" under Treasury
Regulation Section 301.7701-3(b)(1)(ii) for federal income Tax purposes. Except
as set forth in Section 4.23 of APPENDIX II, the Company is also entitled to be
treated as a disregarded entity for state, local and franchise Tax purposes. For
federal income Tax purposes, and for state and local income and franchise Tax
purposes, VerticalNet has reported all items of income, gain, deduction, loss
and credit attributable to the Company's business and operations consistently
with the Company's classification as a disregarded entity. No Person other than
VerticalNet has ever had a Company Membership Interest.
(c) Payment of Taxes. All Taxes in excess of $5,000 in any individual
case due from the Company in respect of periods (or portions thereof) beginning
before the Closing Date have been timely paid or an adequate reserve (in
conformity with GAAP) has been established therefor, as set forth in the
Financial Statements, except for such taxes if any contested by it in good faith
as set forth in Section 4.23 of APPENDIX II and the Company has no Liability for
Taxes in excess of the amounts so paid or reserves so established. Except as set
forth in Section 4.23 of APPENDIX II, all Taxes that the Company is required by
law to withhold or collect have been duly withheld or collected and have been
timely paid over to the appropriate governmental authorities to the extent due
and payable.
(d) Audits, Investigations or Claims. No deficiencies for Taxes of the
Company have been proposed in writing or assessed by any taxing or other
governmental authority. Except as set forth in Section 4.23 of APPENDIX II,
there are no pending or, to the Company's knowledge, threatened audits,
assessments or other Actions for or relating to any Liability in respect of
Taxes of the Company. Except as set forth in Section 4.23 of APPENDIX II, no
extension of a statute of limitations relating to Taxes is in effect with
respect to the Company or any predecessor.
(e) Encumbrances. There are no Encumbrances for Taxes on any of the
Assets or the Company's Company Membership Interest, except for Taxes which are
not yet due.
(f) Tax Elections. All elections with respect to Taxes affecting the
Company, or the Assets, as of the date hereof are set forth in Section 4.23 of
APPENDIX II.
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(g) Prior Affiliated Groups. The Company is not and has never been a
member of an affiliated group within the meaning of Section 1504 of the Code or
any group that has filed a combined consolidated or unitary state or local
return.
(h) Tax Sharing Agreements. There are no Tax-sharing agreements or
similar arrangements (including indemnity arrangements) with respect to or
involving the Company, the Assets or the Business and, after the Closing Date,
none of the Company, the Assets or the Business shall be bound by any such
Tax-sharing agreements or similar arrangements or have any Liability thereunder
for amounts due in respect of periods prior to the Closing Date.
(i) Partnerships. Except as set forth in Section 4.23(i) of APPENDIX
II, the Company has no interest in nor is it subject to any joint venture,
partnership or other arrangement or contract which is treated as a partnership
for federal income tax purposes.
(j) Other Entity Liability. The Company does not have any Liability for
the Taxes of any Person (other than Taxes of the Company (without regard to the
activities of any predecessor)) as a transferee or successor, by contract or
otherwise.
4.24 Insurance. Section 4.24 of APPENDIX II contains a complete and
accurate list of all policies or binders of insurance (showing as to each policy
or binder the carrier, policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided and any pending
claims thereunder) of which the Company is the owner, insured or beneficiary.
Such list indicates whether VerticalNet or the Company is the insured
thereunder. The Company has in full force and effect fire and casualty insurance
policies, with extended coverage, and insurance against other hazards, risks and
liabilities to Persons and property to the extent and in the manner customary
for similarly situated companies in a similar business. The Company is not in
default under any of such policies or binders, and has not failed to give any
notice or to present any material claim under any such policy or binder in a due
and timely fashion. There are no outstanding unpaid claims under any such
policies or binders. Such policies and binders are in full force and effect on
the date hereof and shall be kept in full force and effect by the Company
through the Closing Date.
4.25 Accounts Receivable. The accounts receivable reflected in the
Balance Sheet, and all accounts receivable arising since the Balance Sheet Date,
represent bona fide claims against debtors that are good and collectible in full
at the recorded amounts thereof, net of reserves for doubtful accounts, in each
case, computed in accordance with GAAP and past practices consistently applied.
For purposes of this Section 4.25, an account receivable, net of reserves, shall
no longer be considered "good and collectible" if it remains uncollected for
more than 180 days.
4.26 Purchase Commitments and Outstanding Bids. Except as set forth in
Section 4.26 of APPENDIX II, no outstanding purchase or outstanding lease
commitment of the Company presently is in excess of the normal, ordinary and
usual requirements of the Business or was made at any price in excess of the
then current market price at the time such commitment was entered into or
contains terms and conditions more onerous than those usual and customary in the
Company's business. There are outstanding no pending obligations to lease real
property in addition to those identified in Section 4.7(b) of APPENDIX II.
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4.27 Suppliers and Customers.
(a) Section 4.27 of APPENDIX II sets forth a complete and accurate list
of the names of all material suppliers of goods and services used in connection
with the Business of the Company during the last fiscal year and during the last
fiscal quarter. The Company has not received any written communication from any
supplier named in Section 4.27 of APPENDIX II of any intention to terminate or
materially reduce supplies to the Company.
(b) Section 4.27 of APPENDIX II sets forth a complete and accurate list
of the names of the 20 largest customers of the Business of the Company based on
volume of sales during the last fiscal year and the last fiscal quarter, showing
the approximate total dollar volume of business that each such customer has
generated during such period. The Company has not received any written
communication from any customer named in Section 4.27 of APPENDIX II of any
intention to return, terminate or materially reduce purchases from the Company.
(c) Section 4.27 of APPENDIX II sets forth a complete and accurate list
of the names of the 20 largest suppliers of goods sold as part of the Business
of the Company during the last fiscal year and during the last fiscal quarter,
showing the approximate total purchases in dollars by the Company from each such
supplier during such period. The Company has not received any written
communication from any supplier named in Section 4.27 of APPENDIX II of any
intention to terminate or materially reduce supplies to the Company.
4.28 Brokers; Transaction Costs. Except as set forth in Section 4.28 of
APPENDIX II, neither VerticalNet nor the Company has entered into nor will it
enter into any contract, agreement, arrangement or understanding with any Person
which will result in the obligation of the Company to pay any finder's fee,
brokerage commission, or similar payment in connection with the transactions
contemplated hereby.
4.29 Inventory. Except as set forth in Section 4.29 of APPENDIX II, all
inventories of the Company are of good, usable and merchantable quality. All
such inventories as of the Balance Sheet Date are reflected, in Section 4.29 of
APPENDIX II, and will be reflected on the Audited Closing Date Consolidated
Balance Sheet, at the lower of cost (determined on a first-in, first-out method)
or market in the ordinary course of business, all in accordance with GAAP
applied on a consistent basis. Such inventories do not include any obsolete or
discontinued items, except to the extent of the reserves therefor reflected in
the Audited Closing Date Consolidated Balance Sheet, as determined in the
ordinary course of business and in accordance with GAAP applied on a consistent
basis. Except as set forth in Section 4.29 of APPENDIX II, since the Balance
Sheet Date, no inventory items have been sold or disposed of except through
sales in the ordinary course of business and at gross margins consistent with
past practices.
4.30 No Other Agreements to Sell the Company or the Assets. Neither the
Company nor VerticalNet has any legal obligation, absolute or contingent, to any
other Person to sell any Assets except in the ordinary course of business or to
accept any capital contribution in exchange for Company Membership Interest or
to effect any merger, consolidation or other reorganization of the Company or to
enter into any agreement with respect thereto, except pursuant to this Agreement
or except as may have been waived in writing by Converge.
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4.31 Project Roll-Out. The Company shall, no later than January 31,
2001, launch the projects currently being developed that have the code names
"Merlin" and "Excalibur." Such projects shall, by January 31, 2001, be
functional in material accordance with the Company's current plans.
Notwithstanding anything in this Section 4.31 to the contrary, if Converge
notifies the Company in writing (with a copy to VerticalNet) that Converge would
like the Company to make specified changes in the products, the Company,
VerticalNet and Converge shall agree on an extension of time for the Company to
make such changes.
4.32 Financial Projections. The Company has made available to Converge
certain financial projections with respect to the Business which projections
were prepared for internal use only. The Company makes no representation or
warranty regarding the accuracy of such projections or as to whether such
projections will be achieved, except that the Company represents and warrants
that such projections were prepared in good faith and are based on assumptions
believed by it at the time prepared to be reasonable.
4.33 Misstatements or Omissions. To the Company's knowledge, no
representations or warranties by the Company in this Agreement or any Ancillary
Agreement to which it is a party or in any exhibit, schedule or appendix hereto
or thereto or any certificate to be delivered hereunder or thereunder contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact necessary to make the statements or facts contained
therein not misleading.
4.34 Implied Representations and Warranties. EACH OF VERTICALNET AND
THE COMPANY UNDERSTANDS THAT NEITHER CONVERGE NOR ANY OF ITS AFFILIATES NOR
REPRESENTATIVES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, EXCEPT THOSE REPRESENTATIONS AND WARRANTIES OF CONVERGE EXPLICITLY SET
FORTH IN (A) THIS AGREEMENT, (B) THE ANCILLARY AGREEMENTS AND (C) ANY OTHER
WRITTEN AGREEMENT ENTERED INTO BY ANY OF THE PARTIES WITH RESPECT TO ANY ASSET
OF THE COMPANY, BUT, IN SUCH EVENT, ONLY TO THE EXTENT AS SET FORTH THEREIN WITH
RESPECT TO THE SUBJECT MATTER THEREOF.
ARTICLE 5.
MATTERS RELATING TO THE STOCK CONSIDERATION
5.1 Purchase Entirely for Own Account. The Stock Consideration is being
issued to VNI Holdings Inc., a wholly-owned subsidiary of VerticalNet ("VNI") in
reliance upon VerticalNet's representation to Converge, which by VerticalNet's
execution of this Agreement VerticalNet hereby confirms, that the Stock
Consideration to be issued to VNI (at the direction of VerticalNet) and the
Common Stock issuable upon conversion thereof (collectively, the "SECURITIES")
will be acquired for investment for VNI's own account, not as a nominee or agent
on behalf of any other Person, and not with a view to the resale or distribution
of any part thereof, and that neither VerticalNet or VNI has any present
intention of selling, granting any participation in, or otherwise distributing
same. By executing this Agreement, VerticalNet further represents that
VerticalNet has no Contract with any Person to sell, transfer or grant
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participations to such Person or to any other Person, with respect to any of the
Securities, except as contemplated hereby.
5.2 Disclosure of Information. Converge has provided VerticalNet the
opportunity to ask questions of Converge and has provided full access to its
facilities and personnel in response to any request therefor that VerticalNet,
has made, concerning Converge and its activities, and all other matters relating
to the operations of Converge and the offering and sale of shares of Stock
Consideration. The foregoing, however, does not limit or modify the
representations and warranties of Converge in Article 6 of this Agreement or the
right of VerticalNet to rely thereon.
5.3 Investment Experience. VerticalNet, through VNI, is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Stock
Consideration. VerticalNet also represents VNI has not been organized for the
purpose of acquiring the Securities.
5.4 Accredited Investor. VNI is an "accredited investor" within the
meaning of Rule 501 of Regulation D of the Securities Act, as presently in
effect.
5.5 Restricted Securities. VerticalNet understands that the Securities
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from Converge in a transaction not involving
a public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act, only in
certain limited circumstances. In this connection, VerticalNet represents that
it is familiar with Rule 144 of the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act. In
addition, VerticalNet understands that the Investors Agreement, in the form
attached hereto as EXHIBIT A-1, contains additional restrictions on the
transferability of the Securities.
5.6 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, neither VerticalNet nor VNI shall make any
disposition of all or any portion of the Securities unless and until the
transferee has made, in writing for the benefit of Converge, the representations
and warranties set forth in by this Article 5 executed and delivered to Converge
a counterpart to the Investors Agreement, in the form attached hereto as EXHIBIT
A-1, and:
(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) if reasonably requested by Converge, VerticalNet shall have
furnished Converge with an opinion of counsel, in a form reasonably satisfactory
to Converge, that such disposition will not require registration of such shares
under the Securities Act. Converge will not require opinions of counsel for
transactions made pursuant to Rule 144 of the Securities Act except in unusual
circumstances.
5.7 Removal of Legends; Further Covenants.
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(a) Any legend endorsed on a certificate pursuant to Section 5.8 hereof
shall be removed (i) if the resale of the Stock Consideration or Common Stock
issued upon conversion thereof represented by such certificate shall have been
registered and declared effective under the Securities Act or otherwise lawfully
sold in a public transaction, (ii) if such shares may be transferred in
compliance with Rule 144(k) of Securities Act or (iii) if the holder of such
shares shall have provided Converge with an opinion of counsel, in form and
substance acceptable reasonably acceptable to Converge and its counsel, stating
that a public sale, transfer or assignment of such shares may be made without
registration under the Securities Act or similar state laws.
(b) VerticalNet further covenants that VNI will not transfer the
Securities in violation of the Securities Act or the Exchange Act.
5.8 Legends. VerticalNet acknowledges that in addition to any other
legends that may be required, the certificates evidencing the Stock
Consideration or any Common Stock issued upon conversion thereof will bear the
following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY,
QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE ACT AND THE RULES
AND REGULATIONS PROMULGATED THEREUNDER."
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF CONVERGE
As an inducement to VerticalNet and the Company to enter into this
Agreement, Converge hereby makes, as of the date hereof and, except as otherwise
noted, as of the Closing Date, the following representations and warranties to
VerticalNet and the Company, except as otherwise set forth in a written
disclosure schedule (the "CONVERGE SCHEDULE OF EXCEPTIONS") delivered to the
Company on the date hereof, a copy of which is attached hereto as APPENDIX III.
The Converge Schedule of Exceptions shall have sections that are numbered to
correspond to the various sections of this Article 6 setting forth certain
exceptions to the representations and warranties contained in this Article 6 and
certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular section of the Converge Schedule
of Exceptions shall be deemed made in any other section of the Converge Schedule
of Exceptions unless expressly made therein (by cross-reference or otherwise) or
the Converge Schedule of Exceptions otherwise contains express disclosure which
from a reading of such disclosure it is clear the exception applies to another
section.
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6.1 Organization. Converge 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.
Converge is duly qualified to do business as a foreign entity and is in good
standing in each jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its Business or the ownership of
its properties except where the failure to be so qualified would not have a
Converge Material Adverse Effect. Each jurisdiction in which Converge is
qualified to do business as a foreign entity is set forth in Section 6.1 of
APPENDIX III.
6.2 Capitalization of Converge.
(a) Authorized Capitalization. As of the date of this Agreement,
Converge has authorized (i) 81,818,187 shares of Voting Common Stock, par value
$.001, of which no shares are issued and outstanding, (ii) 16,363,638 shares of
Non-Voting Common Stock, par value $.001, of which no shares are issued and
outstanding and (iii) 45,000,000 shares of Series A Preferred Stock par value
$.001, of which, 45,000,000 shares are issued and outstanding, and owned of
record by the Persons set forth Section 6.2 of APPENDIX III in the respective
amounts set forth therein. As of the date of this Agreement, Converge has no
other equity securities authorized, issued or outstanding. After giving effect
to the Restated Certificate, immediately prior to the Closing, Converge shall be
authorized to issue (i) 88,643,753 shares of Voting Common Stock of which no
shares will be issued and outstanding, (ii) 1,094,751 shares of Non-Voting
Common Stock of which no shares will be issued and outstanding, (iii) 45,000,000
shares of Series A Preferred Stock, of which 45,000,000 shares will be issued
and outstanding, and (iv) 11,523,688 shares of Series B Preferred Stock, par
value $.001, of which no shares will be outstanding and all of which will be
issued to VerticalNet pursuant to this Agreement and to Sumitomo and Sumitronics
pursuant to the letter agreement dated as of the date hereof, by and between
Sumitomo Corporation, Sumitronics Asia Holding Pte Ltd., the Company,
VerticalNet and Converge.
(b) Options. There are 12,272,730 shares of Converge Common Stock
reserved for issuance upon the exercise of options (the "CONVERGE OPTIONS")
granted or available for grant under Converge's 2000 Stock Incentive Plan, of
which 6,430,500 Converge Options have been granted as of the date hereof and no
more than 13,296,563 will have been granted as of the Closing Date.
(c) No Other Capital Stock, Options, Warrants. Except for the Converge
Options, the conversion privileges of the Series A Preferred Stock, the Series B
Preferred Stock or the non-voting Common Stock to be issued hereunder, 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 Converge. Except as set forth in Sections 6.2(a), 6.2(b) and 6.2(c) of
APPENDIX III, no shares of capital stock of Converge are reserved for issuance.
(d) Valid Issuances. All authorized shares of Converge Common Stock to
be issued upon (i) exercise of any of the Converge Options before the Closing
Date; (ii) conversion of the Series A Preferred Stock, the Series B Preferred
Stock, and the non-voting Common Stock (the "CONVERSION SHARES") will, when so
issued, be validly issued, fully paid and non-assessable and
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not subject to any preemptive rights or rights of first refusal that have not
been properly waived, or restriction on transfer (other than such preemptive or
other rights or restrictions under this Agreement, the Investors Agreement as
attached hereto as EXHIBIT A-1 or applicable federal or state securities laws)
created by statute, Converge's Restated Certificate or Bylaws, or any Contract.
The Converge Options that have been granted, and the 45,000,000 shares of
Converge capital stock that have been issued before the Closing Date have been
granted or issued in compliance with all federal and state corporate and
securities laws.
(e) Other Transactions. There is no outstanding vote, plan or pending
proposal of any merger or consolidation of Converge with or into any other
entity.
(f) Stock Consideration. The Stock Consideration to be issued pursuant
to the terms of this Agreement will have been duly authorized and any shares of
capital stock or other securities of Converge issuable upon conversion thereof
will have been duly reserved for issuance prior to the Closing, and, when any
such security is issued in accordance with the terms hereof and the Restated
Certificate, will be validly issued, fully paid and nonassessable.
(g) Agreements. Except for the Investors Agreement and this Agreement,
there are no Contracts among any Persons which affect or relate to the voting or
giving of written consents with respect to any security.
6.3 Authorization. Converge has all necessary corporate power and
authority to enter into this Agreement and the 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 Converge, and this Agreement is, and upon execution
and delivery each of the Ancillary Agreements to which Converge is a party will
be, a valid and binding obligation of Converge enforceable against Converge in
accordance with its terms, subject to the Enforceability Exceptions.
6.4 Officers and Directors. Section 6.4 of APPENDIX III contains a
true, correct and complete list of all the officers and directors of Converge.
6.5 [Reserved].
6.6 Subsidiaries, Etc.(a) . As of the date hereof, Converge does not
own, directly or indirectly, any interest or investment (whether equity or debt)
in any Person.
6.7 Real Property.
(a) General. Converge leases all real property necessary for the
conduct of its Business as presently conducted. Converge has never owned, does
not now own and has not entered into any agreement to acquire any real property.
(b) Leased Real Property. Section 6.7(b) of APPENDIX III sets forth all
Leases pursuant to which Facilities are leased by Converge (as lessee), true and
correct copies of which have been made available to VerticalNet. Except as set
forth in Section 6.7(b) of APPENDIX III, Converge has good and valid leasehold
title to all leased property described in such Leases (the
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"CONVERGE LEASED PROPERTY"), free and clear of any and all Encumbrances other
than any Permitted Encumbrances which would not permit the termination of the
Lease therefor by the lessor as a result of such Encumbrance. With respect to
each such parcel of Converge Leased Property, to Converge's knowledge, there are
no pending or threatened Actions relating to Converge's leasehold interests in
such Converge Leased Property or any portion thereof, (i) neither Converge nor,
to Converge's knowledge, any third party has entered into any sublease,
assignment, license, option, right, concession or other agreement or
arrangement, written or oral, granting to any person the right to use or occupy
such Converge Leased Property or any portion thereof or interest therein, except
in connection with a Permitted Encumbrance or in the ordinary course of
business, and (ii) Converge has not received written notice of any pending or
threatened special assessment relating to such Converge Leased Property.
With respect to each Lease listed in Section 6.7(b) of APPENDIX III (i)
there has been no material Default under any such Lease by Converge, or to
Converge's knowledge, by any other party to such Lease, (ii) no action has been
taken by Converge, and to Converge's knowledge, no event has occurred which,
with notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto other than Converge without the consent of
Converge under any such Lease, (iii) to Converge's knowledge, no party has
repudiated in writing to Converge any term thereof or threatened in writing to
Converge to terminate, cancel or not renew any such Lease and (iv) except with
respect to Permitted Encumbrances, Converge has not assigned, transferred,
conveyed, mortgaged or encumbered any interest therein or in any Converge Leased
Property subject thereto (or any portion thereof).
6.8 Personal Property.
(a) General. Converge owns or leases all personal property Assets
necessary for the conduct of its Business as presently conducted and the
personal property Assets (taken as a whole) are in such operating condition and
repair (subject to normal wear and tear) as is necessary for the conduct of its
Business as presently conducted.
(b) Owned Personal Property. Except as set forth in Section 6.8(b) of
APPENDIX III, Converge has good and marketable title to all personal property
Assets owned by it that are necessary for the conduct of the Business as
presently conducted, free and clear of any and all Encumbrances, other than
Permitted Encumbrances. With respect to each such item of personal property
necessary for the conduct of its Business (i) there are no Leases granting to
any Person the right of use of any portion of such item of personal property,
(ii) there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than Converge
or its employees, agents or representatives) who are in possession of or who are
using any such item of personal property.
(c) Leased Personal Property. Converge has good and valid leasehold
title to all personal property Assets leased by it from third parties that are
necessary for the conduct of its Business as presently conducted, free and clear
of any and all Encumbrances, other than Permitted Encumbrances which would not
permit the termination of the Lease therefor by the lessor as a result of such
Encumbrances. Section 6.8(c) of APPENDIX III sets forth all Leases for
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personal property involving annual payments in excess of $50,000, true and
correct copies of which have been made available to Converge.
With respect to each Lease listed in Section 6.8(c) of APPENDIX III,
(i) there has been no material Default under such Lease by Converge or, to
Converge's knowledge, by any other party to the Lease, (ii) no action has been
taken by Converge, and to Converge's knowledge, no event has occurred which,
with notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto other than by Converge without the consent of
Converge under any such Lease that is material to Converge, (iii) to Converge's
knowledge, no party has repudiated in writing to Converge any term thereof or
threatened in writing to Converge to terminate, cancel or not renew any such
Lease that is material to Converge and (iv), except with respect to Permitted
Encumbrances, Converge has not assigned, transferred, conveyed, mortgaged or
encumbered any interest therein or in any leased property subject thereto (or
any portion thereof).
6.9 Environmental Matters.
(a) Compliance. To Converge's knowledge, Converge is in compliance with
all Environmental Laws, including all Permits required thereunder to conduct its
Business as currently being conducted or as currently proposed to be conducted
except to the extent where Converge's failure to comply with such laws could not
reasonably be expected to have a Converge Material Adverse Effect. All such
material Permits are listed in Section 6.9(a) of APPENDIX III. Converge has not
received any written notice to the effect that, or otherwise has knowledge that,
(i) it is not in compliance in any material respect with, or is in violation in
any material respect of, any such Environmental Laws or Permits required
thereunder or (ii) any currently existing circumstances are reasonably likely to
result in a failure of Converge to comply in any material respect with, or a
material violation by Converge of, any such Environmental Laws or Permits
required thereunder.
(b) Environmental Claims. There are no existing or, to Converge's
knowledge, potential Environmental Claims against Converge except to the extent
that any such Environmental Claims could not reasonably be expected to have a
Converge Material Adverse Effect. Converge has not received any written
notification, and does not otherwise know to its knowledge, of any allegation of
any actual or potential responsibility for, or any inquiry or investigation
regarding, any disposal, Release or threatened Release at any location of any
Hazardous Substance generated or transported by Converge.
(c) Hazardous Substances. To Converge's knowledge, no underground tank
or other underground storage receptacle for Hazardous Substances is currently
located on or at the Facilities, and there have been no Releases of Hazardous
Substances in quantities exceeding the reportable quantities as defined under
Environmental Laws on, upon or into the Facilities subject to the Leases
identified on Schedule 6.7(a) of APPENDIX III other than those authorized by
Environmental Laws including the Permits required thereunder.
(d) Environmental Indemnities and Releases. Except as set forth in
Section 6.9(d) of APPENDIX III, and except as would not reasonably be expected
to have a Converge Material Adverse Effect, to Converge's knowledge, (i)
Converge is not a party, whether as a direct
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signatory or as successor, assign or third-party beneficiary, or otherwise
bound, to any Lease or other Contract (excluding insurance policies listed in
Section 6.9(d) of APPENDIX III) under which Converge is obligated by or entitled
to the benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions and (ii) Converge has not Released any other Person
from any claim under any Environmental Law or waived any rights concerning any
Environmental Condition.
6.10 Contracts.
(a) Disclosure. Section 6.10(a) of APPENDIX III sets forth a complete
and accurate list of all of the Contracts (the "CONVERGE MATERIAL CONTRACTS") of
the following categories:
(i) Contracts not made in the ordinary course of
business;
(ii) License agreements or royalty agreements, whether
Converge is the licensor or, to the extent payments
by Converge thereunder could reasonably be expected
to exceed $100,000, licensee thereunder (excluding
licenses to use commercial off the shelf software and
the License Agreement);
(iii) [Reserved];
(iv) Contracts or commitments involving future
expenditures or Liabilities, actual or potential,
after the date hereof in excess of $500,000 per annum
for Contracts in the ordinary course of business or
in excess of $100,000 for Contracts outside of the
ordinary course of business or otherwise material to
the Business or the Assets;
(v) Contracts or commitments relating to commission
arrangements other than in the ordinary course of
business with others that are material to the
Business;
(vi) Employment contracts, severance agreements,
"stay-bonus" agreements and similar arrangements, in
each such case those currently in effect, with
current and past executive officers or directors of
Converge;
(vii) Agreements (A) where the purpose of such agreement is
to indemnify the other parties thereto against any
type of loss, (B) for the purchase of a business (be
it by purchase of all, or substantially all of the
assets of an entity, or by merger, consolidation,
stock purchase or otherwise) containing an
undertaking to indemnify the other parties thereto
against any type of loss or (C) Converge Material
Contracts containing an indemnification obligation
and, in each such case, where any such obligation
could reasonably be expected to exceed $100,000.
(viii) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit,
guarantees, or other instruments relating to an
obligation to pay money in excess of $100,000 in the
aggregate, whether Converge shall be the borrower,
lender or guarantor thereunder (excluding trade
accounts payable).
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(ix) Contracts containing covenants limiting the freedom
of Converge, or any executive officer or director, to
engage in any line of business or compete with any
Person that relates directly or indirectly to the
Business;
(x) Any Contract with the federal, state or local
government or any agency or department thereof;
(xi) Any other Contract under which the consequences of a
default or termination would reasonably be expected
to have a Converge Material Adverse Effect.
Complete and accurate copies of all of the Contracts listed in Section
6.10(a) of APPENDIX III, have been made available to VerticalNet.
(b) Absence of Defaults. Except as set forth in Section 6.10(b) of
APPENDIX III, all of the Converge Material Contracts are valid, binding and
enforceable on or by Converge in accordance with their terms, subject to the
Enforceability Exceptions. Converge has fulfilled, or taken all action necessary
to enable it to fulfill when due or has received a waiver of, all of its
material obligations under each of such Converge Material Contracts. To
Converge's knowledge, all parties to all Converge Material Contracts have
complied in all material respects with the provisions thereof, no party is in
material Default thereunder and no written notice of any claim of Default has
been given to Converge.
6.11 No Conflict or Violation; Consents.
(a) Except as set forth in Section 6.11 of APPENDIX III, and except as
would not result in a Converge Material Adverse Effect, neither the execution,
delivery or performance of this Agreement or any Ancillary Agreement, the
consummation of the transactions contemplated hereby or thereby, nor compliance
by Converge with any of the applicable provisions hereof or thereof, will (a)
violate or conflict with any provision of the governing documents of Converge,
(b) violate, conflict with, or result in a Default under, or result in the
creation of any Encumbrance, other than Permitted Encumbrances, upon any of the
material Converge's Assets under, any material Contract to which Converge is a
party or by which Converge is bound or (c) violate any material Regulation or
Court Order applicable to Converge.
(b) Section 6.11 of APPENDIX III contains a list of all material
Consents relating to the Business of Converge which are required to be given to
or obtained by Converge from any Person in connection with the consummation of
the transactions contemplated by this Agreement or any Agreement. Except as set
forth in Section 6.11 of APPENDIX III, no material written notices to, material
declaration or filing of, or registration with, or material Consents of, any
Persons are necessary to be made or obtained by Converge in connection with the
execution, delivery or performance of this Agreement or any Ancillary Agreement
to which it is a party.
6.12 Permits. Section 6.12 of APPENDIX III sets forth a complete list
of all of Converge's material Permits which are required under any applicable
Regulation in its operation of the Business or in its ownership of the Assets,
all of which are as of the date hereof, and will be as of the Closing Date, in
full force and effect. Converge has, and at all times since April 26, 2000 has
had, all material Permits required under any applicable Regulation in its
operation of the Business or in its ownership of the Assets, and owns or
possesses such Permits free and clear
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of all Encumbrances other than Permitted Encumbrances. Converge is not in
Default, nor has Converge received any written notice of any claim of Default,
with respect to any such Permit. Except as otherwise governed by law, all such
Permits are renewable by their terms or in the ordinary course of business
without the need to comply with any special qualification procedures or to pay
any amounts other than routine filing fees. This Section 6.12 does not apply to
Permits required under Environmental Laws.
6.13 Financial Statements; Books and Records.
(a) General. The Converge Financial Statements are complete and in
accordance with Converge's Books and Records and fairly present in all material
respects the financial condition, results of operations and cash flows of
Converge as of the dates and for the periods indicated thereby, and have been
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby (except as otherwise expressly indicated in the notes to the
Converge Financial Statements and, in the case of interim financial statements,
for (i) the lack of footnotes and (ii) year-end audit adjustments that are not
material).
(b) Internal Controls. Converge maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i) in all
material respects, transactions are executed with management's authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain accountability for its
Assets, (iii) in all material respects, access to its Assets is permitted only
in accordance with management's authorization and (iv) in all material respects,
the recorded accountability for its Assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(c) Books and Records. The Books and Records, in reasonable detail,
accurately and fairly reflect in all material respects the activities of
Converge and the Business and have been made available to Converge for its
inspection.
(d) All Accounts Recorded. Converge has not engaged in any material
transaction, maintained any bank account or used any material corporate funds
except for transactions, bank accounts or funds which have been and are
reflected in the normally maintained Books and Records.
(e) Records. The stock records and minute books of Converge that have
been delivered to the Company fully reflect in all material respects all minutes
of meetings, resolutions and other material actions and proceedings of its
stockholders and board of directors and all committees thereof, all issuances,
transfers and redemptions of capital stock of which Converge is aware and
contain true, correct and complete copies of its Certificate of Incorporation
and Bylaws and all amendments thereto through the date hereof.
6.14 Absence of Certain Changes or Events. Except as set forth in
Section 6.14 of APPENDIX III and as contemplated by this Agreement and the
Ancillary Agreements, since the Balance Sheet Date, with respect to Converge,
there has not been any:
(a) Converge Material Adverse Change;
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(b) failure to operate the Business in the ordinary course so as to use
commercially reasonable efforts to preserve the continued services of Converge's
employees and the goodwill of material suppliers, customers and others having
material business relations with Converge;
(c) resignation or termination of any officer, director, manager or any
employee whose service is material to Converge's ability to carry on the
Business, or any increase in the rate of compensation payable or to become
payable to any officer, director or manager or Representative of Converge or
Employee of Converge whose service is material to Converge's ability to carry on
the Business (other than in connection with general, regularly-scheduled reviews
and pay increases in the ordinary course of business), including a material
increase in (i) the making of any loan to, or (ii) the payment, grant or accrual
of any bonus, incentive compensation, service award or (iii) other similar
benefit to, any such Person, or the addition to, modification of, or
contribution to any Employee Plan of Converge;
(d) sale, assignment, license, transfer or Encumbrance of any of
Converge's material Assets, tangible or intangible, other than sales,
assignments, licenses, transfers or Encumbrances in the ordinary course of
business and consistent with past practice or Permitted Encumbrances;
(e) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for any such Contracts entered into, modified,
terminated, extended or renewed in the ordinary course of business and
consistent with past practice;
(f) actual or, to Converge's knowledge, threatened termination of any
material customer account or group of accounts of Converge by such Customer or
actual or, to Converge's knowledge, threatened material reduction in purchases
or royalties payable by any such customer or occurrence of any event that is
likely to result in any such termination or reduction;
(g) disposition or lapsing of any Proprietary Rights of Converge, in
whole or in part, or, to Converge's knowledge, any disclosure of any trade
secret, process or know-how to any Person not a Representative of Converge other
than in the ordinary course of business;
(h) change in accounting methods, practices or assumptions by Converge
other than as required by any newly applicable accounting standards or as
required by law;
(i) revaluation by Converge of any of the Assets, including writing off
or establishing reserves with respect to goods, notes or accounts receivable
(other than for which adequate reserves have been previously established);
(j) damage, destruction or loss (whether or not covered by insurance)
that results in or is reasonably likely to result in a Converge Material Adverse
Effect;
(k) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock or any redemption, purchase or
other acquisition of any equity securities of Converge;
(l) issuance or reservation for issuance by Converge of, or commitment
by it to issue or reserve for issuance, any shares of capital stock or other
equity securities or obligations or
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securities convertible into or exchangeable for capital stock or other equity
securities or increase, decrease or reclassification of the capital stock of
Converge;
(m) amendment of Converge's Certificate of Incorporation or Bylaws;
(n) capital expenditure or execution of any Lease or any incurring of
liability therefor by Converge, involving payments or obligations in excess of
$100,000 per annum or $500,000 in the aggregate during any one year period;
(o) failure to pay any material obligation of Converge when due;
(p) cancellation of any indebtedness in excess of $25,000 or waiver of
any rights of substantial value to Converge, except in the ordinary course of
business and consistent with past practice;
(q) indebtedness incurred by Converge for borrowed money or any
commitment to borrow money entered into by Converge, or any loans made or agreed
to be made by Converge in excess of $50,000, except in the ordinary course of
business and consistent with past practice;
(r) Liability in excess of $100,000 incurred by Converge except in the
ordinary course of business and consistent with past practice;
(s) payment, discharge or satisfaction of any Liabilities of Converge
other than the payment, discharge or satisfaction reflected or reserved against
in the Financial Statements or incurred in the ordinary course of business and
consistent with past practice;
(t) acquisition or sale of any equity interest in any other Person; or
(u) agreement by Converge directly or indirectly to do any of the
foregoing.
6.15 Liabilities. Except as set forth in Section 6.15 of APPENDIX III,
Converge has no Liabilities which may reasonably be expected to result in a
Converge Material Adverse Effect except (i) Liabilities which are properly
accrued for in accordance with GAAP in the Converge Financial Statements, (ii)
Liabilities incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date and (iii) Liabilities arising under the
Converge Material Contracts (other than obligations which are required to be
reflected on a balance sheet prepared in accordance with GAAP and Liabilities
relating to breach of contract) or Liabilities which are not required to be
disclosed on such Appendix and which have arisen or been incurred in the
ordinary course of business. Except as set forth in Section 6.15 of APPENDIX
III, none of the Liabilities described in this Section 6.15 relates to any
claim, suit, litigation, proceeding or investigation known to Converge
(collectively, "ACTIONS") or breach of Contract, breach of warranty, tort,
infringement or violation of any Regulation or arose out of any action, order,
writ, injunction, judgment or decree outstanding.
6.16 Litigation. Except as set forth in Sections 6.16 of APPENDIX III,
there is no Action, pending or, threatened in writing (i) against, relating to
or affecting Converge, any of the material Assets or Converge's officers and
directors, in any of their capacity as such, (ii) which seeks to enjoin or
obtain damages in respect of the transactions contemplated hereby or by the
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Ancillary Agreements or (iii) or anticipated which could reasonably be expected
to prevent Converge from consummating the transactions contemplated hereby.
Except as set forth in Section 6.16 of APPENDIX III, none of the Actions, if
adversely determined against Converge, its directors or officers, or any other
Person could reasonably be expected to result in a loss to Converge,
individually in excess of $25,000. To Converge's knowledge, there is no basis
for any Action, which (a) if adversely determined against Converge or (b) if
adversely determined against any officer or director, that could reasonably be
expected to cause Converge to incur an obligation to indemnify such officer or
director under Converge's Certificate of Incorporation or by statute, that
could, in each such case, be reasonably expected to result in a loss to Converge
in excess of $25,000. There are presently no outstanding Court Orders that would
impose upon Converge any material obligation in law or in equity. Section 6.16
of APPENDIX III contains a complete and accurate description of all Actions
since April 26, 2000 to which Converge or any predecessor of Converge has been a
party or, to Converge's knowledge, which otherwise relate to any of the material
Assets of Converge or Converge's officers or directors as such, or any such
Actions which were settled prior to the institution of formal proceedings. This
section does not apply to any Environmental Claims.
6.17 Labor Matters.
(a) General. Converge is not a party to any collective bargaining
agreement with respect to its Employees with any labor organization, group or
association and to Converge's knowledge has not experienced any attempt by
organized labor or its representatives to make Converge conform to demands of
organized labor relating to its Employees or to enter into a binding agreement
with organized labor that would cover the Employees of Converge. There is no
unfair labor practice charge or complaint against Converge pending before the
National Labor Relations Board (or its equivalent in any applicable
jurisdiction) or any other governmental agency arising out of Converge's
activities, there is no labor strike or labor disturbance pending or, to
Converge's knowledge, threatened against Converge nor has Converge received
notice that any grievance is currently being asserted against it; and Converge
has not experienced a work stoppage. There are no material controversies pending
or, to Converge's knowledge, threatened between Converge and its Employees.
(b) Compliance. Converge is in material compliance with all applicable
Regulations respecting employment practices, terms and conditions of employment,
wages and hours, equal employment opportunity. Except as set forth in Section
6.17(b) of APPENDIX III, to Converge's knowledge, Converge is not liable for any
claims for any material amount of past due wages. Except as set forth in Section
6.17(b) of APPENDIX III, Converge is not liable for any penalties for failure to
comply with any of the foregoing.
(c) Severance Obligations. Except as set forth in Section 6.17(c) of
APPENDIX III, Converge is not a party to any severance agreement, "stay-bonus"
agreement or similar arrangement, in each such case those currently in effect,
with any current or past executive officers or directors of Converge that will
result in any obligation (absolute or contingent) of Converge or that would
cause Converge to make any payment in excess of $25,000 to any such persons
following termination of employment or upon consummation of the transactions
contemplated by this Agreement (whether or not employment is continued for any
specified period after the Closing Date). Except as set forth in Section 6.17(c)
of APPENDIX III, neither
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the execution and delivery of this Agreement or any Ancillary Agreement nor the
consummation of the transactions contemplated hereby or thereby will result in
the acceleration or vesting of any other rights of any Person to benefits under
any Employee Plans.
6.18 Employee Benefit Plans. Section 6.18 of APPENDIX III contains a
complete list of Employee Plans which cover or have covered employees of
Converge or any predecessor (with respect to their relationship with Converge or
any predecessor). To the extent they exist, true and complete copies of each of
the following documents have been made available by Converge to VerticalNet: (i)
each Employee Plan document (and, if applicable, related trust agreements,
annuity contracts or other funding instruments) which covers or has covered
employees of Converge (with respect to their relationship with Converge) and all
amendments thereto, all summary plan descriptions, summary of material
modifications (as defined in ERISA) and all written interpretations and
descriptions thereof which Converge generally has distributed to participants
therein, (ii) a complete description of any Employee Plan which is not in
writing, (iii) the most recent determination letter issued by the Internal
Revenue Service and any opinion letter issued by the Department of Labor with
respect to each Employee Plan, (iv) for the three most recent plan years, Annual
Reports on Form 5500 Series required to be filed with any governmental agency
for each Pension Plan or Welfare Plan which covers or has covered employees of
Converge (with respect to their relationship with Converge) and the annual
reports, as described in Section 103 of ERISA and (v) a description setting
forth the amount of any Liability of the Company as of the Closing Date for
payments more than 30 calendar days past due with respect to any Welfare Plan.
(a) Pension Plans.
(i) Each Pension Plan and each related trust agreement or
funding instrument which covers or has covered employees or former
employees of Converge (with respect to their relationship with
Converge) which has been operated as a plan that is intended to be
qualified under Section 401(a) of the Code (1) has received a favorable
determination letter from the Internal Revenue Service stating that
such Pension Plan and each related trust is qualified and tax-exempt
under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a) or still has a remaining period of time under
applicable Treasury Regulations or IRS pronouncements in which to apply
for such letter and to make any amendments necessary to obtain a
favorable determination and (2) to the knowledge of Converge each
Pension Plan has been so qualified during the period from its adoption
to date, and nothing has occurred that is reasonably likely to
adversely affect such qualification.
(ii) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has
covered employees or former employees of Converge (with respect to
their relationship with Converge) currently complies in all material
respects and has been maintained in compliance in all material respects
with its terms and, both as to form and in operation, with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such plans, including ERISA and the
Code.
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(iii) Neither the Company nor any ERISA Affiliate has, at any
time, maintained, contributed to or had any obligation to maintain or
contribute to any Welfare Plan that is a "multiemployer plan," as
defined in Section (3)(37) of ERISA.
(b) Defined Benefit Plans; Multiemployer Plans. Neither Converge nor
any ERISA Affiliate sponsor, maintain or contribute to, and have never
sponsored, maintained or contributed to, or had any liability with respect to
any employee benefit plan subject to Section 302 of ERISA, Section 412 of the
Code or Title IV of ERISA, nor have they any current or contingent obligation to
contribute to any Multiemployer Plan.
(c) Welfare Plans.
(i) Except as set forth in Section 6.18(c)(i) of APPENDIX III,
each Welfare Plan which covers or has covered employees or former
employees of the Company (with respect to their relationship with the
Company) complies in all material respects with its terms and, both as
to form and operation, with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such
Welfare Plan, including ERISA and the Code.
(ii) Except as set forth in Section 6.18(c)(ii) of APPENDIX
III, each Welfare Plan that is a group health plan (within the meaning
of Section 4980B(g)(2) of the Code) complies in all material respects
in all material respects, and in each and every case has materially
complied, with all of the applicable requirements of Section 4980B of
the Code and Parts 6 and 7 of Title I, Subtitle B of ERISA.
(iii) Except as set forth in Section 6.18(c)(iii) of APPENDIX
III, no Welfare Plan provides any health, life or other welfare
coverage to employees of Converge beyond termination of their
employment with Converge by reason of retirement or otherwise, other
than coverage as may be required under Section 4980B of the Code or
Part 6 of ERISA, or otherwise as a result of applicable laws.
(iv) Neither the Company nor any ERISA Affiliate has, at any
time, maintained, contributed to or had any obligation to maintain or
contribute to any Welfare Plan that is a "multiemployer plan," as
defined in Section (3)(37) of ERISA.
(d) Benefit Arrangements. To the knowledge of Converge, each Benefit
Arrangement which covers or has covered employees or former employees of
Converge (with respect to their relationship to Converge) presently complies and
has been maintained in compliance in all material respects (x) with its terms
and (y) with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations.
(e) Deductibility of Payments. There is no contract, agreement, plan or
arrangement covering any employee or former employee of Converge (with respect
to such employee's relationship with Converge) that, individually or
collectively, requires the payment by Converge of any amount (i) that is not
deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
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(f) Prohibited Transactions. There have not been any "prohibited
transactions," as such term is defined under Section 4975 of the Code or Section
406 of ERISA, involving any Welfare Plan or Pension Plan that could subject
Converge to any material penalty or tax imposed under the Code or ERISA.
(g) Litigation. There are no pending, or to the knowledge of Converge,
any threatened claims by or on behalf of any such Employee Plans, or by or on
behalf any individual participants or beneficiaries of any such Employee Plans,
alleging any breach of fiduciary duty on the part of Converge or any of its
officers, directors or employees under ERISA, or claiming material benefit
payments (other than those made in the ordinary operation of such plans), nor is
there, to the knowledge of Converge, any basis for such claim. Except as set
forth in Section 6.18(g) of APPENDIX III, the Employee Plans are not the subject
of any pending (or to the knowledge of Converge, any threatened) investigation
or audit by the Internal Revenue Service, the Department of Labor or the Pension
Benefit Guaranty Corporation.
(h) No Amendments. Except as agreed to pursuant to Section 7.1(a),
neither the Company nor any ERISA Affiliate has announced to employees, former
employees, consultants or directors or managers an intention to create, or
otherwise created, a legally binding commitment to adopt any additional Employee
Plan which is intended to cover employees or former employees of the Company
(with respect to their relationship with the Company) or to amend or modify any
existing Employee Plan which covers or has covered employees of the Company or
any of its Subsidiaries (with respect to their relationship with the Company or
any of its Subsidiaries) except as required by law.
(i) Insurance Contracts. No Employee Plan (other than a "MULTIEMPLOYER
PLAN," as defined in Section 3(37) of ERISA) holds as an asset of any Employee
Plan any interest in any annuity contract, guaranteed investment contract or any
other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship or rehabilitation proceedings.
(j) No Acceleration or Creation of Rights. Except as set forth in
Section 6.18(j) of APPENDIX II, neither the execution and delivery of this
Agreement or the Ancillary Agreements by Converge nor the consummation of the
transactions contemplated hereby or thereby will result in the acceleration or
creation of any rights of any person to benefits under any Employee Plan
(including the acceleration of the vesting or exercisability of any stock
options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any employment severance,
parachute or change in control agreement).
(k) No Other Material Liability. To the knowledge of Converge, no event
has occurred in connection with which Converge, any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to any material
liability (A) under any regulation relating to any Employee Plan or (B) pursuant
to any obligation of Converge to indemnify any Person against liability incurred
under any such statute, regulation or order as they relate to the Employee
Plans.
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6.19 Compliance with Law. Converge has conducted its Business in
compliance with all applicable Regulations and Court Orders applicable to
Converge except as could not reasonably be expected to cause a Converge Material
Adverse Effect. Converge has not received any written notice to the effect that
Converge is not in compliance in any material respect with any such Regulations
or Court Orders.
6.20 [Reserved].
6.21 Tax Matters.
(a) Filing of Tax Returns. Converge has timely filed with the
appropriate taxing authorities all material Tax Returns required to be filed
through the date hereof. The Tax Returns filed are complete and accurate in all
material respects. Except as set forth in Section 6.21 of APPENDIX III, Converge
has not requested any extension of time within which to file any Tax Return.
Converge has made available to VerticalNet complete and accurate copies of
federal, state and local Tax Returns of Converge for the years ended December
31, 1999, 1998 and 1997.
(b) Payment of Taxes. All Taxes in excess of $5,000 in any individual
case due from Converge in respect of periods (or portions thereof) beginning
before the Closing Date have been timely paid or an adequate reserve (in
conformity with GAAP) has been established therefor, as set forth in the
Financial Statements, except for such taxes if any contested by it in good faith
as set forth in Section 6.21 of APPENDIX III and Converge has no Liability for
Taxes in excess of the amounts so paid or reserves so established. Except as set
forth in Section 6.21 of APPENDIX III, all Taxes that Converge is required by
law to withhold or collect have been duly withheld or collected and have been
timely paid over to the appropriate governmental authorities to the extent due
and payable.
(c) Audits, Investigations or Claims. No deficiencies for Taxes of
Converge have been proposed in writing or assessed by any taxing or other
governmental authority. Except as set forth in Section 6.21 of APPENDIX III,
there are no pending or, to Converge's knowledge, threatened audits, assessments
or other Actions for or relating to any Liability in respect of Taxes of
Converge. Except as set forth in Section 6.21 of APPENDIX III, no extension of a
statute of limitations relating to Taxes is in effect with respect to Converge
or any predecessor.
(d) Encumbrances. There are no Encumbrances for Taxes on any of the
Assets, except for Taxes which are not yet due.
(e) Tax Elections. All elections with respect to Taxes affecting
Converge, or the Assets, as of the date hereof are set forth in Section 6.21(e)
of APPENDIX III.
(f) Prior Affiliated Groups. Converge is not and has never been a
member of an affiliated group within the meaning of Section 1504 of the Code or
any group that has filed a combined consolidated or unitary state or local
return.
(g) Tax Sharing Agreements. There are no Tax-sharing agreements or
similar arrangements (including indemnity arrangements) with respect to or
involving Converge, the Assets or the Business and, after the Closing Date, none
of Converge, the Assets or the Business
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shall be bound by any such Tax-sharing agreements or similar arrangements or
have any Liability thereunder for amounts due in respect of periods prior to the
Closing Date.
(h) Partnerships. Except as set forth in Section 6.21(h) of APPENDIX
III, Converge has no interest in nor is it subject to any joint venture,
partnership or other arrangement or contract which is treated as a partnership
for federal income tax purposes.
(i) Other Entity Liability. Converge does not have any Liability for
the Taxes of any Person (other than Taxes of Converge (without regard to the
activities of any predecessor)) as a transferee or successor, by contract or
otherwise.
6.22 Insurance. Section 6.22 of APPENDIX III contains a complete and
accurate list of all policies or binders of insurance (showing as to each policy
or binder the carrier, policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided and any pending
claims thereunder) of which Converge is the owner, insured or beneficiary.
Converge has in full force and effect fire and casualty insurance policies, with
extended coverage, and insurance against other hazards, risks and liabilities to
Persons and property to the extent and in the manner customary for similarly
situated companies in a similar business. Converge is not in default under any
of such policies or binders, and has not failed to give any notice or to present
any material claim under any such policy or binder in a due and timely fashion.
There are no outstanding unpaid claims under any such policies or binders. Such
policies and binders are in full force and effect on the date hereof and shall
be kept in full force and effect by Converge through the Closing Date.
6.23 Accounts Receivable. The accounts receivable reflected in the
Balance Sheet, and all accounts receivable arising since the Balance Sheet Date,
represent bona fide claims against debtors that are good and collectible in full
at the recorded amounts thereof, net of reserves for doubtful accounts, in each
case, computed in accordance with GAAP and past practices consistently applied.
For purposes of this Section 6.23, an account receivable shall no longer be
considered "good and collectible" if it remains uncollected for more than 180
days.
6.24 [Reserved].
6.25 Brokers; Transaction Costs. Except as set forth in Section 6.25 of
APPENDIX III, Converge has not entered into nor will it enter into any contract,
agreement, arrangement or understanding with any Person which will result in the
obligation of Converge to pay any finder's fee, brokerage commission, or similar
payment in connection with the transactions contemplated hereby.
6.26 [Reserved].
6.27 No Other Agreements to Sell Converge or the Assets. Converge does
not have any legal obligation, absolute or contingent, to any other Person to
sell any Assets except in the ordinary course of business, to sell capital stock
of Converge or to effect any merger, consolidation or other reorganization of
Converge or to enter into any agreement with respect thereto, except pursuant to
this Agreement or except as may have been waived in writing by Converge.
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6.28 Financial Projections; Operating Plan. Converge has made available
to Converge certain financial projections with respect to the Business which
projections were prepared for internal use only. Converge makes no
representation or warranty regarding the accuracy of such projections or as to
whether such projections will be achieved, except that Converge represents and
warrants that such projections were prepared in good faith and are based on
assumptions believed by it at the time prepared to be reasonable.
6.29 Misstatements or Omissions. To Converge's knowledge, no
representations or warranties by Converge in this Agreement or any Ancillary
Agreement to which it is a party or in any exhibit, schedule or appendix hereto
or thereto or any certificate to be delivered hereunder or thereunder contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact necessary to make the statements or facts contained
therein not misleading.
6.30 Offering. Subject in part to the truth and accuracy of
VerticalNet's representations set forth in Article 5 of this Agreement, the
offer, sale and issuance of the Series B Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act,
and neither Converge nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such exemption. Neither Converge
nor any person authorized or employed by Converge as agent, broker, dealer or
otherwise in connection with the offering or sale of the Series B Preferred
Stock or any security of Converge similar to the Series B Preferred Stock has
offered the Series B Preferred Stock or any such similar security for sale to,
or solicited any offer to buy the Series B Preferred Stock or any such similar
security from, or otherwise approached or negotiated with respect thereto with,
any Person in a manner that would constitute a violation of the Securities Act.
6.31 Registration Rights. Except as provided in the Investors
Agreement, Converge has not granted or agreed to grant any registration rights,
including piggyback rights, to any Person.
6.32 Implied Representations and Warranties. CONVERGE UNDERSTANDS THAT
NEITHER THE COMPANY NOR VERTICALNET NOR ANY OF THEIR RESPECTIVE AFFILIATES OR
REPRESENTATIVES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, EXCEPT THOSE REPRESENTATIONS AND WARRANTIES OF EACH OF VERTICALNET AND
THE COMPANY EXPLICITLY SET FORTH IN (A) THIS AGREEMENT, (B) THE ANCILLARY
AGREEMENTS AND (C) ANY OTHER WRITTEN AGREEMENT ENTERED INTO BY ANY OF THE
PARTIES WITH RESPECT TO ANY ASSET OF THE COMPANY, BUT, IN SUCH EVENT, ONLY TO
THE EXTENT AS SET FORTH THEREIN WITH RESPECT TO THE SUBJECT MATTER THEREOF.
SUBJECT TO ANY SUCH REPRESENTATIONS AND WARRANTIES, CONVERGE UNDERSTANDS THAT
THE ASSETS AND THE BUSINESS OF THE COMPANY BEING ACQUIRED AS A RESULT OF THIS
AGREEMENT SHALL BE DEEMED TO HAVE BEEN ACQUIRED ON AN "AS IS," "WHERE IS" BASIS
AND IN THEIR PRESENT CONDITION.
6.33 HSR Clearance. No clearance was necessary under the HSR Act in
connection with the investments of the founders of Converge.
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ARTICLE 7.
COVENANTS
7.1 Covenants of the Company Prior to the Closing. The Company and
VerticalNet, each covenant as follows for the period from the date hereof
through the Closing Date:
(a) Conduct of Business. The Company shall, except as otherwise
expressly contemplated by this Agreement, or as consented to by Converge in
writing, operate the Business solely in the ordinary course of business
consistent with past practice. The Company and VerticalNet will not, in any
event, take any action inconsistent with this Agreement, the Ancillary
Agreements or the consummation of the transaction consummated hereby or thereby.
Without limiting the generality of the foregoing, the Company shall not except
as specifically contemplated by this Agreement or as consented to by Converge in
writing:
(i) incur any indebtedness for borrowed money, or assume,
guarantee, endorse (other than endorsements for deposit or collection
in the ordinary course of business), or otherwise become responsible
for obligations of any other Person, in each case, other than in the
ordinary course of business or in excess of $50,000;
(ii) accept or commit to accept any contribution of capital
entitling any Person to a Company Membership Interest or issue or
commit to issue any other securities or any securities convertible into
a Company Membership Interest;
(iii) make or incur any obligation to make any distribution to
the member of the Company other than in the ordinary course of
business;
(iv) make any change to the Company's Operating Agreement;
(v) make any single purchase of stock inventory in excess of
$500,000 or have a balance in the stock inventory account in an amount
more than 50% greater than the amount of stock inventory reflected in
the general ledger of the Company on the Balance Sheet Date;
(vi) mortgage, pledge or otherwise encumber any material
Assets or sell, transfer, license or otherwise dispose of any material
Assets except, in each such case, in the ordinary course of business
and consistent with past practice;
(vii) cancel, release or assign any indebtedness owed to it or
any claims or rights held by it in excess of $50,000 other than in
connection with any transactions pursuant to the Receivables Purchase
Agreement among NECX Funding LLC, ▇▇▇▇.▇▇▇ LLC, Market Street Funding
Corporation and PNC Bank, National Association, dated September 29,
2000;
(viii) make any investment or commitment of a capital nature
either by purchase of stock or securities, contributions to capital,
property transfer or otherwise, other than in the ordinary course of
business;
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(ix) enter into or terminate any material Contract or agree to
make any material adverse change in any material Contract except in the
ordinary course of business;
(x) enter into or materially modify any Contract or other
arrangement with a Related Party;
(xi) (A) enter into (other than with respect to the hiring of
new persons on terms and conditions substantially similar to those of
individuals of equivalent position within the Company) or materially
modify any employment Contract other than in the ordinary course of
business, (B) pay any compensation to or for any employee, officer or
director other than in the ordinary course of business and pursuant to
existing employment arrangements, (C) pay or agree to pay any bonus,
incentive compensation, service award, severance, "stay bonus" or other
like benefit other than pursuant to existing arrangements, or (D) enter
into or modify any other Employee Plan;
(xii) make any change in any method of accounting or
accounting practice except as required by law or to comply with any
newly applicable accounting standards;
(xiii) fail to comply with all Regulations applicable to the
Assets and the Business (except as would not reasonably be expected to
result in a Company Material Adverse Effect);
(xiv) fail to use its commercially reasonable efforts to (i)
maintain the Business as it is currently constituted, other than
changes in the ordinary course, (ii) retain the Employees so that such
Employees will remain available to the Company on and after the Closing
Date other than those failures to retain Employees (A) in the ordinary
course of business due to retirement or termination or (B) as a result
of any Employee's disagreement over bonus compensation, (iii) maintain
existing relationships with material suppliers and customers and others
having business dealings with the Company and (iv) otherwise to
preserve the goodwill of the Business so that such relationships and
goodwill will be preserved on and after the Closing Date;
(xv) make or change any election in respect of Taxes, adopt or
change any material accounting method in respect of Taxes, enter into
any tax allocation agreement, tax sharing agreement, tax indemnity
agreement or closing agreement, settle or compromise any claim, notice,
audit report or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(xvi) commence any Action or other legal proceeding without
the prior written consent of Converge, other than when the failure to
commence such Action could be reasonably likely to lead to the
impairment or diminution of value of any Company Asset; or
(xvii) directly or indirectly take, agree to take or otherwise
permit to occur any of the actions described in Sections 7.1(a)(i)
through 7.1(a)(xvi).
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(b) Access. The Company shall, and shall cause the Company's officers,
Employees and Representatives to, afford the Representatives of Converge
reasonable access upon reasonable notice and at all reasonable times to its
Employees and Representatives, properties, Books and Records, Contracts and
other Assets, and shall furnish Converge and its Representatives upon reasonable
notice and in a timely manner, all financial, operating and other data and
information as Converge or its Affiliates, through their respective
Representatives, may reasonably request.
(c) Notification of Certain Matters. The Company or VerticalNet, as the
case may be, shall give prompt notice to Converge of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty of the Company or VerticalNet contained in
this Agreement to be untrue or inaccurate in any material respect and (ii) any
material failure of the Company or VerticalNet, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that such disclosure shall not be
deemed to cure any breach of a representation, warranty, covenant or agreement
or to satisfy any condition. The Company or VerticalNet, as the case may be,
shall promptly notify Converge of any Default, the threat or commencement of any
Action, or any development that occurs before the Closing that could reasonably
be expected to result in a Company Material Adverse Effect. If the Company shall
receive written notice from any customer identified in Section 4.27(b) of
APPENDIX II or any supplier identified in Section 4.27(c) of APPENDIX II
regarding any Company Material Adverse Change in the business relationship
between such customer or supplier, as the case may be on the one hand, and the
Company, on the other, then the Company shall forward such written notice to
Converge promptly upon receipt.
7.2 No Mergers, Consolidations, Sale of Equity, etc. During the period
from the date of this Agreement through the Closing Date, no Party will,
directly or indirectly, through any Representative or otherwise, other than as
contemplated herein, (a) solicit any inquiries or proposals or continue or enter
into any discussions, negotiations or agreements relating to (i) as to
VerticalNet and the Company, accept any contribution of capital in exchange for
a Company Membership Interest, (ii) as to Converge, issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any additional shares
of, or securities convertible or exchangeable for, or any options granted under
the Converge 2000 Stock Incentive Plan, warrants or rights of any kind to
acquire any shares of, its capital stock of any class, (iii) as to the Company
and Converge, merge with, dispose of a significant amount of the Assets or the
Business, outside the ordinary course of business, to, any Person other than as
contemplated by this Agreement, or (iv) the licensing of any of the Company's
Proprietary Rights to any Person other than in the ordinary course of business
consistent with past practice or (b) provide any assistance or any information
to or otherwise cooperate with any Person in connection with any such
discussions, negotiations or agreements. A "PROPOSED ACQUISITION TRANSACTION"
shall mean any transaction of the kind described in clauses (a)(i) through
(a)(iv) of the preceding sentence. The Company shall not release any third party
from, or waive any provision of, any confidentiality or standstill agreement to
which it is a party. Subject to the last sentence of this paragraph, each Party
shall (w) immediately notify the other Parties (orally and in writing) if any
offer is made or any discussions or negotiations are sought to be initiated, any
inquiry, proposal or contact is made or any information is requested with
respect to any Proposed Acquisition Transaction, (x) promptly notify the other
Parties of the terms of any proposal which it may receive in respect of any such
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Proposed Acquisition Transaction, including the identity of the prospective
purchaser or soliciting party, (y) promptly provide the other Parties with a
copy of any such offer, if written, or a written summary (in reasonable detail)
of such offer, if not in writing, and (z) keep the other Parties informed of the
status of such offer and the offeror's efforts and activities with respect
thereto. The obligations contained in the previous sentence shall not apply to
Converge in connection with any Proposed Transaction described in clause (a)(ii)
of this first sentence of this Section 7.2.
7.3 Transfer of Certain Proprietary Rights. Prior to the Closing Date,
VerticalNet shall:
(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 right, title
and interest set forth in the listed Proprietary Rights;
(b) license other software and Proprietary Rights material to the
Business upon mutual agreement of the Parties;
(c) execute and deliver to the Company all documentation that is
reasonably required to evidence the transfer of all of the URLs listed on
Schedule 7.3(c) to the Company;
(d) perform all services associated with the obligations identified in
Section 7.3(a), 7.3(b) and 7.3(c), all other trade-related products, including
proprietary applications and tools created specifically for the Company.
7.4 Actions by Converge Prior to the Closing. Converge covenants as
follows for the period from the date hereof through the Closing Date.
(a) Conduct of Business. Converge shall, except as otherwise expressly
contemplated by this Agreement, or as consented to by VerticalNet in writing,
operate the Business solely in the ordinary course of business consistent with
past practice. Converge will not, in any event, take any action inconsistent
with this Agreement, the Ancillary Agreements or the consummation of the
transaction consummated hereby or thereby. Notwithstanding any limitation
contained in this Section 7.4(a), Converge shall be permitted to form
Affiliates, transfer Assets to Affiliates and otherwise engage in domestic and
international corporate restructuring or reorganizations.
Without limiting the generality of the foregoing, Converge shall not
except as specifically contemplated by this Agreement or as consented to by
VerticalNet in writing:
(i) declare, pay or incur any obligation to pay any dividend
on the capital stock of Converge or declare, make or incur any
obligation to make any distribution or redemption with respect to the
capital stock of Converge;
(ii) make any change to Converge's Second Amended and Restated
Certificate of Incorporation;
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(iii) cancel, release or assign any indebtedness owed to it or
any claims or rights held by it in excess of $50,000;
(iv) make any investment or commitment of a capital nature
either by purchase of stock or securities, contributions to capital,
property transfer or otherwise, other than in the ordinary course of
business;
(v) modify any Employee Plan;
(vi) fail to comply with all Regulations applicable to the
Assets and the Business (except as would not reasonably be expected to
result in a Material Adverse Effect of Converge); or
(vii) fail to use its commercially reasonable efforts to (A)
maintain the Business as it is currently constituted, other than
changes in the ordinary course, (B) retain its employees so that such
employees will remain available to Converge on and after the Closing
Date other than those failures to retain its employees in the ordinary
course of business due to retirement or termination, (C) maintain
existing relationships with material suppliers and customers and others
having business dealings with Converge and (D) otherwise to preserve
the goodwill of the Business so that such relationships and goodwill
will be preserved on and after the Closing Date; and
(viii) directly or indirectly take, agree to take or otherwise
permit to occur any of the actions described in subsections (i) through
(vii) above.
(b) Access. Converge shall, and shall cause Converge's officers,
employees and Representatives to, afford the Representatives of the Company
access upon reasonable notice and at reasonable times to its employees and
Representatives, properties, Books and Records, Contracts and other Assets, and
shall furnish the Company and its Representatives, upon reasonable notice and in
a timely manner, all financial, operating and other data and information as the
Company, through its Representatives, may reasonably request.
(c) Notification of Certain Matters. Converge shall give prompt notice
to VerticalNet of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty of
Converge contained in this Agreement to be untrue or inaccurate in any material
respect and (ii) any material failure of Converge to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that such disclosure shall not be deemed to cure
any breach of a representation, warranty, covenant or agreement or to satisfy
any condition. Converge shall promptly notify VerticalNet of any Default, the
threat or commencement of any Action, or any development that occurs before the
Closing that could reasonably be expected to result in a Material Adverse Effect
with respect to Converge.
(d) Satisfaction of Conditions. From and after the date hereof Converge
shall take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to satisfy the conditions set forth in
Sections 8.2 and 8.4.
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(e) Intellectual Property. Prior to the Closing Date, Converge shall
provide representations and warranties to VerticalNet of the nature of those set
forth in Section 4.22(a).
7.5 Further Assurances. Upon the terms and subject to the conditions
contained herein, the Parties shall, in each case both before and after the
Closing, (a) use all commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements, (including the filing of all
materials necessary under the HSR Act within seven Business Days of the date
hereof) (b) execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder and under the Ancillary Agreements and (c) cooperate with
each other in connection with the foregoing. Without limiting the foregoing, the
Parties shall use their respective reasonable commercial efforts (i) to obtain
any necessary Consents (including all filings required to be made under the HSR
Act with respect to this Agreement and the transactions contemplated hereby)
(ii) give all notices to, and make all registrations and filings with third
parties, including submissions of information requested by governmental
authorities and (iii) fulfill all other conditions to this Agreement.
7.6 Tax Matters. At any time prior to or following the Closing Date:
(a) Section 338 Elections. Converge shall not make any election under
section 338 of the Code (or any comparable provision under state or local law)
with respect to the purchase of the Company or any of its Subsidiaries. Converge
and the Company shall indemnify and hold harmless VerticalNet from and against
any and all Tax liability arising from the making of any such election in
violation of this paragraph.
(b) Consent for Certain Distributions. Each of Converge and the Company
shall not, without the prior written consent of VerticalNet, cause or permit any
of the foreign Subsidiaries of the Company to make any distribution of cash or
property during the Prohibited Period. The Prohibited Period shall mean the
period commencing on the Closing Date and ending on the date which is the last
day of the current taxable year of any such foreign Subsidiary. VerticalNet's
consent may be granted or withheld in VerticalNet's sole discretion, and may be
conditioned upon payment to VerticalNet of any increase in Tax Liability
resulting from such distribution. Converge and Company shall indemnify and hold
harmless VerticalNet from and against any and all Tax Liability arising from the
making of any such distributions during the Prohibited Period.
(c) Converge and VerticalNet shall treat this transaction as a purchase
of assets for federal income tax purposes.
(d) In the event that either VerticalNet or the Company appears before
the Singapore Economic Development Board (the "DEVELOPMENT BOARD"), VerticalNet
or the Company, as appropriate, shall provide Converge with prompt written
notice of such appearance, and shall use all commercially reasonable efforts to
provide Converge the opportunity to participate in the activities of the
Development Board; provided, however, that nothing shall prevent VerticalNet
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or the Company from appearing before the Development Board in the event that a
failure to so appear would impair any of the assets, operations or rights of
VerticalNet or the Company.
7.7 Board of Directors. Within 90 days from the date hereof, Converge
shall take such action as VerticalNet may reasonably deem appropriate to
increase the number of Converge's directors to seven.
7.8 ▇▇▇▇▇▇▇▇ Agreement. Prior to the Closing Date, Converge shall, at
its sole option, either (i) assume the contractual obligations of VerticalNet
under ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ employment agreement with VerticalNet or (ii)
negotiate and enter into a new employment agreement with ▇▇. ▇▇▇▇▇▇▇▇.
ARTICLE 8.
CONDITIONS TO THE COMPANY'S AND VERTICALNET'S OBLIGATIONS
The obligation of the Company and VerticalNet to complete the
transactions contemplated by this Agreement are subject to the satisfaction or
waiver, on or prior to the Closing Date, of each of the following conditions:
8.1 Representations, Warranties and Covenants.
(a) Except as set forth in the last sentence hereof, the
representations and warranties (considered collectively) and each representation
and warranty (considered individually) of Converge contained in this Agreement
which are qualified by materiality, Material Adverse Effect or other words of
similar import shall be true and correct at and as of the Closing Date, unless
such representation or warranty specifically refers to another date, in which
case such representation or warranty shall have been true and correct in all
respects on such date, and all other representations and warranties of Converge
shall have been true and correct in all material respects at and as of the
Closing Date or such other specifically referenced date, and Converge shall have
performed in all material respects all agreements and covenants, including the
covenants contained in Article 7, required hereby to be performed prior to or at
the Closing Date (without regard to any materiality qualifier contained
therein). Any action permitted to be taken by Converge in the last sentence of
the first paragraph of Section 7.4(a) shall not be deemed to affect the truth or
correctness of the representation and warranty contained in Section 6.6.
(b) Converge shall have delivered to VerticalNet or the Company the
documents and other items described in Section 10.2 and such other documents and
items as the Company or VerticalNet may reasonably request.
(c) There shall be delivered to VerticalNet a certificate of an
executive officer of Converge to the foregoing effect ("CONVERGE CLOSING
CERTIFICATE").
8.2 Restated Certificate. Converge shall have adopted and filed with
the Secretary of State of Delaware the Restated Certificate.
8.3 Secretary's Certificate. The Secretary of Converge shall have
delivered to VerticalNet a certificate (the "CONVERGE SECRETARY'S CERTIFICATE")
certifying (a) the names, true
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signatures and incumbency of the officers authorized to sign the Agreement and
the Ancillary Agreements to which Converge is a party, (b) the resolutions of
Converge's Board of Directors and stockholders approving the transactions
contemplated by the Agreement and the Ancillary Agreements to which Converge is
a party, (c) Converge's Bylaws and (d) the Restated Certificate.
8.4 Investors Agreement. The Investors Agreement shall be amended and
restated in the form attached hereto as EXHIBIT A-1 and executed by a sufficient
number of the stockholders of Converge who are currently parties to the
Investors Agreement to effect such amendment, which shall then be binding upon
all stockholders of Converge.
8.5 Consents(a). The waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall have
expired or been terminated.
8.6 No Court Orders. No Action by any court, governmental authority or
other Person shall have been instituted or threatened wherein an unfavorable
resolution with respect to any Party could reasonably be expected to prevent the
carrying out of the transactions contemplated hereby and by the Ancillary
Agreements. There shall not be any Regulation or Court Order that makes the
assignment of VerticalNet's Company Membership Interest to Converge, or the
acquisition by Converge of all of the Company Membership Interest contemplated
hereby illegal or otherwise prohibited.
8.7 Opinions of Counsel. VerticalNet shall have received from Pillsbury
Winthrop LLP, counsel to Converge, dated as of the Closing Date, the opinions
set forth on B and VerticalNet shall have received from Morris, Nichols, Arsht &
▇▇▇▇▇▇▇, special Delaware counsel to Converge, dated as of the Closing Date, the
opinion set forth on EXHIBIT C.
ARTICLE 9.
CONDITIONS TO CONVERGE'S OBLIGATIONS
The obligations of Converge to complete the transactions contemplated
by this Agreement are subject, in the discretion of Converge, to the
satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
9.1 Representations, Warranties and Covenants.
(a) The representations and warranties (considered collectively) and
each representation and warranty (considered individually) of the Company and
VerticalNet contained in this Agreement which are qualified by materiality,
Material Adverse Effect or other words of similar import shall be true and
correct at and as of the Closing Date, unless such representation or warranty
specifically refers to another date, in which case such representation or
warranty shall have been true and correct in all respects on such date, and all
other representations and warranties of the Company, and VerticalNet shall have
been true and correct in all material respects at and as of the Closing Date or
such other specifically referenced date, and the Company and Vector shall have
performed, in all material respects, all agreements and
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covenants, including the covenants contained in Article 7, required hereby to be
performed prior to or at the Closing Date (without regard to any materiality
qualifier contained therein).
(b) Each document required to be delivered by any of the Company or
VerticalNet pursuant to Section 10.1 must have been delivered.
(c) Each of VerticalNet and the Company shall have delivered to
Converge a certificate (the "COMPANY CLOSING CERTIFICATES") signed by an
executive officer of VerticalNet and a manager of the Company, respectively, to
the foregoing effect.
9.2 Consents(a). The waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall have
expired or been terminated.
9.3 No Actions or Court Orders. No Action by any court, governmental
authority or other Person shall have been instituted wherein an unfavorable
resolution with respect to any Party could reasonably be expected to prevent the
carrying out of the transactions contemplated hereby and by the Ancillary
Agreements. There shall not be any Regulation or Court Order that makes the
assignment of VerticalNet's Company Membership Interest as contemplated hereby
illegal or otherwise prohibited.
9.4 Secretary's Certificates.
The Secretary of the Company shall have delivered to Converge a
certificate (the "COMPANY SECRETARY'S CERTIFICATE") certifying (a) the names and
true signatures of the officers authorized to sign the Agreement and the
Ancillary Agreements to which the Company is a party, (b) the resolutions of the
Company's managers and sole member approving the transactions contemplated by
the Agreement and the Ancillary Agreements to which the Company is a party, (c)
the Operating Agreement and (d) the Company's Certificate of Formation.
The Secretary of VerticalNet shall have delivered to Converge a
certificate (the "VERTICALNET SECRETARY'S CERTIFICATE" and together with the
Company Secretary's Certificate, the "SELLERS' SECRETARY'S CERTIFICATES")
certifying (a) the names and true signatures of the officers authorized to sign
the Agreement and the Ancillary Agreements, (b) the resolutions of VerticalNet's
Board of Directors approving the transactions contemplated by the Agreement and
the Ancillary Agreements to which VerticalNet is a party, (c) VerticalNet's
Bylaws and (d) VerticalNet's Articles of Incorporation.
9.5 Ownership of ECXA. Converge shall have become, in accordance with
the letter agreement described in the last clause hereof, the sole owner,
directly or indirectly, of all outstanding ownership interests in Electronic
Commodity Exchange Asia Pte. Ltd. ("ECXA"), free of outstanding warrants,
options or other rights to purchase or otherwise obtain any such interests,
unless Converge's failure to become the sole owner of ECXA shall have resulted
solely from any breach by Converge of any representation, warranty, covenant or
agreement set forth in the letter agreement dated as of the date hereof, by and
between Sumitomo Corporation, Sumitronics Asia Holding Pte Ltd., the Company,
VerticalNet and Converge.
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9.6 Closing Documents. The Company or VerticalNet, or both, as the case
may be, shall have delivered to Converge the documents and other items described
in Section 10.1.
9.7 Tax Matters. No new elections with respect to Taxes, or changes in
current elections with respect to Taxes, affecting the Company shall have been
made after the date of this Agreement without the prior written consent of
Converge, which consent shall not be unreasonably withheld.
9.8 Opinion of Counsel. Converge shall have received from the General
Counsel of the Company, dated as of the Closing Date, the opinion set forth on
EXHIBIT D and Converge shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇ & Bockius LLP,
counsel to VerticalNet, dated as of the Closing Date, the opinions set forth on
EXHIBIT E.
9.9 Material Adverse Change. Since the date hereof, there shall not
have been any Company Material Adverse Change.
ARTICLE 10.
CLOSING
On the Closing Date:
10.1 Deliveries to Converge by VerticalNet and/or the Company. Each of
the Company and VerticalNet shall deliver (or cause to be delivered) to
Converge:
(a) counterparts to the Ancillary Agreements to which it
is a party;
(b) any Consents required to be obtained by the Company
or VerticalNet under Section 9.2 hereof;
(c) the Company Closing Certificates;
(d) the opinions provided for in Section 9.8;
(e) the Sellers' Secretary's Certificates; and
(f) evidence of the release of the intercompany
indebtedness owed VerticalNet by the Company and
evidence that the intercompany account balance,
immediately following Closing, will be $0.
10.2 Deliveries by Converge to VerticalNet and/or the Company. Converge
shall deliver to VerticalNet:
(a) counterparts to the Ancillary Agreements to which it
is a party:
(b) any Consents required to be obtained by Converge
under Section 8.5 hereof;
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(c) the Converge Closing Certificate;
(d) the opinions provided for in Section 8.7;
(e) the Cash Consideration, by wire transfer in
immediately available funds;
(f) evidence of filing of the Restated Certificate with
the Secretary of the State of Delaware;
(g) certificates representing the Stock Consideration;
and
(h) the Converge Secretary's Certificate.
ARTICLE 11.
INDEMNIFICATION
11.1 Survival of Representations, etc. All statements contained in this
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the Parties pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by such Party hereunder. The representations and
warranties contained herein (and claims based upon or arising out of such
representations and warranties, as well as any claims based upon or arising out
of any covenants and agreements herein or made hereunder) may be asserted at any
time and shall survive the Closing Date until the relevant dates set forth in
Section 11.3(c). No investigation made by any of the Parties (whether prior to,
on or after the Closing Date) shall in any way limit the representations and
warranties of the Parties. On the Closing Date all representations and
warranties contained in this Agreement and made by the Company shall expire as
to the Company and thereafter will be deemed to have been made exclusively by
VerticalNet. The termination of the representations and warranties provided
herein shall not affect the rights of a Party in respect of any claim made by
such Party in a writing received by any other Party prior to the expiration of
the applicable survival period provided in Section 11.3(c).
11.2 Indemnification.
(a) General.
(i) Subsequent to the Closing, VerticalNet shall, subject to
the limitations contained in Sections 3.5 and 11.3, indemnify Converge,
its Affiliates, and each of their respective, officers, directors,
employees, stockholders and agents ("CONVERGE INDEMNIFIED PARTIES")
against, and hold each of the Converge Indemnified Parties harmless
from, any damage, claim, Encumbrance, loss, cost, Tax, Liability or
expense (including interest, penalties, reasonable attorneys' fees and
expenses of investigation), diminution of value, response action,
removal action or remedial action (collectively "DAMAGES") sustained,
suffered or incurred by any such Converge Indemnified Party, that arise
out of or relate to, the breach of any warranty, representation,
covenant or agreement of the Company or VerticalNet contained in this
Agreement or any schedule hereto delivered by or on behalf of the
Company or VerticalNet pursuant to this
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Agreement or in connection with the transactions contemplated hereby,
net of any related insurance recoveries and any related reductions
after Closing in the federal, state or local Liability of any Converge
Indemnified Party or the Company for Taxes paid or payable during the
tax year in which a Claim, as defined in Section 11.2(b), is made or
any refund of a prior Liability attributable to adjustments to the
income, deductions or credits of any Converge Indemnified Party or the
Company resulting from any event that is a basis for indemnification
under this Section 11.
(ii) Subsequent to the Closing, subject to the limitations
contained in Sections 3.5 and 11.3, Converge shall indemnify
VerticalNet, its Affiliates, and each of their respective partners,
officers, directors, employees, shareholders and agents, as the case
may be ("VERTICALNET INDEMNIFIED PARTIES"), against, and hold each of
the VerticalNet Indemnified Parties harmless from, any Damages
sustained, suffered or incurred by such VerticalNet Indemnified Party,
that arise out of or relate to, whether directly or indirectly, the
breach of any warranty, representation, covenant or agreement of
Converge contained in this Agreement or delivered by Converge pursuant
to this Agreement net of any related insurance recoveries and any
related reductions after Closing in the federal, state or local
Liability of any VerticalNet Indemnified Party or the Company for Taxes
paid or payable during the tax year in which a Claim, as defined in
Section 11.2(b), is made or any refund of a prior Liability
attributable to adjustments to the income, deductions or credits of any
VerticalNet Indemnified Party or the Company resulting from any event
that is a basis for indemnification under this Section 11. In the case
of Damages actually sustained, suffered or incurred by a VerticalNet
Indemnified Party ("ACTUAL DAMAGES"), any VerticalNet Indemnified Party
that is an equity owner of Converge shall be deemed to have sustained,
suffered or incurred Damages in an amount that is at least equal to
such VerticalNet Indemnified Party percentage ownership interest in
Converge multiplied by the amount of such Actual Damages.
(iii) To the extent that any Converge Indemnified Party
recovers a Claim for Damages related to a breach of Section 4.25 due to
the fact that an account receivable was not collectible within the time
period set forth therein and payment of such accounts receivable is
subsequently received, the amount of such payment will promptly be paid
to Seller.
The term "DAMAGES" as used in this Section 11.2 is not limited to
matters asserted by third parties against VerticalNet Indemnified Parties or
Converge Indemnified Parties, but includes Damages incurred or sustained by such
Persons in the absence of third party claims. The right to obtain
indemnification provided in this Section 11.2(a) is the sole recourse and remedy
at law or in equity for breaches of this Agreement, other than with respect to
Section 12.2 and 12.3 or as set forth in Section 3.3, in which case, in the
event of any breach or threatened breach by any Party, the non-breaching Party
shall be entitled to injunctive or other equitable relief, restraining such
breaching Party from engaging in conduct that would constitute a breach of the
obligations of a Party under such Sections. Such relief shall be in addition to
and not in lieu of any other remedies that may be available, including an action
for the recovery of Damages.
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(b) Procedure for Claims.
If a claim for Damages (a "CLAIM") is to be made by a VerticalNet
Indemnified Party or a Converge Indemnified Party entitled to indemnification
hereunder, the Person claiming such indemnification (the "CLAIMING PARTY") shall
give written notice (a "CLAIM NOTICE") to the indemnifying Person (the
"INDEMNIFYING PARTY") promptly after the Claiming Party becomes aware of any
fact, condition or event which gives rise to Damages for which indemnification
may be sought under this Section 11.2. The failure of any Claiming Party to give
timely notice hereunder shall not affect rights to indemnification hereunder
unless the rights of or remedies available to the Indemnifying Party are
prejudiced by such failure, and then only to the extent thereof. In the event
that fact or circumstance gives rise to a breach of more than one representation
or warranty by an Indemnifying Party, the Claiming Party shall only be entitled
to a make a Claim under one such representation or warranty and shall not have
the right to make a Claim under any other representation or warranty at any
time. In the case of a Claim involving the assertion of a claim by a third party
(whether pursuant to a lawsuit, other legal action or otherwise, a "THIRD-PARTY
CLAIM"), if the Indemnifying Party shall acknowledge in writing to the Claiming
Party that the Indemnifying Party shall be obligated to indemnify the Claiming
Party under the terms of its indemnity hereunder in connection with such
Third-Party Claim, then (i) the Indemnifying Party shall be entitled and, if it
so elects, shall be obligated at its own cost, risk and expense, (A) to take
control of the defense and investigation of such Third-Party Claim and (B) to
pursue the defense thereof in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued, including employing and
engaging attorneys of its own choice reasonably acceptable to the Claiming Party
to handle and defend the same, and (ii) the Indemnifying Party shall be entitled
(but not obligated), if it so elects, to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the
Claiming Party, such consent not to be unreasonably withheld. In the event the
Indemnifying Party elects to assume control of the defense and investigation of
such lawsuit or other legal action in accordance with this Section 11.2(b), the
Claiming Party may, at its own cost and expense, participate in the
investigation, trial and defense of such Third-Party Claim; provided that, if
the named Persons to a lawsuit or other legal action include both the
Indemnifying Party and the Claiming Party and the Claiming Party has been
advised in writing by counsel that there may be one or more legal defenses
available to such Claiming Party that are different from or additional to those
available to the Indemnifying Party, the Claiming Party shall be entitled, at
the Indemnifying Party's cost, risk and expense, to retain one firm of separate
counsel of its own choosing. If the Indemnifying Party fails to assume the
defense of such Third-Party Claim in accordance with this Section 11.2(b) within
10 Business Days after receipt of the Claim Notice, the Claiming Party against
which such Third-Party Claim has been asserted shall (upon delivering notice to
such effect to the Indemnifying Party) have the right to undertake, at the
Indemnifying Party's cost, risk and expense, the defense, compromise and
settlement of such Third-Party Claim on behalf of and for the account of the
Indemnifying Party; provided that such Third-Party Claim shall not be
compromised or settled without the written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. In the event the Indemnifying
Party assumes the defense of the claim, the Indemnifying Party shall keep the
Claiming Party reasonably informed of the progress of any such defense,
compromise or settlement, and in the event the Claiming Party assumes the
defense of the claim, the Claiming Party shall keep the Indemnifying Party
reasonably informed of the progress of any such defense, compromise or
settlement. The Indemnifying Party shall be liable for any settlement of
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any Third-Party Claim effected pursuant to and in accordance with this Section
11.2 and for any final judgment (subject to any right of appeal), and the
Indemnifying Party shall indemnify and hold harmless each Claiming Party from
and against any and all Damages by reason of such settlement or judgment.
11.3 Threshold; Limitations on Indemnity.
(a) The Converge Indemnified Parties shall not be entitled to recover
for any Damages until such time as the Damages claimed by the Converge
Indemnified Parties in the aggregate exceed $1.5 million (the "DAMAGE
THRESHOLD"), at which time the Converge Indemnified Parties shall be entitled to
be indemnified against and compensated and reimbursed for all such Damages in
excess of the initial $500,000 thereof. Notwithstanding the foregoing, the
maximum amount of Damages claimed by the Converge Indemnified Parties, in the
aggregate, shall not exceed the lesser of Cash Consideration or $52 million.
(b) The VerticalNet Indemnified Parties shall not be entitled to
recover for any Damages until such time as the Damages claimed by the
VerticalNet Indemnified Parties in the aggregate exceed the Damage Threshold, at
which time the VerticalNet Indemnified Parties shall be entitled to be
indemnified against and compensated and reimbursed for all such Damages in
excess of the initial $500,000 thereof. Notwithstanding the foregoing, the
maximum amount of Damages claimed by the VerticalNet Indemnified Parties, in the
aggregate, shall not exceed the lesser of the Cash Consideration or $52 million.
(c) Any claim for a breach of a covenant or of the representations and
warranties of the Parties contained in this Agreement shall survive the Closing
until September 30, 2002, except the representations and warranties set forth in
Sections 4.9, 4.16, 4.22, 4.23, 6.9 and 6.21 and the covenants contained in
Section 7.6 shall survive the Closing Date until the earlier of the fifth
anniversary of the Closing Date or the date that is 20 Business Days after the
date of the expiration of the applicable statute of limitations (including any
extensions thereof). The covenants and agreements (including any covenants and
agreements contained within the representations and warranties in Article 4, 5
or 6) of the Parties hereto shall survive the Closing until performed in
accordance with their terms. In the event that more than one such survival
period should apply to a Claim the shorter survival period shall be deemed to
govern the ability of a Claiming Party to timely bring such Claim.
ARTICLE 12.
MISCELLANEOUS
12.1 Termination.
(a) This Agreement may be terminated at any time prior to Closing:
(i) By the written agreement of Converge and VerticalNet;
(ii) By Converge or VerticalNet if the Closing shall not have
occurred on or before the Termination Date, other than due to a breach
of this Agreement by the Party seeking to terminate;
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(iii) By Converge if there is a material breach of any
representation or warranty set forth in Article 4 or Article 5 or any
covenant or agreement to be complied with or performed by the Company
or VerticalNet pursuant to the terms of this Agreement and such breach
persists for 10 Business Days or more after notice is given, so long as
any such breach is not caused solely by the action or inaction of
Converge;
(iv) By VerticalNet if there is a material breach of any
representation or warranty set forth in Article 6 hereof or of any
covenant or agreement to be complied with or performed by Converge
pursuant to the terms of this Agreement and such breach persists for 10
Business Days or more after written notice is given, so long as any
such breach is not caused solely by the action or inaction of the
Company or VerticalNet; or
(v) By Converge or VerticalNet if a court of competent
jurisdiction or governmental authority shall have issued a final and
nonappealable order in writing, or shall have taken such other action
having the effect of permanently restraining, enjoining, or otherwise
prohibiting the consummation of the transactions contemplated hereby.
(b) In the event of termination of this Agreement:
(i) The provisions of the Confidentiality Agreement and
Sections 4.22(j), 12.1(b), 12.2, 12.5, 12.7, 12.9 through 12.11, and
12.13 shall continue in full force and effect; and
(ii) Except as otherwise specified herein, no Party shall have
any liability to any other Party, except for any willful breach of, or
knowing misrepresentation made in, this Agreement occurring prior to
the formal termination of this Agreement.
(c) So long as Converge shall not have breached its obligations
hereunder, if this Agreement is terminated by Converge pursuant to clause
(a)(ii) or (a)(iii) of Section 12.1, within ten Business Days thereafter,
VerticalNet shall pay Converge a termination fee as set forth on Schedule
12.1(c).
12.2 Non-solicitation. Neither Converge nor VerticalNet, nor any of its
Affiliates will, itself or through agents or intermediaries, (i) prior to May 8,
2001, without the prior written consent of the other Party, hire any of the
other party's employees who hold a title of "vice president" or higher (each, a
"KEY EMPLOYEE") or (ii) prior to December 8, 2001, solicit any employee of the
other Party to cease their current employment and become an employee of the
soliciting party (except as is implicit in an acquisition of the Company by
Converge). Except with respect to Key Employees, this provision does not
prohibit a party's responding to unsolicited employment inquiries and/or
indirect solicitations and other employment activities (e.g., job postings,
advertising of positions) that are not specifically targeted at any particular
individual.
12.3 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by the Company or VerticalNet without the
prior written consent of Converge, or, subject to the following sentence, by
Converge without the prior written consent of VerticalNet. Notwithstanding the
previous sentence, Converge shall have the right to acquire, or to cause any of
its Affiliates (whether or not in existence on the date of this Agreement) to
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acquire, from the Company or any of its Subsidiaries any Proprietary Rights or
other Assets owned by the Company or such Subsidiary, for such amount payable in
Stock Consideration or Cash Consideration, in each case as the parties may
agree; provided that the amount of Stock Consideration or Cash Consideration
payable by Converge pursuant to Section 2.4 shall be reduced by the portion of
Stock Consideration or Cash Consideration, as the case may be, which shall have
been paid to acquire any Asset pursuant to this Section 12.3.
12.4 Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any Party to the other
shall be in writing and delivered in person or by courier, telegraphed, telexed,
sent by facsimile transmission, sent via overnight delivery service or mailed by
registered or certified mail (such notice to be effective upon receipt), as
follows:
If to the Company:
▇▇▇▇.▇▇▇ LLC
Four ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to VerticalNet:
VerticalNet, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & BOCKIUS LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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If to Converge:
Converge, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
PILLSBURY WINTHROP LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other place and with such other copies as any Party may designate as
to itself by written notice to the others in accordance herewith.
Each such notice, request, instruction or other document shall be
effective (a) if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 12.4 and the appropriate facsimile
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section 12.4.
12.5 Choice of Law. This Agreement 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.
12.6 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 Agreement 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 Agreement and has executed this Agreement free from coercion,
duress or undue influence.
12.7 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto and, the Ancillary Agreements, 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, of the Parties including the Memorandum of
Understanding dated December 12, 2000. No supplement, modification or waiver of
this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. This Agreement may be amended at any time; provided, however,
that no amendment shall be made without the further approval of VerticalNet as
sole member of the Company if such approval is required under applicable law. No
waiver of any of the provisions of this
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Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided. The waiver by any Party of any of
the conditions precedent to its obligations under this Agreement will not
preclude it from seeking redress for breach of this Agreement other than with
respect to the condition so waived.
12.8 Counterparts. This Agreement 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 Agreement to produce or account for more than one such counterpart.
12.9 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument, and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the Parties. The Parties
shall to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
12.10 Expenses. Except as set forth herein each Party shall pay its own
legal, accounting, advisory and other fees, and other out-of-pocket expenses
incurred in connection with the transactions contemplated hereby and will not
look to any other Party for any contribution toward such expenses. Converge
shall pay one half and VerticalNet shall pay one half of the HSR Act filing. The
Company shall not incur any of such fees, costs and expenses in excess of
$150,000 without the prior consent of VerticalNet and Converge (which will not
be unreasonably withheld).
12.11 Publicity. The Parties shall not issue any press release or make
any public statement other than the press release attached hereto as Schedule
12.11 or make any public statement regarding the transactions contemplated
hereby without the prior approval of each other Party which approval shall not
be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing,
any such press release or public statement may be issued by VerticalNet prior to
such consultation, if, in the opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, such press
release or public statement is required by applicable Regulation. In the event
that VerticalNet issues such a press release or public statement without
consulting with Converge, VerticalNet shall promptly provide a copy thereof to
Converge by facsimile in accordance with Section 12.4.
12.12 No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of each Party hereto and their successors
and assigns, and nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, including by way of
subrogation, except as specifically set forth herein.
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12.13 Service of Process; Consent to Jurisdiction.
(a) SERVICE OF PROCESS. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS
TO THE SERVICE OF ANY PROCESS, PLEADING, NOTICES OR OTHER PAPERS BY THE MAILING
OF COPIES THEREOF BY REGISTERED, CERTIFIED OR FIRST CLASS MAIL, POSTAGE PREPAID,
TO SUCH PARTY AT SUCH PARTY'S ADDRESS SET FORTH HEREIN, OR BY ANY OTHER METHOD
PROVIDED OR PERMITTED UNDER DELAWARE LAW.
(b) CONSENT AND JURISDICTION. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY (I) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING
ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT IN ANY DELAWARE STATE COURT SITTING
IN NEWCASTLE COUNTY OR IN THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
DELAWARE; (II) CONSENTS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING; AND (III) WAIVES ANY OBJECTION WHICH SUCH PARTY MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT.
[signature pages follow]
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IN WITNESS WHEREOF, each Party hereto has executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
VERTICALNET, INC.,
a Pennsylvania corporation
By: /s/ ▇▇▇▇▇ ▇. Mirage
--------------------------------------------
▇▇▇▇▇ ▇. Mirage
Vice President - Mergers & Acquisitions
CONVERGE, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Vice President and Treasurer
▇▇▇▇.▇▇▇ LLC,
a Delaware limited liability company
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and Chief Executive Officer
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APPENDIX I
DEFINED TERMS
"ACTION" has the meaning set forth in Section 4.15.
"AFFILIATE" of a particular Person means any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such particular Person. The term "control" (including, with correlative
meaning, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"ANCILLARY AGREEMENTS" means the Investors Agreement, in the form
attached hereto as EXHIBIT A-1, the Assignment and Assumption Agreement, the
License Agreement and all other agreements required hereunder to consummate the
transactions contemplated by this Agreement.
"ASSETS" means, with respect to a particular Person, the right, title
and interest of such Person in its properties, assets and rights of any kind,
whether tangible or intangible, real or personal, including, when referring
specifically to the Company, the right, title and interest of the Company in the
following:
a) all of its Contracts and Contract Rights;
b) all of its Fixtures and Equipment;
c) all of its Books and Records;
d) all of its Proprietary Rights;
e) all of its Permits;
f) all of its return and other rights under or pursuant to all
warranties, representations and guarantees made by suppliers
and other third parties in connection with the Assets or
services furnished to such Person;
g) all of its cash, accounts receivable, deposits and prepaid
expenses; and
h) all of its goodwill.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and
Assumption Agreement between Converge and VerticalNet as of the Closing Date.
"BALANCE SHEET" means the balance sheet of the Company as of the
Balance Sheet Date.
"BALANCE SHEET DATE" means October 31, 2000.
"BENEFIT ARRANGEMENT" means any employment, consulting, severance or
other similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement
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or commitment (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(b) is entered into, maintained, contributed to or required to be contributed
to, as the case may be, by the Company or any ERISA Affiliate or under which the
Company or any ERISA Affiliate may incur any liability, and (c) covers any
employee or former employee of the Company or any ERISA Affiliate.
"BOOKS AND RECORDS" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets or
the Business of the Company or Converge, as the case may be, (b) all books,
records, lists, ledgers, financial data, files, reports, product and design
manuals, plans, drawings, technical manuals and operating records of every kind
relating to the Assets or the Business (including records and lists of
customers, distributors, suppliers and personnel) of the Company or Converge, as
the case may be, and (c) all telephone and fax numbers used in the Business, in
each case whether maintained as hard copy or stored in computer memory and
whether owned by the Company or Converge, as the case may be, or their
respective Affiliates.
"BUSINESS" means, with respect to a particular Person, the business and
operations of such Person, including, when referring to the Company, operations
conducted and document-sharing software provided in connection with its web site
and related services.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day on
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York.
"CASH CONSIDERATION" means $60 million, other than with respect to
references to such term in Article 11, in which case such term shall mean $60
million, as adjusted pursuant to Section 3.4.
"CLAIM" has the meaning set forth in Section 11.2(b).
"CLOSING" has the meaning set forth in Section 2.1.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986.
"COMPANY CLOSING CERTIFICATES" has the meaning set forth in Section
9.1(c).
"COMPANY'S KNOWLEDGE" or phrases of similar import shall mean the
actual knowledge, without any independent investigation, of any of ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇. ▇▇▇▇▇▇.
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"COMPANY MATERIAL ADVERSE EFFECT" or "COMPANY MATERIAL ADVERSE CHANGE"
means a Material Adverse Effect with respect to the Company, VerticalNet, the
Business of the Company or the Assets of the Company.
"COMPANY MEMBERSHIP INTEREST" means, with respect to a Person, the
entire ownership interest and rights of such Person (expressed as a percentage),
in the Company (whether in the capital or profits thereof). The sum of the
Company Membership Interest for all such Persons shall equal 100%.
"COMPANY SCHEDULE OF EXCEPTIONS" has the meaning set forth in the
preamble of Article 4.
"COMPONENT" means any software, Software Product, Custom Software,
Hardware, Database or Embedded Control.
"CONSENTS" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"CONTRACT RIGHTS" means all rights and obligations under the Contracts.
"CONTRACTS" means all agreements, contracts, leases (whether for real
or personal property), purchase orders, undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, instruments,
obligations and commitments to which the Company or Converge, as the case may
be, is a party or by which the Company or Converge, as the case may be, or any
of its Assets are bound or subject, whether written or oral.
"CONVERGE CLOSING CERTIFICATE" has the meaning set forth in Section
8.1(c).
"CONVERGE COMMON STOCK" means the common stock, $.001 par value per
share, of Converge.
"CONVERGE MATERIAL ADVERSE EFFECT" or "CONVERGE MATERIAL ADVERSE
CHANGE" means a Material Adverse Effect with respect to Converge, the Business
or the Assets.
"CONVERGE OPTIONS" has the meaning set forth in Section 6.2(b).
"CONVERGE'S FINANCIAL STATEMENTS" means (a) the unaudited balance sheet
of Converge as of October 31, 2000 and the related statements of income, changes
in stockholders' equity and cash flows, of Converge for the period then ended
and (b) the unaudited quarterly financial statements of the Company as of July
31, 2000 and the related statements of income and changes in stockholders'
equity and cash flows, of Converge for the three months then ended.
"CONVERGE'S KNOWLEDGE" or phrases of similar import shall mean the
actual knowledge, without any independent investigation, of any of ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ Melbourne.
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"COURT ORDER" means any judgment, decision, consent decree, injunction,
ruling or order of any foreign, federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"CUSTOM SOFTWARE" means any computer software that has been developed
or designed for use in the Business.
"DAMAGES" has the meaning set forth in Section 11.2(a)(i).
"DATABASE" means any data and other information recorded, stored,
transmitted and retrieved in electronic form by a System or any Component,
whether located on any Components of a System or archived in storage media of a
type employed or used in conjunction with any Component or System.
"DEFAULT" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"DGCL" means the Delaware General Corporate Law.
"EMBEDDED CONTROL" means any microprocessor, microcontroller, smart
instrumentation or other sensor, driver, monitor, robotic or other device
containing a semiconductor, memory circuit, BIOS, PROM or other microchip, all
as the same is used in the operation of the Business.
"EMPLOYEE PLANS" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"EMPLOYEES" means, with respect to a particular Person, all officers
and managers of the Person and all other Persons employed by such Person on a
full or part-time basis.
"ENFORCEABILITY EXCEPTIONS" means the effect of (a) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws, from time to time in effect, relating to or affecting the rights of
creditors, (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and (c) with
respect to the indemnification provisions set forth in this Agreement or the
Ancillary Agreements, applicable federal and state securities laws.
"ENCUMBRANCE" means any claim, lien, pledge, option, charge, equitable
interest, community property interest, right of first refusal, easement, tax
assessment, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" means all notices of violation, liens, claims,
demands, suits, or causes of action for any damage, including personal injury,
property damage (including any
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depreciation or diminution of property values) or lost use of property, arising
directly or indirectly out of Environmental Conditions or Environmental Laws. By
way of example only (and not by way of limitation), Environmental Claims include
(i) violations of or obligations under any contract related to Environmental
Laws or Environmental Conditions between the Company or Converge, as the case
may be, and any other person, (ii) actual or threatened damages to natural
resources, (iii) claims for nuisance or its statutory equivalent, (iv) claims
for the recovery of response costs, or administrative or judicial orders
directing the performance of investigations, responses or remedial actions under
any Environmental Laws, (v) requirements to implement "corrective action"
pursuant to any order or permit issued pursuant to the Resource Conservation and
Recovery Act, or similar provisions of applicable state law, (vi) claims related
to Environmental Laws or Environmental Conditions for restitution, contribution,
or indemnity, (vii) fines, penalties or liens of any kind against property
related to Environmental Laws or Environmental Conditions, (viii) claims related
to Environmental Laws or Environmental Conditions for injunctive relief or other
orders or notices of violation from federal, state or local agencies or courts,
and (ix) with regard to any present or former employees, claims relating to
exposure to or injury from Environmental Conditions.
"ENVIRONMENTAL CONDITIONS" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, Release, or threatened Release
of Hazardous Substances by the Company or Converge, or any of their predecessors
or successors in interest, or by their respective agents, representatives,
employees or independent contractors when acting in such capacity on behalf of
the Company or Converge, as the case may be. With respect to Environmental
Claims by third parties, Environmental Conditions also include the exposure of
persons to Hazardous Substances at the work place or the exposure of persons or
property to Hazardous Substances migrating from or otherwise emanating from or
located on property owned or occupied by the Company.
"ENVIRONMENTAL LAWS" means all applicable federal, state, district and
local laws, all rules or regulations promulgated thereunder, and all orders,
consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata), including (i) laws relating to the Release or
threatened Release of Hazardous Substances into the environment and (ii) laws
relating to the identification, generation, manufacture, processing,
distribution, use, treatment, storage, disposal, recovery, transport or other
handling of Hazardous Substances. Environmental Laws shall include the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Toxic Substances Control Act, the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act ("RCRA"), the
Clean Water Act, the Safe Drinking Water Act, the Clean Air Act, the
Occupational Safety and Health Act, and all analogous laws promulgated or issued
by any state or other governmental authority.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" means any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an
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"affiliated service group" with, or otherwise required to be aggregated with,
the Company or Converge, as the case may be, as set forth in Section 414(b),
(c), (m) or (o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FACILITIES" means offices, administration buildings, real property
and related facilities.
"FINANCIAL STATEMENTS" means (a) the audited balance sheet of the
Company (or its predecessor, as the case may be) as of December 31, 1999 and the
audited balance sheet and the related statements of income, changes in members'
equity and cash flows, of the Company for the 11 months ended November 30, 1999,
together with the report of the Company's independent accountants thereon, (b)
the unaudited quarterly financial statements of the Company as of March 31,
2000, June 30, 2000 and September 30, 2000 and the related statements of income
and changes in members' equity and cash flows, of the Company for the three
months then ended (c) unaudited monthly financial statements for the months
ended September 2000 and October 2000 and (d) the notes thereto (except for the
monthly financial statements).
"FIXTURES AND EQUIPMENT" means all of the furniture, fixtures,
furnishings, computer hardware, and other tangible personal property owned by
the Company or Converge, as the case may be, wherever located.
"FORMER PROPERTIES" means all offices, warehouses, administration
buildings and all real property and related facilities owned, leased or operated
by the Company or any predecessor prior to the date hereof, but excluding the
Facilities.
"GAAP" means generally accepted United States accounting principles,
applied on a consistent basis.
"HARDWARE" means any mainframe, midrange computer, personal computer,
notebook or laptop computer, server, switch, printer, modem, driver, peripheral
or any component of any of the foregoing, all as the same is used in the
operation of the Business.
"HAZARDOUS SUBSTANCES" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation under Environmental Laws. By way of example only, the term
Hazardous Substances includes petroleum, urea formaldehyde, flammable, explosive
and radioactive materials, polychlorinated biphenyls, pesticides, herbicides,
asbestos, and chemical solvents.
"HSR ACT" means the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of
1976.
"INVESTORS AGREEMENT" shall mean the Investors Agreement among Converge
and the stockholders party thereto as in effect from time to time.
"LEASED PROPERTY" has the meaning set forth in Section 4.7(b).
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"LEASES" means leases, subleases, licenses, options, rights,
concessions or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any personal property or portion of a
parcel of real property, as the case may be.
"LIABILITY" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"LICENSE AGREEMENT" means the form of Software License Agreement by and
between Vert Tech LLC and ▇▇▇▇.▇▇▇ LLC, attached hereto.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" or a similar
phrase, with respect to any Person, means any change, effect or circumstance
that, individually or in the aggregate, is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of such Person and its
Subsidiaries, taken as a whole; provided, however, that the following shall not
be taken into account in determining whether there has been or would be a
Material Adverse Effect or Material Adverse Change on or with respect to such
Person (a) any change, effect or circumstance relating to conditions affecting
the United States economy generally; (b) any change, effect or circumstance
relating to conditions generally affecting the industry (or industries) in which
such Person participates, and not affecting such Person in a materially
disproportionate manner; and (c) any change, circumstance or effect caused by
the announcement or pendency of this Agreement, or the transactions contemplated
hereby.
"MULTIEMPLOYER PLAN" means any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which the Company or Converge, as the
case may be, or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of the Company or Converge, as the case may be, or
any ERISA Affiliate.
"OPERATING AGREEMENT" means the Limited Liability Company Operating
Agreement of NECX Acquisition LLC entered into as of November 10, 1999 by
VerticalNet.
"PENSION PLAN" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
Converge, as the case may be, or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the five years prior
to the Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which the Company or Converge, as the case may be, or
any ERISA Affiliate may incur any liability (including any contingent liability)
and (b) covers any employee or former employee of the Company or Converge, as
the case may be, or any ERISA Affiliate.
"PERMITTED ENCUMBRANCES" means (a) statutory liens of landlords, liens
of carriers, warehousepersons, mechanics and materialpersons incurred in the
ordinary course of business for sums (i) not yet due and payable, or (ii) being
contested in good faith, if, in either such case,
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an adequate reserve, shall have been made therefor in such Person's financial
statements, (b) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, (c) easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case, which do
not interfere with the ordinary conduct of business of such Person and do not
materially detract from the value of the property upon which such encumbrance
exists, and (d) liens securing taxes, assessments and governmental charges not
yet delinquent.
"PERMITS" means all licenses, permits, franchises, authorizations or
orders of any governmental authority, whether foreign, federal, state or local
necessary or desirable for the conduct or operation of the business of any
Person as it is presently conducted, or the ownership of the assets of such
Person.
"PERSON" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar legal entity.
"PROPRIETARY RIGHTS" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including ▇▇▇▇▇
patents and utility models and applications (including provisional applications)
therefor, (b) U.S. and foreign trademarks, service marks, trade dress, logos,
trade names and corporate names and the goodwill associated therewith and
registrations and applications for registration thereof, (c) U.S. and foreign
copyrights and registrations and applications for registration thereof, (d) U.S.
and foreign mask work rights and registrations and applications for registration
thereof, (e) Trade Secrets, (f) URL and domain name registrations, (g) other
proprietary rights, (h) copies and tangible embodiments thereof (in whatever
form or medium) and (i) licenses granting any rights with respect to any of the
foregoing.
"PURCHASE PRICE" means the sum of the Cash Consideration and the Stock
Consideration.
"REGULATIONS" means any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines and orders of any
foreign, federal, state or local government and any other governmental
department or agency, including energy, motor vehicle safety, public utility,
zoning, building and health codes, Environmental Laws, occupational safety and
health and laws respecting employment practices, employee documentation, terms
and conditions of employment and wages and hours.
"RELATED PARTY" means VerticalNet and (i) any of the Company's
officers, directors and members, relatives of such officers, directors and
members and (ii) any Person in which the Company or VerticalNet has a 5% or
greater direct or indirect equity interest.
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"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
Hazardous Substances into the environment.
"REPRESENTATIVE" of any Person means any officer, director, principal,
consultant, advisor, agent, employee or other representative of such Person,
including legal counsel, accountants and financial advisors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SERIES B PREFERRED STOCK" means the Series B Convertible Preferred
Stock, $.001 par value per share, of Converge.
"SOFTWARE PRODUCTS" means any computer software products sold,
distributed or marketed by the Company, and all computer operating, security or
programming software, that is owned by or licensed to the Company or used, in
whole or in part, directly or indirectly, or has been developed or designed for
or is in the process of being developed or designed for use, in whole or in
part, directly or indirectly, in the conduct of the Business of any nature
whatsoever, including all systems software, all applications software, whether
for general business usage (e.g., accounting, finance, word processing,
graphics, spreadsheet analysis, etc.) or specific, unique-to-the-Business usage
(e.g., telephone call processing, etc.), and any and all documentation and
object and source codes related thereto, all as used in the operation of the
Business. "Software Products" does not include commercial off the shelf
software.
"STOCK CONSIDERATION" means 10,371,319 shares of Series B Preferred
Stock and 1,094,751 shares of non-voting Common Stock, subject to adjustment for
stock splits, stock combinations and the like.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members to the board of directors, or other
persons performing similar functions with respect to such corporation, is held,
directly or indirectly, by such Person, (b) any partnership or limited liability
company of which (i) such Person is a general partner or managing member or (ii)
such person possesses a 50% or greater interest in the total capital or total
income of such partnership or limited liability company.
"TAKEOVER STATUTE" means a "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States.
"TAX RETURN" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) including information returns, and any
documents with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
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"TAXES" means any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, estimated, excise, value-added,
real or personal property, sales, withholding, social security, retirement,
unemployment, disability occupation, worker's compensation, use, service,
license, utility, net worth, payroll, ad valorem, franchise and transfer and
recording, imposed by the Internal Revenue Service or any taxing authority or
jurisdiction (whether domestic or foreign, including any federal, state, county,
local or foreign government or any subdivision or taxing agency thereof
(including a U.S. possession)), whether computed on a separate, consolidated,
unitary, combined or any other basis and whether disputed or not; and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments.
"TRADE SECRETS" means all trade secrets and confidential business
and/or technical data or information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, research and development information, software, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans, marketing mailing and e-mail lists, and customer and
supplier mailing and e-mail lists and information).
"VERTICALNET'S ACCOUNTANTS" means KPMG LLP.
"WELFARE PLAN" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) the Company or Converge, as the case may be, or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or under which the Company or Converge, as the case may be, or
any ERISA Affiliate may incur any liability and (b) covers any Employee or
former Employee of the Company or Converge, as the case may be, or any ERISA
Affiliate.
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