EXHIBIT 10.3

 

--------------------------------------------------------------------------------

 

EXCHANGE AGREEMENT

 

dated as of July 22, 2003

 

by and between

 

VERTICALNET, INC.

 

and

 

TQA MASTER FUND, LTD.

 

--------------------------------------------------------------------------------

 

Relating to

 

5 1/4% Convertible Subordinated Debentures due 2004

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

               Page

--------------------------------------------------------------------------------

1.   

Definitions

   1 2.   

Agreement to Exchange; Exchange Value

   3      (a)   

Agreement to Exchange

   3      (b)   

Closing

   4      (c)   

DWAC and DTC Delivery

   4 3.   

Representations, Warranties, Covenants, Etc. of the Holder

   4      (a)   

Ownership of Securities

   4      (b)   

Authority

   4 4.   

Representations, Warranties, Covenants, Etc. of the Company

   4      (a)   

Organization and Authority

   5      (b)   

Concerning the Shares

   5      (c)   

Corporate Authorization

   5      (d)   

Non-contravention

   5      (e)   

Approvals, Filings, Etc

   6      (f)   

Information Provided

   6      (g)   

SEC Filings

   6      (h)   

Absence of Certain Changes

   6      (i)   

Absence of Brokers, Finders, Etc

   6      (j)   

Certain Securities Law Matters

   6      (k)   

No Integrated Offering

   6 5.   

Covenants

   6      (a)   

Exchange with Holders of Other Debentures

   6      (b)   

Principal Market Listing; Reporting Status

   7      (c)   

State Securities Laws

   7 6.   

Conditions to the Company’s Obligation to Exchange

   7 7.   

Conditions to the Holder’s Obligations to Exchange

   7 8.   

Indemnification and Contribution

   8      (a)   

Indemnification

   8      (b)   

Contribution

   9      (c)   

Other Rights

   9 9.   

Miscellaneous

   9      (a)   

Governing Law

   9      (b)   

Headings

   9      (c)   

Severability

   9      (d)   

Notices

   9      (e)   

Counterparts

   10      (f)   

Entire Agreement; Benefit

   10      (g)   

Waiver

   10      (h)   

Amendment

   10      (i)   

Best Efforts

   10      (j)   

Further Assurances

   10      (k)   

Expenses

   11      (l)   

Termination

   11

 

--------------------------------------------------------------------------------

TABLE OF CONTENTS

(continued)

 

               Page

--------------------------------------------------------------------------------

     (m)   

Survival

   11      (n)   

Public Statements, Press Releases, Etc

   11      (o)   

Construction

   11

ANNEXES

          ANNEX I    Form of Warrant      ANNEX II    Form of Opinion of General
Counsel to be Delivered on the Closing Date     

--------------------------------------------------------------------------------

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT, dated as of July 22, 2003 (this “Agreement”), by and
between VERTICALNET, INC., a Pennsylvania corporation (the “Company”), and TQA
MASTER FUND, LTD., a New York limited partnership (the “Holder”).

 

W I T N E S S E T H:

 

WHEREAS, the Holder is the owner of one or more Debentures (such capitalized
term and all other capitalized terms used in this Agreement having the meanings
provided in Section 1);

 

WHEREAS, upon the terms and subject to the conditions of this Agreement, the
Holder wishes to exchange the Debentures with the Company for shares of Common
Stock, Warrants to purchase shares of Common Stock and cash, and the Company
wishes to issue shares of Common Stock, Warrants and pay cash to the Holder in
exchange for the Debentures; and

 

WHEREAS, the parties hereto intend that the shares of Common Stock to be issued
in exchange for the Debentures be exempt from registration pursuant to Section
3(a)(9) of the 1933 Act;

 

NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1. Definitions.

 

(a) As used in this Agreement, the terms “Agreement”, “Company” and “Holder”
shall have the respective meanings assigned to such terms in the introductory
paragraph of this Agreement.

 

(b) All the agreements or instruments herein defined shall mean such agreements
or instruments as the same may from time to time be supplemented or amended or
the terms thereof waived or modified to the extent permitted by, and in
accordance with, the terms thereof and of this Agreement.

 

(c) The following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

 

“Change of Control” shall mean an event or series of events as a result of which
(i) any “person” (as such term is used in Section 13(d)(3) of the 1934 Act)
acquires beneficial ownership, directly or indirectly, through a purchase,
merger or other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such person to exercise more than 50% of
the combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company (the “Voting Stock”), other
than any such acquisition by the Company, any subsidiary of the Company or any
employee benefit plan of the Company and excluding the transactions contemplated
hereunder and under similar agreements executed with other holders of the
Company’s 5¼% Convertible Subordinated Debentures due 2004 and any equity
financing that closes not more than 10 business days following the Closing Date;
or (ii) the Company consolidates with or merges into any other person, any
merger of another person into the Company, or any conveyance, transfer, sale,
lease or other disposition of all or substantially all of the properties and
assets of the Company to another person, other than (a) any such transaction (x)
that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock of the Company and (y)
pursuant to which holders of

 

--------------------------------------------------------------------------------

capital stock immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, more than 50% of the total voting power of the
Voting Stock of the continuing or surviving person immediately after such
transaction and (b) any merger which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares
of Common Stock of the surviving entity. Beneficial ownership will be determined
in accordance with Rule 13d-3 under the 1934 Act.

 

“Claims” means any losses, claims, damages, liabilities or expenses (joint or
several), incurred by a Person.

 

“Closing Date” means 12:00 noon, New York City time, on July 23, 2003 or such
other mutually agreed to time.

 

“Common Stock” means the Common Stock, par value $0.01 per share, of the
Company.

 

“Common Stock Equivalents” means any warrant, option, subscription or purchase
right with respect to shares of Common Stock, any security convertible into,
exchangeable for, or otherwise entitling the holder thereof to acquire, shares
of Common Stock or any warrant, option, subscription or purchase right with
respect to any such convertible, exchangeable or other security.

 

“Debentures” means $300,000 aggregate principal amount of the Company’s 5 1/4%
Convertible Subordinated Debentures due 2004, owned by the Holder and registered
in the name of the Holder or its nominee.

 

“DTC” means The Depository Trust Company.

 

“Event of Default” shall have the meaning provided in the Indenture.

 

“Exchange Consideration” shall have the meaning provided in Section 2(a)(1).

 

“Indemnified Person” means the Holder and each of its affiliates and their
respective officers, directors, stockholders and members and each Person who
controls the Holder within the meaning of the 1933 Act or the 1934 Act.

 

“Indenture” means the Indenture, dated as of September 27, 1999, between the
Company and Deutsche Bank (as successor to Bankers Trust Company), a New York
banking corporation, as Trustee, relating to the Company’s 5 1/4% Convertible
Subordinated Debentures due 2004.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended.

 

“1933 Act” means the Securities Act of 1933, as amended.

 

“Person” means any natural person, corporation, partnership, limited liability
company, trust, incorporated organization, unincorporated association, or
similar entity or any government, governmental agency or political subdivision.

 

“Principal Market” means the Nasdaq Smallcap Market or such other U.S. market or
exchange which is the principal market on which the Common Stock is then listed
for trading.

 

“Rule 144” means Rule 144 under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time provide a “safe harbor” exemption
from registration under the 1933 Act so

 

- 2 -

--------------------------------------------------------------------------------

as to permit a holder of any securities to sell securities of the Company to the
public without registration under the 1933 Act.

 

“SEC” means the Securities and Exchange Commission.

 

“SEC Reports” means all annual reports, quarterly reports, proxy statements and
other reports filed by the Company under the 1934 Act, in each case as filed
with the SEC and including the information and documents (other than exhibits)
incorporated therein by reference.

 

“Shares” means the shares of Common Stock issuable or issued in exchange for the
Debentures.

 

“Short Sale” shall have the meaning given such term in Rule 3b-3 under the 1934
Act as in effect on the date of this Agreement.

 

“Subsidiary” means any corporation or other entity of which a majority of the
capital stock or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Company.

 

“Trading Day” means a day on which the Principal Market is open for the general
trading of securities.

 

“Violation” means

 

(i) any violation or alleged violation by the Company of the 1933 Act, the 1934
Act, any state securities law or any rule or regulation under the 1933 Act, the
1934 Act or any state securities law, or

 

(ii) any breach or alleged breach by any Person other than the Holder of any
representation, warranty, covenant, agreement or other term of this Agreement.

 

“Warrant” means a warrant to purchase 48,000 shares of Common Stock at an
exercise price of $0.01 per share upon a Change of Control of the Company, in
substantially the form as Annex I attached hereto.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrant.

 

2. Agreement to Exchange; Exchange Value

 

(a) Agreement to Exchange. Upon the terms and subject to the conditions of this
Agreement,

 

(1) the Holder agrees to sell, assign, transfer and deliver the Debentures to
the Company in exchange for (A) payment by the Company to the Holder of $60,000
in cash, (B) issuance by the Company to the Holder of 72,000 Shares, (C)
issuance by the Company to the Holder of the Warrant and (D) payment by the
Company to the holder of an amount equal to accrued and unpaid interest on the
Debentures to the Closing Date in cash (collectively, the “Exchange
Consideration”); and

 

- 3 -

--------------------------------------------------------------------------------

(2) the Company agrees (A) to pay the Holder $60,000 in cash, (B) to issue to
the Holder 72,000 Shares, (C) to issue to the Holder the Warrant and (D) to pay
the Holder in cash an amount equal to accrued and unpaid interest on the
Debentures to the Closing Date, in exchange for the Debentures.

 

The Company agrees to cancel the Debentures in full immediately after the
closing.

 

(b) Closing. The closing of the exchange provided for in Section 2(a) shall
occur on the Closing Date at the Law Offices of Morgan, Lewis & Bockius LLP,
1701 Market Street, Philadelphia, Pennsylvania. At the closing, upon the terms
and subject to the conditions of this Agreement, (1) the Company shall pay or
issue, as applicable, the Exchange Consideration to the Holder against delivery
by the Holder to the Company of the Debentures in the manner provided in Section
2(c), and (2) the Holder shall deliver to the Company the Debentures against
payment and delivery by the Company to the Holder of the Exchange Consideration.

 

(c) DWAC and DTC Delivery. (1) The Company shall effect delivery of the Shares
to the Holder by causing its transfer agent electronically to transmit the
Shares to the Holder at the closing on the Closing Date by crediting the account
of the Holder’s broker with DTC through its Deposit Withdrawal Agent Commission
system under the Fast Automated Securities Transfer program. The Holder shall
furnish the name and account number of its broker to the Company prior to the
closing in order to effect such delivery.

 

(2) Payment by the Company to the Holder on the Closing Date of the portion of
the Exchange Consideration to be paid in cash shall be made by wire transfer of
immediately available funds at the closing on the Closing Date. The Holder shall
furnish to the Company the Holder’s wire transfer information and account number
prior to the closing, in order to effect such delivery.

 

(3) The transfer of the Debentures by the Holder at the closing shall be made in
accordance with Section 2.5(b)(2) of the Indenture, in accordance with the
applicable procedures of DTC. The Company shall furnish to the Holder the name
of the Company’s broker who is a DTC participant and account number prior to the
closing, in order to effect such delivery.

 

3. Representations, Warranties, Covenants, Etc. of the Holder. The Holder
represents and warrants to, and covenants and agrees with, the Company as
follows:

 

(a) Ownership of Securities. The Holder is the beneficial owner of the
Debentures and, upon consummation of the exchange of the Exchange Consideration
for the Debentures as provided in Section 2(a), will transfer and deliver to the
Company good title to the Debentures, free and clear of any lien or encumbrance.

 

(b) Authority. The execution, delivery and performance by the Holder of this
Agreement are within the powers of the Holder and have been duly authorized by
all necessary action on the part of the Holder. This Agreement constitutes a
valid and binding agreement of the Holder, enforceable against the Holder in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors’ rights generally and general
principles of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law.

 

4. Representations, Warranties, Covenants, Etc. of the Company. The Company
represents and warrants to the Holder that the following matters are true and
correct on the date of

 

- 4 -

--------------------------------------------------------------------------------

execution and delivery of this Agreement, will be true and correct on the
Closing Date and the Company covenants and agrees with the Holder as follows:

 

(a) Organization and Authority. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has all requisite corporate power and authority (i) to own,
lease and operate its properties and to carry on its business as described in
the SEC Reports and as currently conducted, and (ii) to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.

 

(b) Concerning the Shares. The Shares and the Warrant Shares have been duly
authorized and when issued in exchange for the Debentures at the closing in the
case of the Shares and upon exercise of the Warrant in the case of the Warrant
Shares, will be duly and validly issued, fully paid and non-assessable and will
not subject the holder thereof to personal liability by reason of being such
holder. The holders of outstanding shares of capital stock of the Company are
not entitled to preemptive or other rights to subscribe for the Shares or the
Warrant Shares. The Common Stock is listed for trading on the Principal Market
and (1) the Company and the Common Stock meet the criteria for continued listing
and trading on the Principal Market, except as set forth on Schedule 4(b)
hereto; (2) the Company has not been notified since December 31, 2001 of any
failure or potential failure to meet the criteria for continued listing and
trading on the Principal Market, except as set forth on Schedule 4(b) hereto,
and (3) no suspension of trading in the Common Stock is in effect. The Company
knows of no reason that the Shares or the Warrant Shares will not be eligible
for listing on the Principal Market.

 

(c) Corporate Authorization. This Agreement has been duly and validly authorized
by the Company; this Agreement has been duly executed and delivered by the
Company and, assuming due execution and delivery by the Holder, this Agreement
is a valid and binding obligation of the Company enforceable in accordance with
its terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors’ rights generally and general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law.

 

(d) Non-contravention. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
herein do not and will not, with or without the giving of notice or the lapse of
time, or both, (i) result in any violation of any provision of the certificate
of incorporation or by-laws or similar instruments of the Company or any
Subsidiary, (ii) conflict with or result in a breach by the Company or any
Subsidiary of any of the terms or provisions of, or constitute a default under,
or result in the modification of, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or any of their respective properties
or assets are bound or affected which would have a material adverse effect on
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and the Subsidiaries, taken as a whole,
(iii) violate or contravene any applicable law, rule or regulation or any
applicable decree, judgment or order of any court, United States federal or
state regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any Subsidiary or any of their respective
properties or assets which would have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company and the Subsidiaries, taken as a whole, or (iv) have
any material adverse effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company or any
Subsidiary to own or lease and operate any of its properties and to conduct any
of its business or the ability of the Company or any Subsidiary to make use
thereof.

 

- 5 -

--------------------------------------------------------------------------------

(e) Approvals, Filings, Etc. No authorization, approval or consent of, or filing
with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company or any Subsidiary in connection
with the execution, delivery and performance of this Agreement and the issuance
of the Shares as contemplated by this Agreement other than application by the
Company to the Principal Market for the listing of the Shares.

 

(f) Information Provided. The information provided by or on behalf of the
Company to the Holder in connection with this Agreement does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, it being understood that for purposes of
this Section 4(f), any statement contained in such information shall be deemed
to be modified or superseded for purposes of this Section 4(f) to the extent
that a statement in any document included in such information which was prepared
or filed with the SEC on a later date modifies or replaces such statement,
whether or not such later prepared or filed statement so states.

 

(g) SEC Filings. The Company has timely filed all reports required to be filed
under the 1934 Act and any other material reports or documents required to be
filed with the SEC since December 31, 2001. All of such reports and documents
complied, when filed, in all material respects, with all applicable requirements
of the 1933 Act and the 1934 Act.

 

(h) Absence of Certain Changes. Since December 31, 2001, there has been no
material adverse change in the business, properties, operations, condition
(financial or other), results of operations or, to the best knowledge of the
Company and the Subsidiaries, prospects of the Company and the Subsidiaries,
taken as a whole, except as disclosed in the SEC Reports.

 

(i) Absence of Brokers, Finders, Etc. No broker, finder, or similar Person is
entitled to any commission, fee, or other compensation by reason of the
transactions contemplated by this Agreement. The Company has not and will not
pay any commission or other remuneration for soliciting exchanges of Debentures
for Shares.

 

(j) Certain Securities Law Matters. The Shares may be issued to the Holder
pursuant to this Agreement without registration under the 1933 Act by virtue of
Section 3(a)(9) of the 1933 Act. For purposes of Rule 144, the Holder will be
entitled to tack the holding period of the Debentures to the holding period of
the Shares and, so long as (x) the aggregate period during which the Debentures
and the Shares are held is at least two years and (y) at the time of
determination the Holder is not and has not for the preceding three months been
an “affiliate” (as such term is defined in Rule 144) of the Company, the Shares
may be sold pursuant to Rule 144(k).

 

(k) No Integrated Offering. Neither the Company nor any Person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of any securities of the Company under circumstances which would
require, under the 1933 Act, the integration of such offering with the
transactions contemplated hereby) which might reasonably be expected to subject
the issuance of the Shares to the registration requirements of Section 5 of the
1933 Act.

 

5. Covenants.

 

(a) Exchange with Holders of Other Debentures. From the Closing Date through
September 26, 2004, the Company will not enter into any agreement with any other
holder of the Company’s 5 1/4% Convertible Subordinated Debentures due 2004 to
exchange, repurchase, retire, repay or otherwise acquire any of such debentures
(other than by payment when due at maturity) upon terms

 

- 6 -

--------------------------------------------------------------------------------

that include cash payment(s) more favorable to such holder than the 20% of par
value of the Debentures received by the Holder hereunder, without the prior
written consent of the Holder.

 

(b) Principal Market Listing; Reporting Status. Prior to the Closing Date, the
Company will file with Nasdaq an application or other document required by
Nasdaq for the listing of the Shares with the Principal Market and shall provide
evidence of such filing to the Holder. So long as the Holder beneficially owns
any of the Shares, the Company shall (x) use its best efforts to maintain the
listing of the Common Stock on the Nasdaq SmallCap Market or the Nasdaq National
Market, and (y) timely file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.

 

(c) State Securities Laws. On or before the Closing Date, the Company shall take
such action as shall be necessary to qualify, or to obtain an exemption for, the
offer and sale of the Shares and the Warrant to the Holder as contemplated by
this Agreement under such of the securities laws of jurisdictions in the United
States as shall be applicable thereto. Notwithstanding the foregoing obligations
of the Company in this Section 5(a)(4), the Company shall not be required (1) to
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 5(a)(4), (2) to subject itself to
general taxation in any such jurisdiction, (3) to file a general consent to
service of process in any such jurisdiction, (4) to provide any undertakings
that cause more than nominal expense or burden to the Company or (5) to make any
change in its charter or by-laws which the Company determines to be contrary to
the best interests of the Company and its stockholders. The Company shall
furnish the Holder with copies of all filings, applications, orders and grants
or confirmations of exemptions relating to such securities laws on or before the
Closing Date.

 

6. Conditions to the Company’s Obligation to Exchange. The Holder understands
that the Company’s obligation to issue and pay to the Holder the Exchange
Consideration in exchange for the Debentures on the Closing Date is conditioned
upon satisfaction of the following conditions precedent on or before the Closing
Date (any or all of which may be waived by the Company in its sole discretion):

 

(a) On the Closing Date, no legal action, suit or proceeding shall be pending or
threatened which seeks to restrain or prohibit the transactions contemplated by
this Agreement; and

 

(b) The representations and warranties of the Holder contained in this Agreement
shall have been true and correct on the date of this Agreement and on the
Closing Date as if made on the Closing Date and on or before the Closing Date
the Holder shall have performed all covenants and agreements of the Holder
required to be performed by the Holder on or before the Closing Date.

 

7. Conditions to the Holder’s Obligations to Exchange. The Company understands
that the Holder’s obligation to exchange Debentures for the Exchange
Consideration on the Closing Date is conditioned upon satisfaction of the
following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Holder in its sole discretion):

 

(a) On the Closing Date, no legal action, suit or proceeding shall be pending or
threatened which seeks to restrain or prohibit the transactions contemplated by
this Agreement;

 

(b) The representations and warranties of the Company contained in this
Agreement shall have been true and correct on the date of this Agreement and
shall be true and correct on the Closing Date as if given on and as of the
Closing Date (except for representations given as of a specific date, which
representations shall be true and correct as of such date), and on or before the
Closing Date the

 

- 7 -

--------------------------------------------------------------------------------

Company shall have performed all covenants and agreements of the Company
contained herein required to be performed by the Company on or before the
Closing Date;

 

(c) No Event of Default under and as defined in the Indenture or event which,
with the giving of notice or the passage of time, or both, would constitute an
Event of Default under and as defined in the Debentures shall have occurred and
be continuing;

 

(d) The Company shall have delivered to the Buyer a certificate, dated the
Closing Date, duly executed by its Chief Executive Officer or Chief Financial
Officer to the effect set forth in subparagraphs (a), (b), and (c) of this
Section 7;

 

(e) The Company shall have delivered to the Holder a certificate, dated the
Closing Date, of the Secretary of the Company certifying (A) the Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date, (B)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby and
(C) such other matters as reasonably requested by the Holder;

 

(f) On the Closing Date, the Buyer shall have received an opinion of Chris Kuhn,
Esq., General Counsel of the Company, dated the Closing Date, addressed to the
Holder, in form, scope and substance reasonably satisfactory to the Holder,
substantially in the form of Annex II to this Agreement;

 

(g) The Shares shall have been approved for listing on the Principal Market; and

 

(h) On the Closing Date (i) trading in securities on the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. or the Nasdaq National Market
shall not have been suspended or materially limited and (ii) a general
moratorium on commercial banking activities in the State of New York shall not
have been declared by either federal or state authorities.

 

8. Indemnification and Contribution.

 

(a) Indemnification. (1) To the extent not prohibited by applicable law, the
Company will indemnify and hold harmless each Indemnified Person against any
Claims to which any of them may become subject, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any Violation or any of the transactions
contemplated by this Agreement; provided that the Company shall not be liable
under this provision to the extent that such Claims resulted from the gross
negligence or willful misconduct of the Indemnified Person. The Company shall
reimburse each such Indemnified Person, promptly as such expenses are incurred
and are due and payable, for any documented reasonable legal fees or other
documented and reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(a) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld.

 

(2) Promptly after receipt by an Indemnified Person under this Section 8(a) of
notice of the commencement of any action (including any governmental action),
such Indemnified Person shall, if a Claim in respect thereof is to be made
against the Company under this Section 8(a), deliver to the Company a notice of
the commencement thereof and the Company shall have the right to participate in,
and, to the extent the Company so desires, to assume control of the defense
thereof with counsel reasonably satisfactory to the Indemnified Person;
provided, however, that an Indemnified Person shall have the right to retain its
own counsel with the fees and expenses to be paid by the Company, if, in the

 

- 8 -

--------------------------------------------------------------------------------

reasonable opinion of counsel retained by the Company, the representation by
such counsel of the Indemnified Person and the Company would be inappropriate
due to actual or potential differing interests between such Indemnified Person
and any other party represented by such counsel in such proceeding; provided
further, however, that the Company shall not be responsible for the fees and
expenses of more than one separate counsel for all Indemnified Persons hereunder
and one separate counsel in each jurisdiction in which a Claim is pending or
threatened. The failure to deliver notice to the Company within a reasonable
time of the commencement of any such action shall not relieve the Company of any
liability to the Indemnified Person under this Section 8(a), except to the
extent that the Company is prejudiced in its ability to defend such action. The
indemnification required by this Section 8(a) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.

 

(b) Contribution. To the extent any indemnification by the Company as set forth
in Section 8(a) above is applicable by its terms but is prohibited or limited by
law, the Company agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 8(a) to the fullest
extent permitted by law. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative fault of
each party, the parties’ relative knowledge of and access to information
concerning the matter with respect to which the Claim was asserted, the
opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances; provided, however,
that (a) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth in
Section 8(a) and (b) no Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any other Person who was not guilty of such fraudulent misrepresentation.

 

(c) Other Rights. The indemnification and contribution provided in this Section
shall be in addition to any other rights and remedies available at law or in
equity.

 

9. Miscellaneous.

 

(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(b) Headings. The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

 

(c) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

 

(d) Notices. Any notices required or permitted to be given under the terms of
this Agreement shall be in writing and shall be sent by mail, personal delivery,
by telephone line facsimile transmission or courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally, by telephone line facsimile transmission or by courier, in each case
addressed to a party at such party’s address (or telephone line facsimile
transmission number) shown in the introductory paragraph or on the signature
page of this Agreement or such other address (or telephone line facsimile
transmission number) as a party shall have provided by notice to the other party
in accordance with this provision. In the case of any notice to the Company,
such notice shall be addressed to the Company at its address (or telephone line
facsimile transmission number) shown on the signature page hereto, Attention:
Chief Executive Officer, with a copy addressed to the General Counsel, and in
the

 

- 9 -

--------------------------------------------------------------------------------

case of any notice to the Holder, such notice shall be addressed to the Holder
at its address (or telephone line facsimile transmission number) shown on the
signature page hereto and a copy shall be given to: [Holder’s address].

 

(e) Counterparts. This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the same instrument.
A telephone line facsimile transmission of this Agreement bearing a signature on
behalf of a party hereto shall be legal and binding on such party. Although this
Agreement is dated as of the date first set forth above, the actual date of
execution and delivery of this Agreement by each party is the date set forth
below such party’s signature on the signature page hereof. Any reference in this
Agreement or in any of the documents executed and delivered by the parties
hereto in connection herewith to (1) the date of execution and delivery of this
Agreement by the Holder shall be deemed a reference to the date set forth below
the Holder’s signature on the signature page hereof, (2) the date of execution
and delivery of this Agreement by the Company shall be deemed a reference to the
date set forth below the Company’s signature on the signature page hereof and
(3) the date of execution and delivery of this Agreement, or the date of
execution and delivery of this Agreement by the Holder and the Company, shall be
deemed a reference to the later of the dates set forth below the signatures of
the parties on the signature page hereof.

 

(f) Entire Agreement; Benefit. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. There are
no restrictions, promises, warranties, or undertakings, other than those set
forth or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings, whether written or oral, between the parties
hereto with respect to the subject matter hereof. This Agreement and the terms
and provisions hereof are for the sole benefit of only the Company, the Holder
and their respective successors and permitted assigns and in no event shall the
Holder have any liability to any stockholder or creditor of the Company or any
other Person (other than the Company) in any way relating to or arising from
this Agreement or the transactions contemplated hereby.

 

(g) Waiver. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
or course of dealing between the parties, shall not operate as a waiver thereof
or an amendment hereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or exercise of
any other right or power.

 

(h) Amendment. No amendment, modification, waiver, discharge or termination of
any provision of this Agreement nor consent to any departure by the Holder or
the Company therefrom shall in any event be effective unless the same shall be
in writing and signed by the party to be charged with enforcement, and then
shall be effective only in the specific instance and for the purpose for which
given. No course of dealing between the parties hereto shall operate as an
amendment of this Agreement.

 

(i) Best Efforts. Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party’s obligations set forth in
Section 6 or 7, as the case may be, of this Agreement on or before the Closing
Date.

 

(j) Further Assurances. Each party to this Agreement will perform any and all
acts and execute any and all documents as may be necessary and proper under the
circumstances in order to accomplish the intents and purposes of this Agreement
and to carry out its provisions.

 

- 10 -

--------------------------------------------------------------------------------

(k) Expenses. The Company and the Holder shall each be responsible for their
expenses (including, without limitation, the legal fees and expenses of its
counsel), except as otherwise specifically provided in this Section 9(k),
incurred by them in connection with the negotiation and execution of, and
closing under, this Agreement and of the transactions contemplated hereby.

 

(l) Termination. The Holder shall have the right to terminate its obligation to
exchange the Debenture under this Agreement by giving notice to the Company at
any time at or prior to the closing or Closing Date if:

 

(1) the Company shall have failed, refused, or been unable at or prior to the
date of such termination of this Agreement to perform any of its material
obligations hereunder;

 

(2) any other material condition of the Holder’s obligations hereunder is not
fulfilled; or

 

(3) the closing shall not have occurred on a Closing Date on or before August
            , 2003, other than solely by reason of a breach of this Agreement by
the Holder.

 

Any such termination shall be effective upon the giving of notice thereof by the
Holder. Upon a termination under Section 9(l)(1) or (3), the Holder shall have
no further obligation to the Company.

 

(m) Survival. The respective representations, warranties, covenants and
agreements of the Company and the Holder contained in this Agreement and the
documents delivered in connection with this Agreement shall survive the
execution and delivery of this Agreement and the closing hereunder, and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Holder or any Person controlling or acting on behalf
of the Holder or by the Company or any Person controlling or acting on behalf of
the Company.

 

(n) Public Statements, Press Releases, Etc. The Company and the Holder shall
have the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of the
Holder, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations, including
the 1934 Act and the rules and regulations promulgated thereunder (although the
Holder shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).

 

(o) Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

 

- 11 -

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers or other representatives thereunto duly authorized
as of the date first set forth above and on the dates set forth below their
respective signatures.

 

VERTICALNET, INC. By:      

--------------------------------------------------------------------------------

Name:

 

Gene S. Godick

Title:

  Executive Vice President and Chief Financial Officer

Address:

 

400 Chester Field Parkway

Malvern, Pennsylvania 19355

 

Facsimile No.: (610) 240- 9470

 

Date: July         , 2003

 

TQA MASTER FUND, LTD. By:  

/s/ Robert E. Butman

 

--------------------------------------------------------------------------------

Name:

 

Robert E. Butman

Title:

  President and CEO

Address:

 

  405 Lexington Ave., 45th Floor

  New York, NY 10174

Facsimile No.: 212-599-5877

 

Date: July 17, 2003

 

- 12 -