Document:

Restricted Stock Award Agreement With Neal C. Hansen, Dated 08/30/2002

 Exhibit 10.56 
  
 RESTRICTED STOCK AWARD AGREEMENT 
  
 This Restricted Stock Award Agreement (this “Agreement”) is entered into as of August 30, 2002 (the “Award Date”), by
and between CSG SYSTEMS INTERNATIONAL, INC., a Delaware corporation (the “Company”), and NEAL C. HANSEN (“Grantee”). 
  
 * * * 
  
 WHEREAS, the Company has adopted a 1996 Stock Incentive Plan (the “Plan”); and 
  
 WHEREAS, the Plan is administered by the Compensation
Committee (the “Committee”) of the Board of Directors of the Company; and 
  
 WHEREAS, the Committee has authority under the Plan to grant Restricted Stock Awards covering shares of the Common Stock of the Company
(the “Common Stock”); and 
  
 WHEREAS,
pursuant to the Plan, on the Award Date the Committee granted a Restricted Stock Award of 110,000 shares of the Common Stock (the “Award”) to Grantee subject to and in exchange for Grantee’s surrender and cancellation of certain stock
options previously granted to Grantee by the Company covering an aggregate of 1,390,000 shares of the Common Stock (the “Cancelled Options”) and directed the Company to execute this Agreement for the purpose of setting forth the terms and
conditions of the Award; and 
  
 WHEREAS, Grantee
accepted the Award and agreed to such exchange; and 
  
 WHEREAS, the Committee has expressed its intent to grant an additional Restricted Stock Award of 270,833 shares of the Common Stock to Grantee in 2003 pursuant to the Plan in further exchange for the Cancelled Options; 
  
 NOW, THEREFORE, in consideration of the premises and of the
covenants and conditions contained herein, the Company and Grantee agree as follows: 
  

	 	1.	Award of Restricted Shares. 

  
 (a) The Company hereby confirms the grant of the Award to Grantee as of the Award Date in exchange for the surrender and cancellation of
the Cancelled Options, and Grantee hereby confirms Grantee’s acceptance of the Award from the Company in exchange for the surrender and cancellation of the Cancelled Options. The Award covers 110,000 shares of the Common Stock (the
“Shares”) and is subject to all of the terms and conditions of this Agreement. 
  
 (b) Promptly after the execution of this Agreement, the Company shall cause one or more certificates evidencing the Shares to be issued in
the name of Grantee and deposited with the Escrow Agent pursuant to Section 5. 
  

	 	2.	Vesting of the Shares. 

  
 (a) The Shares automatically shall vest in Grantee on the first anniversary of the Award Date (such anniversary being referred to herein
as the “Vesting Date”); provided, however, that no Shares shall vest in Grantee on the Vesting Date unless Grantee has been continuously employed by the Company from the Award Date until the Vesting Date. For purposes of this Agreement, in
the context of employment of Grantee, the term “Company” shall include a Subsidiary (as defined in the Plan) if Grantee is then employed by a Subsidiary; provided, however, that neither a transfer of Grantee from the employ of the Company
to the employ of a Subsidiary nor the transfer of Grantee from the employ of a Subsidiary to the employ of the Company or another Subsidiary shall be deemed to be a Termination of Employment of Grantee. 
  
 (b) Notwithstanding the provisions of Section 2(a), all
Shares which have not previously vested in Grantee pursuant to Section 2(a) automatically shall vest in Grantee upon the occurrence of any of the following events while Grantee is employed by the Company: 
  

	 	(1)	Grantee’s death; 

  

	 	(2)	A Termination of Employment of Grantee by reason of a mental or physical condition that, in the opinion of the Committee, renders Grantee unable or incompetent to carry out the job
responsibilities which Grantee then holds as an employee of the Company or the tasks to which Grantee is then assigned as an employee of the Company and that is expected to be permanent or to continue for an indefinite duration exceeding one year;

  

	 	(3)	A Termination of Employment of Grantee after Grantee has reached the age of sixty-five (65) years; or 

  

	 	(4)	The occurrence of a Change of Control. 

  
 (c) Notwithstanding the provisions of Section 2(a), fifty percent (50%) of any Shares which have not previously vested in Grantee pursuant
to Section 2(a) automatically shall vest in Grantee upon an involuntary Termination of Employment of Grantee without Cause. 
  
 (d) For purposes of this Agreement, a “Termination of Employment” of Grantee means the effective time when the employer-employee
relationship between Grantee and the Company terminates for any reason whatsoever. 
  

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 (e) For purposes of this Agreement, a “Change of Control” shall be deemed to
have occurred upon the happening of any of the following events: 
  

	 	(1)	The Company is merged or consolidated into another corporation or entity, and immediately after such merger or consolidation becomes effective the holders of a majority of the
outstanding shares of voting capital stock of the Company immediately prior to the effectiveness of such merger or consolidation do not own (directly or indirectly) a majority of the outstanding shares of voting capital stock or other equity
interests having voting rights of the surviving or resulting corporation or other entity in such merger or consolidation; 

  

	 	(2)	any person, entity, or group of persons within the meaning of Sections 13(d) or 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) and the rules promulgated
thereunder becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of thirty percent (30%) or more of the outstanding voting capital stock of the Company; 

  

	 	(3)	the Common Stock of the Company ceases to be publicly traded because of an issuer tender offer or other “going private” transaction (other than a transaction sponsored by
the then current management of the Company); 

  

	 	(4)	the Company dissolves or sells or otherwise disposes of all or substantially all of its property and assets (other than to an entity or group of entities which is then under common
majority ownership (directly or indirectly) with the Company); or 

  

	 	(5)	 In one or more substantially concurrent transactions or in a series of related transactions, the Company directly or indirectly disposes of a portion or portions of
its business operations (collectively, the “Sold Business”) other than by ceasing to conduct the Sold Business without its being acquired by a third party (regardless of the entity or entities through which the Company conducted the Sold
Business and regardless of whether such disposition is accomplished through a sale of assets, the transfer of ownership of an entity or entities, a merger, or in some other manner) and either (i) the fair market value of the consideration received
or to be received 

  

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by the Company for the Sold Business is equal to at least thirty percent (30%) of the market value of the outstanding Common Stock of the Company determined
by multiplying the average of the closing prices for the Common Stock of the Company on the thirty (30) trading days immediately preceding the date of the first public announcement of the proposed disposition of the Sold Business by the average of
the numbers of outstanding shares of Common Stock on such thirty (30) trading days or (ii) the revenues of the Sold Business during the most recent four (4) calendar quarters ended prior to the first public announcement of the proposed disposition
of the Sold Business represented thirty percent (30%) or more of the total consolidated revenues of the Company during such four (4) calendar quarters. 

  

	 	(6)	during any period of two consecutive years or less, individuals who at the beginning of such period constituted the Board of Directors of the Company cease, for any reason, to
constitute at least a majority of the Board of Directors of the Company, unless the election or nomination for election of each new director of the Company who took office during such period was approved by a vote of at least seventy-five percent
(75%) of the directors of the Company still in office at the time of such election or nomination for election who were directors of the Company at the beginning of such period. 

  
 (f) For purposes of this Agreement, “Cause” shall
mean only (i) Grantee’s confession or conviction of theft, fraud, embezzlement, or other crime involving dishonesty, (ii) Grantee’s excessive absenteeism (other than by reason of physical injury, disease, or mental illness) without a
reasonable justification, (iii) material violation by Grantee of the provisions of any employment or non-disclosure agreement with the Company or any Subsidiary, (iv) habitual and material negligence by Grantee in the performance of Grantee’s
duties and responsibilities as an employee of the Company or any Subsidiary and failure on the part of Grantee to cure such negligence within twenty (20) days after Grantee’s receipt of a written notice from the Board of Directors or the Chief
Executive Officer of the Company setting forth in reasonable detail the particulars of such negligence, (v) material failure by Grantee to comply with a lawful directive of the Board of Directors or the Chief Executive Officer of the Company and
failure to cure such non-compliance within twenty (20) days after Grantee’s receipt of a written notice from the Board of Directors or the Chief Executive Officer of the Company setting forth in reasonable detail the particulars of such
non-compliance, (vi) a material breach by Grantee of any of 

  

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Grantee’s fiduciary duties to the Company and, if such breach is curable, Grantee’s failure to cure such breach within ten (10) days after
Grantee’s receipt of a written notice from the Board of Directors or the Chief Executive Officer of the Company setting forth in reasonable detail the particulars of such breach, or (vii) willful misconduct or fraud on the part of Grantee in
the performance of Grantee’s duties as an employee of the Company or any Subsidiary. In no event shall the results of operations of the Company or any Subsidiary or any business judgment made in good faith by Grantee constitute an independent
basis for a Termination of Employment of Grantee for Cause. 
  

	 	3.	Cancellation of Unvested Shares. 

  
 Upon a Termination of Employment of Grantee, all of the rights and interests of Grantee in any of the Shares which have not vested in
Grantee prior to or upon such Termination of Employment of Grantee, as provided in Section 2, automatically shall completely and forever terminate; and the Escrow Agent shall deliver to the Company for cancellation the certificates for such Shares.

  

	 	4.	Employment. 

  
 Nothing contained in this Agreement (i) obligates the Company, or a Subsidiary, to continue to employ Grantee in any capacity whatsoever
or (ii) prohibits or restricts the Company or a Subsidiary from terminating the employment of Grantee at any time or for any reason whatsoever, subject to any rights which Grantee may have under any other agreement with the Company or a Subsidiary.
In the event of any Termination of Employment of Grantee, Grantee shall have only the rights set forth in this Agreement with respect to the Shares. 
  

	 	5.	Escrow of Shares. 

  
 To ensure the availability for delivery to the Company for cancellation of the certificates for any unvested Shares in the event of a
Termination of Employment of Grantee, Grantee shall deliver to and deposit with the escrow agent (the “Escrow Agent”) named in joint escrow instructions in the form of Annex A hereto (the “Joint Escrow Instructions”) a stock
power duly endorsed in blank for each certificate for the Shares, and the Company shall cause the certificates for the Shares to be delivered to and deposited with the Escrow Agent as provided in Section 1(b). Such stock powers and certificates are
to be held and delivered by the Escrow Agent pursuant to the terms of the Joint Escrow Instructions, which shall be executed by Grantee and the Company and delivered to the Escrow Agent concurrently with the execution of this Agreement. The parties
acknowledge that the Joint Escrow Instructions have been executed solely for administrative convenience and that all questions as to Share ownership and whether or not Shares have vested shall be determined solely pursuant to this Agreement
notwithstanding any action by the Escrow Agent. Grantee at all times shall have the right to vote with respect to all of the Shares, whether or not they have vested in Grantee. 
  

	 	6.	Change in Capitalization. 

  
 If at any time that any of the Shares have not vested in Grantee there is any non-cash dividend of securities or other property or rights
to acquire securities or other property, any 

  

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liquidating dividend of cash and/or property, or any stock dividend or stock split or other change in the character or amount of any of the outstanding
securities of the Company, then in such event any and all new, substituted, or additional securities or other property to which Grantee may become entitled by reason of Grantee’s ownership of such unvested Shares immediately shall become
subject to this Agreement, shall be delivered to the Escrow Agent to be held pursuant to the Joint Escrow Instructions, and shall have the same status with respect to vesting as the Shares upon which such dividend was paid or with respect to which
such new, substituted, or additional securities or other property was distributed. Any cash or cash equivalents received pursuant to the first sentence of this Section 6 shall be invested in conservative short-term interest-bearing securities, and
interest earned thereon also shall have the same status as to vesting. Cash dividends (other than liquidating dividends) paid on such unvested Shares shall be paid to Grantee and shall not be subject to vesting or to the Joint Escrow Instructions.

  

	 	7.	Grantee Representations. 

  
 Grantee hereby represents and warrants to the Company as follows: 
  
 (a) Grantee has full power and authority to execute, deliver, and perform Grantee’s obligations under
this Agreement; and this Agreement is a valid and binding obligation of Grantee, enforceable in accordance with its terms, except that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, moratorium, or other similar
laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). 
  
 (b) Grantee (i) received and reviewed copies of this
Agreement and the accompanying Joint Escrow Instructions prior to their execution, (ii) received all such business, financial, tax, and other information as Grantee deemed necessary and appropriate to enable Grantee to evaluate the financial risk
inherent in accepting the award of the Shares in exchange for Grantee’s surrender and cancellation of the Cancelled Options, and (iii) received satisfactory and complete information concerning the business and financial condition of the Company
in response to all of Grantee’s inquiries in respect thereof. Grantee acknowledges the public availability of the Company’s periodic and other filings made with the United States Securities and Exchange Commission at www.sec.gov.

  

	 	8.	Company Representations and Warranties. 

  
 The Company hereby represents and warrants to Grantee as follows: 
  
 (a) The Company is a corporation duly organized, validly existing, and in good standing under the laws of
Delaware and has all requisite corporate power and authority to enter into this Agreement, to issue the Shares to Grantee, and to perform its obligations hereunder. 
  
 (b) The execution and delivery of this Agreement by the Company have been duly and validly authorized, and
all necessary corporate action has been taken to make this Agreement a valid and binding obligation of the Company, enforceable in accordance with its terms, except that the enforcement thereof may be subject to bankruptcy, insolvency, 

  

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reorganization, moratorium, or other similar laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity or at law). 
  
 (c) When issued to Grantee as provided for herein, the Shares will be duly and validly issued, fully paid, and non-assessable. 

 

	 	9.	Gross-Up Payments. 

  
 If the vesting of any Shares is accelerated pursuant to Section 2(b)(4) and such accelerated vesting causes Grantee to become liable for
any excise tax on “excess parachute payments” (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and any regulations thereunder) and any interest or penalties thereon (such excise tax, interest, and
penalties, collectively, the “Tax Penalties”), then the Company promptly shall make a cash payment (the “Cash Payment”) to Grantee in an amount equal to the Tax Penalties. The Company also promptly shall make an additional cash
payment to Grantee in an amount rounded to the nearest $100.00 which is equal to any additional income, excise, and other taxes (using the individual tax rates applicable to Grantee for the year for which such Tax Penalties are owed) for which
Grantee will be liable as a result of the Grantee’s receipt of the Cash Payment (the additional cash payment provided for in this sentence being referred to as a “Gross-Up Payment”). In addition, Grantee shall be entitled to promptly
receive from the Company a further Gross-Up Payment in respect of each prior Gross-Up Payment until the amount of the last Gross-Up Payment is less than $100.00. 
  

	 	10.	Restriction on Sale or Transfer. 

  
 None of the Shares that have not vested in Grantee pursuant to this Agreement (or any beneficial interest therein) may be sold,
transferred, assigned, pledged, or encumbered in any way (including transfer by operation of law); and any attempt to make any such sale, transfer, assignment, pledge, or encumbrance shall be null and void and of no effect. 
  

	 	11.	Legends. 

  
 The certificates representing the Shares will, upon their issuance to Grantee, bear a legend in substantially the following form:

  
 “This certificate and the shares of
stock represented hereby are subject to the terms and conditions (including forfeiture provisions and restrictions against transfer) contained in the CSG Systems International, Inc. 1996 Stock Incentive Plan and a Restricted Stock Award Agreement
entered into between the registered owner and CSG Systems International, Inc. Release from such terms and conditions may be obtained only in accordance with the provisions of such Plan and Agreement, a copy of each of which is on file in the office
of the Secretary of CSG Systems International, Inc.” 
  
 Grantee shall be entitled to have such legend removed from the certificates representing Shares which have vested in Grantee. 
  

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	 	12.	Enforcement. 

  
 The parties acknowledge that the remedy at law for any breach or violation or attempted breach or violation of the provisions of Section
10 will be inadequate and that, in the event of any such breach or violation or attempted breach or violation, the Company shall be entitled to injunctive relief in addition to any other remedy, at law or in equity, to which the Company may be
entitled. 
  

	 	13.	Violation of Transfer Provisions. 

  
 The Company shall not be required to transfer on its books any Shares which have been sold, transferred, assigned, pledged, or encumbered
in violation of any of the provisions of this Agreement or to treat as the owner of such Shares or to accord the right to vote or pay dividends to any purported transferee or pledgee to whom such Shares shall have been so sold, transferred,
assigned, pledged, or encumbered. 
  

	 	14.	Section 83(b) Election. 

  
 Grantee shall have the right to make an election pursuant to Treasury Regulation § 1.83-2 with respect to the Shares and promptly
will furnish the Company with a copy of the form of election Grantee has filed and evidence that such an election has been filed in a timely manner. 
  

	 	15.	Dispute Resolution. 

  
 Subject to the provisions of Section 12, any claim or dispute by Grantee or the Company arising from or in connection with this Agreement,
whether based on contract, tort, common law, equity, statute, regulation, order, or otherwise (a “Dispute”), shall be resolved as follows: 
  

	 	(a)	Such Dispute shall be submitted to mandatory and binding arbitration at the election of either Grantee or the Company (the “Disputing Party”). Except as otherwise provided
in this Section 15, the arbitration shall be pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the “AAA”). 

  

	 	(b)	 To initiate the arbitration, the Disputing Party shall notify the other party in writing within 30 days after the occurrence of the event or events which give rise
to the Dispute (the “Arbitration Demand”), which notice shall (i) describe in reasonable detail the nature of the Dispute, (ii) state the amount of any claim, and (iii) specify the requested relief. Within fifteen (15) days after the other
party’s receipt of the Arbitration Demand, such other party shall serve on the Disputing Party a written statement (i) answering the claims set forth in the Arbitration Demand and including any affirmative 

  

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defenses of such party and (ii) asserting any counterclaim, which statement shall (A) describe in reasonable detail the nature of the Dispute relating to the
counterclaim, (B) state the amount of the counterclaim, and (C) specify the requested relief. The parties shall attempt in good faith to agree upon a single arbitrator (the “Sole Arbitrator”). If the parties are unable to so agree, then
each party shall appoint an arbitrator who (A) has been licensed to practice law in the U.S. for at least ten years, (B) has no past or present relationship with either Grantee or the Company, and (C) is experienced in representing clients in
connection with corporate law matters (the “Basic Qualifications”); and promptly, but in any event within five (5) days after such appointments, the two arbitrators so appointed shall select a third neutral arbitrator from a list provided
by the AAA of potential arbitrators who satisfy the Basic Qualifications and who have no past or present relationship with the parties’ counsel, except as otherwise disclosed in writing to and approved by the parties. If a Sole Arbitrator is
not appointed, then the arbitration will be heard by a panel of the three arbitrators so appointed (the “Arbitration Panel”), with the third arbitrator so appointed serving as the chairperson of the Arbitration Panel. Decisions of the Sole
Arbitrator or of a majority of the members of the Arbitration Panel, as the case may be, shall be determinative. 

  

	 	(c)	The arbitration hearing shall be held in Denver, Colorado, or such other city in which the principal executive office of the Company was located immediately prior to a Change of
Control (if a Change of Control has occurred). The Sole Arbitrator or the Arbitration Panel, as the case may be, is specifically authorized to render partial or full summary judgment as provided for in the Federal Rules of Civil Procedure. The
Arbitration Panel will have no power or authority, under the Commercial Arbitration Rules of the AAA or otherwise, to relieve the parties from their agreement hereunder to arbitrate or otherwise to amend or disregard any provision of this agreement,
including, without limitation, the provisions of this Section 15. At either party’s request, the Sole Arbitrator or the Arbitration Panel, as the case may be, shall have the right to grant injunctive relief. 

  

	 	(d)	Within ten (10) days after the closing of the arbitration hearing, the Sole Arbitrator or the Arbitration Panel, as the case may be, shall prepare and distribute to the parties a
writing setting forth the Sole Arbitrator’s or the Arbitration Panel’s finding of facts and conclusions of law relating to the Dispute, including the reason for the giving or denial of any award. The findings and conclusions and the award,
if any, shall be deemed to be confidential information. 

  

	 	(e)	 The Sole Arbitrator or the Arbitration Panel, as the case may be, is instructed to schedule promptly all discovery and other procedural steps and otherwise to
assume case management initiatives and controls to effect an efficient, economical, and expeditious resolution of the Dispute. The Sole Arbitrator 

  

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or the Arbitration Panel, as the case may be, is authorized to issue monetary sanctions against either party if, upon a showing of good cause, such party is
unreasonably delaying the proceeding. 

  

	 	(g)	Any award rendered by the Sole Arbitrator or the Arbitration Panel, as the case may be, will be final, conclusive, and binding upon the parties and shall be the exclusive remedy for
all claims, counterclaims, or issues presented to the Sole Arbitrator or the Arbitration Panel, as the case may be; and any judgment on such award may be entered and enforced in any court of competent jurisdiction. 

  

	 	(h)	Each party will bear an equal share of all fees, costs, and expenses of the arbitrators. Notwithstanding any law to the contrary, (i) if the Company is the prevailing party in the
arbitration, then each party will bear all of the fees, costs, and expenses of such party’s own attorneys, experts, and witnesses and (ii) if the Grantee is the prevailing party in the arbitration, then the Company shall pay all of the
reasonable fees, costs, and expenses of both the Company’s and the Grantee’s attorneys, experts, and witnesses. However, in connection with any judicial proceeding to compel arbitration pursuant to this agreement or to enforce any award
rendered by the Sole Arbitrator or the Arbitration Panel, as the case may be, the prevailing party in such a proceeding will be entitled to recover reasonable attorneys’ fees and expenses incurred in connection with such proceedings, in
addition to any other relief to which such party may be entitled. 

  

	 	(i)	Nothing contained in the preceding provisions of this Section 15 shall be construed to prevent either party from seeking from a court a temporary restraining order or other
injunctive relief pending final resolution of a Dispute pursuant to this Section 15. 

  

	 	16.	Withholding. 

  
 Upon Grantee’s making of the election referred to in Section 14 with respect to any of the Shares or upon the vesting in Grantee of
any of the Shares as to which the election referred to in Section 14 was not made, Grantee shall pay to or provide for the payment to or withholding by the Company of all amounts which the Company is required to withhold for federal, state, or local
tax purposes from Grantee’s compensation by reason of or in connection with such election or vesting. Notwithstanding any provision of the Joint Escrow Instructions to the contrary, neither the Company nor the Escrow Agent shall be obligated to
deliver any certificate for any of the Shares until Grantee’s obligations under this Section 16 have been satisfied.  
  

	 	17.	Application of Plan. 

  
 The relevant provisions of the Plan relating to Restricted Stock Awards and the authority of the Committee under the Plan shall be
applicable to this Agreement to the extent that this Agreement does not otherwise expressly address the subject matter of such provisions. 
  

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	 	18.	General Provisions. 

  
 (a) No Assignments. Grantee may not sell, transfer, assign, pledge, or encumber any of Grantee’s rights or obligations under
this Agreement without the prior written consent of the Company; and any such attempted sale, transfer, assignment, pledge, or encumbrance shall be void. 
  
 (b) Notices. All notices, requests, consents, and other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given and made upon personal delivery to the person for whom it is intended (including by a reputable overnight delivery service which shall be deemed to have effected personal delivery) or upon deposit, postage
prepaid, registered or certified mail, return receipt requested, in the United States mail as follows: 
  
 (i) if to Grantee, addressed to Grantee at Grantee’s address shown on the stock register maintained by or on behalf of the Company or
at such other address as Grantee may specify by written notice to the Company, or 
  
 (ii) if to the Company, addressed to the Chief Executive Officer of the Company at the principal office of the Company or at such other
address as the Company may specify by written notice to the Grantee. 
  
 Each such notice, request, consent, and other communication shall be deemed to have been given upon receipt thereof as set forth above or, if sooner, three (3) business days after deposit as described above. The
addresses for purposes of this Section 18(b) may be changed by giving written notice of such change in the manner provided herein for giving notice. Unless and until such written notice is received, the addresses provided herein shall be deemed to
continue in effect for all purposes hereunder. 
  
 (c) Choice of Law. This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts of laws, of the State of Delaware. 
  
 (d) Severability. The parties hereto agree that the
terms and provisions in this Agreement are reasonable and shall be binding and enforceable in accordance with the terms hereof and, in any event, that the terms and provisions of this Agreement shall be enforced to the fullest extent permissible
under law. In the event that any term or provision of this Agreement shall for any reason be adjudged to be unenforceable or invalid, then such unenforceable or invalid term or provision shall not affect the enforceability or validity of the
remaining terms and provisions of this Agreement, and the parties hereto hereby agree to replace such unenforceable or invalid term or provision with an enforceable and valid arrangement which in its economic effect shall be as close as possible to
the unenforceable or invalid term or provision. 
  
 (e) Parties in Interest. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective permitted heirs, personal representatives, successors, and assigns of
the parties hereto; provided, that the provisions of this Section 18(e) shall not authorize any assignment which is otherwise prohibited by this Agreement. 
  

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 (f) Modification, Amendment, and Waiver. No modification, amendment, or waiver of
any provision of this Agreement shall be effective against the Company or Grantee unless approved in writing and, in the case of the Company, authorized by the Committee and unless it specifically states that it is intended to modify, amend, or
waive a specific provision of this Agreement. The failure of a party at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter
to enforce each and every provision of this Agreement in accordance with its terms. 
  
 (g) Integration. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior negotiations, understandings, and agreements, written or oral. 
  
 (h) Headings. The headings of the sections and paragraphs of this Agreement have been inserted for convenience of reference only
and do not constitute a part of this Agreement. 
  
 (i) Counterparts. This Agreement may be executed in counterpart with the same effect as if all parties had signed the same document. All such counterparts shall be deemed to be an original, shall be construed together, and shall
constitute one and the same instrument. 
  
 (j)
Further Assurances. The parties agree to use their best efforts and act in good faith in carrying out their obligations under this Agreement. The parties also agree to execute such further instruments and to take such further actions as
reasonably may be necessary or desirable to carry out the purposes and intent of this Agreement. 
  
 In Witness Whereof, the parties hereto have executed this Restricted Stock Award Agreement as of the date first above written. 

 

	 COMPANY:
  
 CSG SYSTEMS INTERNATIONAL, INC.,
a Delaware corporation
	 	 	 	 GRANTEE:
  
 /s/ Neal C. Hansen

 Neal C. Hansen

				
	By:	 	 /s/ John P. Pogge

	 	 	 	 
	 	 	John P. Pogge, President	 	 	 	 

  

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 ANNEX A

  
 JOINT ESCROW INSTRUCTIONS 
  
 August 30, 2002 
  
 Joseph T. Ruble, Corporate Secretary 
 CSG
Systems International, Inc. 
 7887 East Belleview Avenue, Suite 1000 
 Englewood, Colorado 80111 
  
 Dear Sir: 
  
 As the Escrow Agent for CSG Systems International, Inc. (the
“Company”), a Delaware corporation, and the undersigned holder of Common Stock of the Company (the “Grantee”), you hereby are authorized and directed to hold the documents delivered to you pursuant to the terms of that certain
Restricted Stock Award Agreement (the “Agreement”) between the undersigned dated the date hereof, to which these Joint Escrow Instructions relate, in accordance with the following instructions: 
  
 1. A copy of the Agreement has been delivered to you
concurrently with the execution of these Joint Escrow Instructions. By signing these Joint Escrow Instructions, you acknowledge receipt of such copy. 
  
 2. The Company promptly shall notify you (with a copy to Grantee) upon (i) the vesting in Grantee of any of the Shares covered by the
Agreement and (ii) Grantee’s satisfaction of the withholding requirements set forth in Section 16 of the Agreement. Five (5) business days after your receipt of such notice, you shall deliver to Grantee the certificate or certificates for the
Shares that have so vested and as to which such withholding requirements have been satisfied and any other items pertaining to such Shares then held by you pursuant to Section 6 of the Agreement. 
  
 3. The Company promptly shall notify you (with a copy to
Grantee) of a Termination of Employment (as defined in the Agreement) of Grantee which results in the termination of the rights and interests of Grantee in any of the Shares covered by the Agreement in accordance with Section 3 of the Agreement.
Five (5) business days after your receipt of such notice, you shall deliver to the Company for cancellation the certificates for such Shares and any other items pertaining to such Shares then held by you pursuant to Section 6 of the Agreement.

  
 4. The escrow created by these Joint Escrow
Instructions shall terminate upon the delivery by you, in accordance with the Agreement and these Joint Escrow Instructions, of all of the certificates for the Shares covered by the Agreement and all other items pertaining to the Shares received by
you pursuant to Section 6 of the Agreement. 
  
 5.
Your duties hereunder may be altered, amended, modified, or revoked only by a writing signed by the parties hereto. 
  

 6. You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in acting or refraining from acting in reliance upon any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be
personally liable for any act you may do or omit to do hereunder as Escrow Agent while acting in good faith and in the exercise of your own good judgment and not in contravention of the express terms hereof, and any act done or omitted by you
pursuant to the advice of your own independent attorneys shall be conclusive evidence of such good faith. 
  
 7. You shall not be liable in any respect on account of the identity, authority, or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder or thereunder. 
  
 8. You shall be entitled to employ such independent legal counsel and other experts as you may deem necessary properly to advise you in
connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation for such advice. 
  
 9. Your responsibilities as Escrow Agent hereunder shall terminate on the thirtieth day following receipt by the parties of your written
notice of resignation or upon the joint selection of a successor Escrow Agent by the Company and Grantee and your receipt of written notification of such a selection. In the event of your resignation, you and the Company shall jointly appoint a
successor Escrow Agent. 
  
 10. If you reasonably
require other or further instruments in connection with these Joint Escrow Instructions or your obligations in respect hereto, the necessary parties hereto shall furnish or join in furnishing such instruments. 
  
 11. If a dispute arises with respect to the delivery and/or
ownership or right of possession of the securities or any other property held by you hereunder, then you are authorized and directed to retain in your possession without liability to anyone all or any part of such securities or other property until
such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order of a court of competent jurisdiction, but you shall be under no duty whatsoever to institute or defend any such proceedings. All
questions as to whether any securities held by you have vested will be determined under the Agreement by the Company and Grantee or by a final order of a court of competent jurisdiction, and you have no authority to make any such decisions. No
transfer of securities or other property by you shall be effective unless made pursuant to the terms of the Agreement, and any transfer in contravention thereof shall be null and void. 
  

 2 

 12. Any notice required or permitted hereunder shall be given in writing and shall be
deemed effectively given upon personal delivery (including by a reputable overnight delivery service which shall be deemed to have effected personal delivery) or upon deposit in the United States mail, by registered or certified mail with postage
and fees prepaid, return receipt requested, addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by ten (10) days’ advance written notice to each of the other
parties hereto: 
  

	 Company:
	 	CSG Systems International, Inc.
7887 East Belleview Avenue, Suite 1000
Englewood, Colorado 80111
Attn: Chief Executive Officer
		
	 Grantee:
	 	Notice to Grantee shall be sent to the address set forth below Grantee’s signature on these Joint Escrow Instructions.
		
	 Escrow Agent:
	 	Notice to the Escrow Agent shall be sent to his address at the beginning of these Joint Escrow Instructions.

  
 13. By
signing these Joint Escrow Instructions, you become a party hereto only for the purpose of these Joint Escrow Instructions; and you do not become a party to the Agreement. 
  
 14. All liabilities, losses, costs, fees, and disbursements incurred or made by you in connection with the
performance of your duties hereunder, including without limitation the compensation paid to legal counsel pursuant to Paragraph 8 hereof, shall be borne by the Company; and the Company hereby agrees to indemnify you against and hold you harmless
from all claims, actions, demands, liabilities, losses, costs, fees, and expenses incurred by you in the performance of your duties hereunder; provided, however, that this indemnity shall not extend to conduct which has been determined, by a final
order of a court of competent jurisdiction, to have been grossly negligent or to have constituted intentional misconduct. You shall not be entitled to compensation for your services hereunder. 
  
 15. This instrument shall be governed by and construed in
accordance with the internal laws, and not the laws of conflicts of laws, of the State of Delaware. 
  
 16. This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted
assigns. 
  
 [This space intentionally left blank] 
  

 3 

 19. This instrument may be executed in counterparts with the same effect as if all
parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 
  

	Very truly yours,
	
	COMPANY:
	
	CSG SYSTEMS INTERNATIONAL, INC.
		
	By:	 	/s/ John P. Pogge
	 	

	 	 	 John P. Pogge, President

  

	GRANTEE:
	
	/s/ Neal C. Hansen
	

	 Neal C. Hansen

	 
	 Grantee’s Address:

 41
Charlou Circle

 Englewood, CO 80111

  
  

	Accepted:
	
	ESCROW AGENT:
	
	/s/ Joseph T. Ruble
	

	Joseph T. Ruble, Corporate Secretary
of CSG Systems International, Inc.

  

 4EXCHANGE AGREEMENT DATED JULY 22, 2003 - TQA Master Fund, LTD.

 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 51⁄4% 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 

  

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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 

  

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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. 
  

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 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 -

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