SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
Verticalnet, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
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(4) Date filed:
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PRELIMINARY PROXY MATERIALS
[VERTICALNET LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 5, 2002
------------------
To Our Shareholders:
The 2002 annual meeting of shareholders of Verticalnet, Inc. will be
held at Penn State Great Valley, 30 East Swedesford Road, Routes 202 and 29,
Malvern, Pennsylvania, on Wednesday, June 5, 2002, beginning at 10:00 a.m. local
time. At the meeting, you will be asked to act on the following matters:
(1) Election of three directors.
(2) Approval of the Verticalnet, Inc. Equity Compensation Plan for
Employees (1999)
(3) Approval of the Verticalnet, Inc. 1999 Long Term Incentive Plan
(4) To consider and vote upon an amendment to our Amended and Restated
Articles of Incorporation and to permit the board, at its
discretion, at any time prior to our next annual meeting to effect
a reverse split of our outstanding common stock at an exchange
ratio of not less than 1-for-5 and not more than 1-for-10. Our
board of directors would retain discretion to elect to implement a
reverse stock split in this range or to elect not to implement a
reverse stock split.
(5) Any other matters that properly come before the meeting.
All holders of record of shares of Verticalnet's common stock at the
close of business on April 19, 2002 are entitled to vote at the meeting or any
postponements or adjournments of the meeting.
YOUR VOTE IS IMPORTANT. PLEASE READ THE PROXY STATEMENT AND THE VOTING
INSTRUCTIONS ON THE PROXY CARD AND THEN VOTE EITHER BY MAIL BY COMPLETING THE
PROXY CARD AND RETURNING IT OR BY INTERNET OR TELEPHONE BY FOLLOWING THE VOTING
INSTRUCTIONS PRINTED ON THE PROXY CARD SENT TO YOU.
By order of the board of directors,
/s/ James W. McKenzie, Jr.
James W. McKenzie, Jr.
Executive Vice President, General Counsel
and Secretary
May __, 2002
Malvern, Pennsylvania
[VERTICALNET LOGO]
300 CHESTER FIELD PARKWAY
MALVERN, PENNSYLVANIA 19355
---------------------
PROXY STATEMENT
---------------------
This proxy statement contains information related to the annual meeting
of shareholders of Verticalnet, Inc. to be held on Wednesday, June 5, 2002,
beginning at 10:00 a.m. local time, at Penn State Great Valley, 30 East
Swedesford Road, Routes 202 and 29, Malvern, Pennsylvania 19355, and any
postponements or adjournments thereof. Verticalnet first mailed these proxy
materials to shareholders on or about May __, 2002.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, shareholders will act upon the matters listed in
the Notice of Annual Meeting and any other matters that properly come before the
meeting. In addition, the management team will report on the performance of
Verticalnet during its 2001 fiscal year and respond to questions from
shareholders.
WHO CAN VOTE AT THE MEETING?
All shareholders of record at the close of business on April 19, 2002,
or the "record date," are entitled to vote at the meeting and any postponements
or adjournments of the meeting.
WHAT ARE THE VOTING RIGHTS OF THE HOLDERS OF THE COMMON STOCK?
Holders of the common stock will vote on all matters to be acted upon
at the annual meeting. Each outstanding share of the common stock will be
entitled to one vote on each matter to be voted upon at the meeting.
WHO CAN ATTEND THE MEETING?
All shareholders as of the record date, or their duly appointed
proxies, may attend the meeting. Each shareholder may be asked to present valid
picture identification, such as a driver's license or passport. If you hold your
shares through a broker or other nominee, you must bring a copy of a brokerage
statement reflecting your stock ownership as of the record date. Everyone must
check in at the registration desk at the meeting.
HOW DO I VOTE?
You may attend the annual meeting and vote in person. Alternatively,
you may vote your shares by proxy:
- By mail
- By telephone
- Via the Internet
1
To vote by mail, simply mark, sign and date your proxy card and return
it in the postage-paid envelope provided. The enclosed proxy card contains
instructions for telephone or Internet voting, which is available to
shareholders 24 hours a day, 7 days a week until noon, Malvern, Pennsylvania
time on June 4, 2002.
Please note that if your shares are held in "street name," you must
check the proxy card or contact your broker or nominee to determine if you will
be able to vote by telephone or via the Internet. If you want to vote in person
at the meeting and you hold Verticalnet stock in street name, you must obtain a
proxy card from your broker and bring that proxy card to the meeting, together
with a copy of a brokerage statement reflecting your stock ownership as of the
record date.
Please also note that, by casting your vote by proxy in any of the
three ways listed above, you are authorizing the individuals listed on the proxy
card to vote your shares in accordance with your instructions.
IS MY VOTE CONFIDENTIAL?
Yes. Proxy cards, ballots and voting tabulations that identify
shareholders are kept confidential except in certain circumstances where it is
important to protect the interests of Verticalnet and its shareholders.
WHAT IF I DO NOT INDICATE MY PREFERENCE ON THE PROXY CARD?
If you do not indicate how you would like your shares to be voted for a
particular nominee for director, your shares will be voted FOR the election of
the nominee. If you "withhold" your vote for a particular nominee for director,
your shares will be voted AGAINST that particular nominee. As to other matters
as may properly come before the meeting (or any adjournments or postponements
thereof), the proxy holders will vote as recommended by the board of directors.
If no such recommendation is made, the proxy holders will be authorized to vote
upon such matters in their own discretion.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised by filing with the Secretary of
Verticalnet either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and request to recast your vote. Attendance at the meeting
will not, by itself, revoke a previously granted proxy.
WHAT CONSTITUTES A QUORUM?
As of the record date, Verticalnet had ____________ shares of its
common stock outstanding. The presence at the meeting, in person or by proxy, of
the holders entitled to cast at least a majority of votes which all shareholders
are entitled to cast as of the record date will constitute a quorum. Broker
non-votes, abstentions and votes withheld count as shares present at the meeting
for purposes of a quorum.
WHAT ARE THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS?
Unless you instruct otherwise on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the board of directors. The board's recommendations are set forth below. In
summary, the board recommends a vote:
- FOR the election of the nominated slate of directors;
- FOR the approval of the Verticalnet, Inc. Equity Compensation Plan
for Employees (1999;
- FOR the approval of the Verticalnet, Inc. Long Term Incentive Plan;
and
- FOR the approval of the amendment to the amended and restated
articles of incorporation.
2
The proxy holders will vote as recommended by the board of directors
with respect to any other matter that properly comes before the meeting. If no
recommendation is given by the board of directors on any such matter, the proxy
holders will vote in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether there
is a quorum.
OTHER PROPOSALS. For each other proposal that may be properly brought
before the meeting, the affirmative vote of a majority of the votes cast by all
shareholders entitled to vote for the proposal will be required for approval. A
properly executed proxy marked "ABSTAIN" with respect to any such matter will be
counted for purposes of determining whether there is a quorum. However, under
Pennsylvania law, a proxy marked "ABSTAIN" is not considered a vote cast.
Accordingly, an abstention will have no effect on the approval of the other
proposals.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. So, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in the voting results. Shares
represented by such "broker non-votes" will, however, be counted in determining
whether there is a quorum. Accordingly, broker non-votes will not be counted
toward a nominee's total of affirmative votes in the election of directors and
will have no effect on the approval of the other proposals.
WHO CONDUCTS THE PROXY SOLICITATION AND HOW MUCH WILL IT COST?
Verticalnet is soliciting the proxies and will bear the cost of the
solicitation. Verticalnet has retained Georgeson Shareholder to aid in the
solicitation. For these services, Verticalnet will pay Georgeson Shareholder a
fee of $______ and reimburse it for out-of-pocket disbursements and expenses.
Verticalnet may ask its officers and other employees, without compensation other
than their regular compensation, to solicit proxies by further mailing or
personal conversations, or by telephone, facsimile, Internet or other means of
electronic transmission. Verticalnet will also, if asked, reimburse brokerage
firms and others for their reasonable expenses in forwarding solicitation
material to the beneficial owners of the common stock.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The board of directors is currently divided into three classes, each of
which consists of two members. Each class has a three-year term. The classes
expire in successive years.
The board of directors proposes that each of the nominees identified
below, all of whom are currently serving as directors, be re-elected into the
class listed below for a new term expiring at the annual meeting in the year
listed below and until their successors are duly elected and qualified.
NOMINEE FOR: CURRENT DIRECTOR IN:
------------------------- -------------------------
NAME CLASS TERM EXPIRING CLASS TERM EXPIRING
---- ----- ------------- ----- -------------
Kevin S. McKay III 2005 I 2003
Howard D. Ross III 2005 III 2002
Mark L. Walsh I 2003 III 2002
Each of the nominees has consented to serve for the term indicated
above. If any of them become unavailable to serve as a director prior to the end
of their term, the board may designate a substitute nominee. In that case, the
persons named as proxies will vote for the substitute nominee designated by the
board.
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THE BOARD RECOMMENDS THAT YOU VOTE FOR EACH OF THE FOLLOWING CLASS III
DIRECTOR NOMINEES.
KEVIN S. MCKAY, 48, has served as our President and Chief Executive
Officer since February 2002 and as a director since July 2001. Most recently,
Mr. McKay was President and CEO of Capita Technologies, a leading technology
service provider in the Interpublic Group. Mr. McKay previously served as Chief
Executive Officer of SAP America, Inc., where he had responsibility for the
company's North and Latin American operations, including all sales and marketing
efforts, customer implementation and support. Prior to that, Mr. McKay was the
Chief Operating Officer and the Chief Financial Officer at SAP America, where
his primary duties spanned the financial, accounting, and operational management
of SAP subsidiaries in the United States, Canada and Latin America. He was also
a member of the SAP AG Extended Management board and the SAP America, Inc. board
of directors.
HOWARD D. ROSS, 49, has served as a director since June 2000. Mr. Ross
is a founding partner of LLR Equity Partners, L.P. Prior to founding LLR Equity
Partners, he spent 26 years with Arthur Andersen LLP and served as partner in
charge of Arthur Andersen's Growth Company Practice in the mid-Atlantic region.
Mr. Ross received a B.S. in Economics from the Wharton School of Business,
University of Pennsylvania, and is a Certified Public Accountant.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING CLASS I DIRECTOR
NOMINEE.
MARK L. WALSH, 46, has served as a director since August 1997. Mr.
Walsh has been the Chief Technology Advisor to the Democratic National Committee
since January 2002. He served as Chairman of the Verticalnet board of directors
from July 2000 until February 2002. Prior to that, he served as President and
Chief Executive Officer from August 1997 to July 2000. Prior to joining
Verticalnet, he was a Senior Vice President and corporate officer at America
Online, Inc. from 1995 to 1997. He founded and managed AOL Enterprise, the
business-to-business division of AOL. Prior to his position with AOL, Mr. Walsh
was the President of GEnie, General Electric's online service from 1994 to 1995.
He also was the President of Information Kinetics, Inc., a venture capital
backed interactive information company focusing on the recruitment and
classified advertising market from 1993 to 1994. He received his MBA from
Harvard Business School and B.A. from Union College.
INCUMBENT DIRECTORS
The following persons are serving as Class I directors, whose terms
expire in 2003:
ROBERT F. BERNSTOCK, 50, has served as a director since December 2001.
Mr. Bernstock was the President and CEO of Atlas Commerce from January 2001 to
December 2001. Mr. Bernstock was President, Chief Executive Officer and a board
member of Vlasic Foods International Inc. from March 1998 when Vlasic was
spun-off from Campbell Soup Company, to December 2000. Vlasic filed voluntarily
for bankruptcy in January 2001 under Chapter 11 of the United States Bankruptcy
Code. Mr. Bernstock served as Executive Vice President of Campbell Soup Company
and President of its Specialty Foods Division from July 1997 to March 1998.
Prior to that, he was appointed President - U.S. Grocery Division and Senior
Vice President of Campbell Soup Company in March 1996. Mr. Bernstock served as
President International Grocery Division of Campbell Soup Company from August
1994 to February 1996. He served as President - International Soup Division of
Campbell Soup Company from June 1993 to July 1994 and was Vice President of
Campbell Soup Company.
WALTER W. BUCKLEY, III, 42, has served as a director since 1996. Mr.
Buckley is co-founder, President, Chief Executive Officer and a director of
Internet Capital Group, Inc. Prior to joining Internet Capital Group, Mr.
Buckley was Vice President of Acquisitions for Safeguard Scientifics, Inc.
between 1991 and 1996. Mr. Buckley directed many of Safeguard's investments and
was also responsible for developing and executing Safeguard's multi-media and
Internet investment strategies. Before Safeguard, Mr. Buckley was the President
and co-founder of Centralized Management Systems, Inc., a medical supply
company, which he sold in 1987. Mr. Buckley is also a member of the board of
directors of Breakaway Solutions, Inc. and Safeguard Scientifics. Mr. Buckley
received his B.A. from the University of North Carolina, Chapel Hill.
4
The following persons are serving as Class II directors, whose terms
expire in 2004:
JEFFREY C. BALLOWE, 46, has served as a director since July 1998. Mr.
Ballowe is retired from Ziff-Davis, Inc. ("ZD") where he was President,
Interactive Media and Development Group. Before leaving Ziff Davis at the end of
1998, Ballowe led the launches of five magazines, ZDNet on the Web, ZDTV (now
Tech TV) and the initial ZD Softbank investments in Yahoo!, USWeb, Gamespot and
Herring Communications. Currently he serves as a director of Onvia.com and is on
the advisory boards of Internet Capital Group and ShopEaze.com. He is the
co-founder and President of the not-for-profit Electronic Literature
Organization. He received an MBA from the University of Chicago, an M.A. in
French from the University of Wisconsin-Madison and a B.A. from Lawrence
University.
MICHAEL J. HAGAN, 39, co-founded Verticalnet in 1995 and has served as
Chairman of the Board since February 2002. Prior to that, he served as our
President and Chief Executive Officer since January 2001. He has served as a
director since 1995. Since our founding, Mr. Hagan has held various executive
positions with us, including Executive Vice President and Chief Operating
Officer immediately before becoming President and Chief Executive Officer. Prior
to our founding, Mr. Hagan was Vice President and Senior Manager at Merrill
Lynch Asset Management from 1990 to 1995. He served at Merrill Lynch in the
areas of finance, technology and accounting. Prior to that time, Mr. Hagan
worked for Bristol Myers Squibb from 1988 to 1990. Mr. Hagan received a B.S.
from St. Joseph's University and is a Certified Public Accountant.
COMPENSATION OF DIRECTORS
Verticalnet does not pay its directors cash compensation for regular
service on the board. However, they are reimbursed for expenses they incur in
attending meetings. Additionally, each non-employee, non-investor director is
eligible to receive options to purchase Verticalnet common stock. New
non-employee, non-investor directors receive 50,000 options upon joining the
board for the first time. Continuing non-employee, non-investor directors
receive 50,000 options on the date of the annual meeting if they remain
directors after the meeting ends. Therefore, retiring directors would not get a
new grant. The options are non-qualified stock options for 50,000 shares of
stock, granted at the closing price per share on the date of grant. Options are
fully vested on the date of grant. Options have a maximum term of 10 years,
except that a director has 90 days to exercise after leaving the board. Options
can be exercised at any time, but there is a sale restriction on the underlying
shares as follows: 12,500 can be sold starting on the grant date, and 12,500
additional can be sold after each additional three month period. This sale
restriction lapses on the set dates irrespective of the person's continuing
status as a board member. In fiscal 2001, Verticalnet granted its three
non-employee, non-investor directors an aggregate of 150,000 stock options.
Verticalnet pays the members of its audit committee $3,500 for each
fiscal quarter that they serve on the committee. Verticalnet pays the members of
its compensation committee $1,500 for each fiscal quarter that they serve on the
committee.
BOARD MEETINGS DURING FISCAL 2001
The board of directors met 13 times during fiscal 2001. Four of the
meetings were regular meetings and the other nine were special meetings. Each
current director attended more than 75% of the total number of meetings of the
board and committees on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has the following standing committees:
COMPENSATION COMMITTEE. The compensation committee is charged with
reviewing Verticalnet's general compensation policies; reviewing, approving,
recommending and administering Verticalnet's incentive compensation and stock
option plans; and approving certain employment arrangements. In fiscal 2001, the
compensation committee met five times. The compensation committee consists of
Messrs. Ballowe and Ross.
5
AUDIT COMMITTEE. The functions of the audit committee are to recommend
the appointment of independent auditors; review the arrangements for and scope
of the audit by independent auditors; review the audit reports of the
independent auditors; and review procedures. In fiscal 2001, the audit committee
met five times. During 2001 Messrs. Ballowe, McKay and Ross were the members of
the audit committee. After Mr. McKay was appointed president and CEO in February
2002, he was replaced on audit committee by Mr. Buckley, a former audit
committee member, who will serve on an interim basis until another independent
director is appointed. The audit committee currently consists of Messrs.
Ballowe, Buckley and Ross.
REPORT OF THE AUDIT COMMITTEE
The following report of the audit committee, as well as the report of
the compensation committee and the performance graph included elsewhere in this
proxy statement, do not constitute soliciting material and should not be deemed
filed or incorporated by reference into any other filing Verticalnet makes under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent Verticalnet specifically incorporates these reports or the performance
graph by reference therein.
The audit committee of the board of directors is responsible for
providing independent, objective oversight of the Company's financial reporting
process and internal controls. The audit committee operates under a written
charter adopted by the board of directors. A copy of the current charter is
attached as Annex A.
The audit committee is composed of three directors, each of whom is
independent as defined by the listing standards of The Nasdaq Stock Market. In
2001, the audit committee consisted of Jeffrey C. Ballowe, Kevin S. McKay and
Howard D. Ross. When Mr. McKay became Verticalnet's president and CEO in
February 2002, he no longer qualified as an independent director. Mr. Buckley
has replaced Mr. McKay on the audit committee for 2002.
Management is responsible for the Company's internal controls and
financial reporting processes. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States and for issuing a report thereon. The audit committee's
responsibility is to monitor and oversee these processes.
The audit committee reviewed and discussed Verticalnet's audited
financial statements for the fiscal year ended December 31, 2001, with
Verticalnet's management and with Verticalnet's independent accountants, KPMG
LLP. In addition, the audit committee discussed with KPMG LLP the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committee. The audit committee also received the letter
from KPMG LLP required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and the audit committee
discussed with the KPMG LLP that firm's independence. The audit committee also
considered whether KPMG LLP's provision of non-audit services was compatible
with maintaining that firm's independence.
Based on the audit committee's review of Verticalnet's audited
financial statements and the review and discussions with management and the
independent accountants, the audit committee recommended to the board of
directors that the audited financial statements for the fiscal year ended
December 31, 2001, be included in Verticalnet's Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, for filing with the Securities and
Exchange Commission.
THE AUDIT COMMITTEE
FEBRUARY 2002
Howard D. Ross, Chairman
Jeffrey C. Ballowe
Kevin S. McKay
6
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP audited Verticalnet's financial statements for the fiscal year
ended December 31, 2001. No auditor has been selected for the fiscal year ending
December 31, 2002 as the Board of Directors, consistent with prior practice,
will appoint an auditor for the current fiscal year prior to the commencement of
the audit.
One or more representatives of KPMG LLP are expected to attend the
annual meeting to respond to appropriate questions. They will have an
opportunity to make a statement if they so desire.
Material non-audit services will be approved by the audit committee
prior to the rendering of such services after due consideration of the effect of
the performance thereof on the independence of the auditors.
FISCAL 2001 AUDIT FIRM FEE SUMMARY
The fees paid by Verticalnet to KPMG for the 2001 fiscal year were as
follows:
AUDIT FEES. The aggregate fees billed by KPMG LLP for professional
services rendered for the audit of Verticalnet's annual financial statements for
fiscal 2001 and the reviews of the financial statements included in
Verticalnet's Quarterly Reports on Form 10-Q were $947,800.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The
aggregate fees billed by KPMG Consulting, Inc. during January 2001 were $63,700.
ALL OTHER FEES. The aggregate fees billed for services rendered by KPMG
LLP, other than the fees discussed in the foregoing paragraphs, were $394,700,
of which $177,500 related to tax services, $91,250 related to the sale of
NECX.com LLC, $72,400 related to services provided in connection with other
acquisitions, and $53,550 related to filings with the Securities and Exchange
Commission, technical research and other services.
7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 7, 2000, Microsoft Corporation and Verticalnet completed
Microsoft's purchase of 100,000 shares of Verticalnet's Series A 6.00%
convertible redeemable preferred stock, which are initially convertible into
1,151,080 shares of Verticalnet's common stock, for $100 million in cash. In
addition, Microsoft also received warrants entitling Microsoft to purchase
1,500,000 shares of Verticalnet's common stock at an exercise price of $69.50.
Under the terms of this investment, Microsoft received registration rights and
the right to nominate one member of Verticalnet's board of directors.
Microsoft's right to designate one board nominee continues for so long as
Microsoft and its affiliates own at least 25% of the shares of common stock that
remain issued and outstanding following, or that are issuable upon, the
conversion of the Series A preferred stock and that have not been sold pursuant
to a registration statement or Rule 144 under the Securities Act of 1933, as
amended. Microsoft currently has no nominee named to Verticalnet's board of
directors.
STOCK OWNERSHIP
Except as set forth in the following table, Verticalnet knows of no
single person or group that is the beneficial owner of more than 5% of
Verticalnet's common stock.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Internet Capital Group, Inc. 35,841,747 (1)(2) 31.6%
435 Devon Park Drive, Bldg. 600
Wayne, PA 19087
Safeguard Scientifics, Inc. 10,523,103 (2) 9.4%
800 The Safeguard Building
435 Devon Park Drive, Bldg. 800
Wayne, PA 19087
---------------
(1) Includes 478,624 shares of common stock issuable upon the conversion of
warrants and 250,000 shares of common stock issuable upon the conversion of
Verticalnet's 5 -1/4% convertible subordinated debentures. All amounts are
as of March 15, 2002. Excludes 51,592 shares owned by Walter W. Buckley
III. Mr. Buckley disclaims beneficial ownership of all shares held by
Internet Capital Group. Mr. Buckley is the President, Chief Executive
Officer and a director of Internet Capital Group.
(2) Includes the 10,523,103 shares owned by Safeguard Scientifics. Internet
Capital Group filed a Schedule 13D on March 15, 2002 stating that they had
reached an agreement with Safeguard Scientifics that provides ICG with the
right of first refusal to purchase the shares that Safeguard owns.
The following table shows the amount of common stock of Verticalnet
beneficially owned (unless otherwise indicated) by Verticalnet's directors, the
executive officers of Verticalnet named in the Summary Compensation Table
appearing later in this proxy statement and the directors and named executive
officers of Verticalnet as a group. Except as otherwise indicated, all
information is as of April 19, 2002.
8
AGGREGATE NUMBER OF
SHARES BENEFICIALLY ACQUIRABLE WITHIN 60 PERCENT OF SHARES
NAME OWNED(1) DAYS(2) OUTSTANDING (3)
---- -------- ------- ---------------
Jeffrey C. Ballowe.......... 33,804 187,140 *
Robert F. Bernstock......... 0 162,885 *
Walter W. Buckley, III...... 24,641,612(4) 728,624(5) 23.3%(4)(5)
Michael J. Hagan............ 1,951,050 377,692 [___%]
David Kostman............... 6,921 822,391 *
Christopher Larsen.......... 0 550,000 *
Kevin S. McKay.............. 0 65,625 *
James W. McKenzie, Jr....... 13,258 537,500 *
Howard D. Ross.............. 0 100,000 *
Mark L. Walsh............... 530,782 1,398,194 [___%]
All directors and named
executive officers as a
group (10 persons)....... 27,177,427 4,930,051(4) [___%]
---------------
* Represents less than 1% of Verticalnet's outstanding common stock.
(1) The number of shares shown includes shares that are individually or jointly
owned, as well as shares over which the individual has either sole or
shared investment or voting authority.
(2) Unless otherwise noted, reflects the number of shares that could be
purchased by exercise of options available at April 1, 2002 or within 60
days thereafter under Verticalnet's stock option plans.
(3) Based on [__________] shares outstanding at April 19, 2002.
(4) Includes 24,590,020 shares by Internet Capital Group, for which Mr. Buckley
serves as the President, Chief Executive Officer and a director, as
disclosed in a Schedule 13G filed February 14, 2002. Does not include the
10,523,103 shares owned by Safeguard Scientifics over which Internet
Capital Group shares beneficial ownership, as disclosed in a Schedule 13D
filed by Internet Capital Group on March 15, 2002.
(5) Includes 478,624 shares of common stock issuable upon the conversion of
warrants held by Internet Capital Group and 250,000 shares of common stock
issuable upon the conversion of Verticalnet's 5 -1/4% convertible
subordinated debentures held by Internet Capital Group. All amounts are as
of March 15, 2002. Mr. Buckley serves as the President, Chief Executive
Officer and a director of Internet Capital Group. Mr. Buckley disclaims
beneficial ownership of Verticalnet's warrants and debentures held by
Internet Capital Group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires officers,
directors and holders of more than 10% of Verticalnet's common stock to file
reports of ownership and changes of ownership with the Securities and Exchange
Commission. To the best of Verticalnet's knowledge, the reports for all
officers, directors and holders of more than 10% of Verticalnet's common stock
were timely filed during fiscal 2001.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of the board of directors, which reviews
Verticalnet's general compensation policies and approves incentive compensation
and stock option plans, has furnished the following report on executive
compensation for fiscal 2001.
WHAT IS VERTICALNET'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
Verticalnet's philosophy of executive officer compensation is designed
to align the interests of executive officers with the short- and long-term
interests of Verticalnet shareholders. Towards that goal, the compensation
program for executives consists of three key elements:
9
- a base salary,
- a performance-based annual bonus, and
- periodic grants of stock options.
The compensation committee believes that this approach best serves the
interests of Verticalnet and its shareholders. Verticalnet operates in a
challenging and competitive environment, so the compensation committee must
ensure that executive officers are compensated in a way that advances both the
short- and long-term interests of shareholders. Under this approach, a
significant portion of an executive officer's total compensation is tied to
performance -- namely, the annual bonus and stock options. The variable annual
bonus permits individual performance to be recognized on an annual basis, and is
based, in significant part, on an evaluation of the contribution made by the
executive officer to Verticalnet's performance. Stock options relate a
significant portion of long-term remuneration directly to stock price
appreciation realized by Verticalnet's shareholders. During 2001, the Company
faced the challenge of
BASE SALARY: Base salaries for Verticalnet's executive officers, as
well as changes in such salaries, are determined after considering numerous
factors including:
- competitive salaries;
- the nature of the officer's position and its subjective importance to
Verticalnet's success;
- level of experience;
- expected amount of individual responsibility; and
- general market conditions.
ANNUAL BONUS: Annual bonuses for executive officers of Verticalnet are
based on the achievement of goals pertaining to financial and operating
objectives, individual objectives, and goals relating to targets for areas of
responsibility and. The bonus plan weighs the objective goals more heavily than
the subjective targets. During 2001, Verticalnet's executive officers met the
goals that the compensation committee set for the year. The compensation
committee reevaluates the performance targets each year to reflect Verticalnet's
goals for the coming year.
STOCK OPTIONS: The compensation committee has utilized stock options to
motivate and retain executive officers. The compensation committee believes that
this form of compensation closely aligns the officers' interests with those of
shareholders and provides an incentive to building long-term shareholder value.
Options are typically granted annually and are subject to vesting provisions to
encourage executive officers to remain employed with Verticalnet. Each executive
officer receives stock options based upon that officer's relative position,
responsibilities and his or her anticipated performance and responsibilities.
Additionally, the compensation committee reviews the prior level of grants to
the executive officers and to other members of senior management, including the
number of shares that continue to be subject to vesting under outstanding
options, in setting the level of options to be granted to the executive
officers. Stock options are granted at the market price on the date of grant and
provide value only if the price of Verticalnet's common stock is over the
exercise price on the date of exercise.
HOW WAS THE CHIEF EXECUTIVE OFFICER COMPENSATED?
When Mr. Hagan was appointed president and CEO in January 2002, he was
at that time the Chief Operating Officer with a salary of $225,000 and a target
bonus of 100% of salary. The compensation committee offered to increase Mr.
Hagan's salary commensurate with the increase in his responsibilities. Mr.
Hagan, who is a co-founder of the company, instead requested at the end of the
third quarter that his salary be reduced to $150,000, and his target bonus be
reduced to 50% of salary. The compensation committee approved an employment
agreement with Mr. Hagan in October 2001, which provided for the decreased
salary level and target bonus levels. The compensation committee approved a 2001
bonus for Mr. Hagan of $150,000, reflecting the average of his target bonus
level of $225,000 through most of 2001 and his revised target of $75,000. The
compensation committee believes that this bonus was merited by Mr. Hagan's
leadership in the transition of the company throughout the year to an enterprise
software company.
10
HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the individuals named in the Summary Compensation Table. However,
the statute exempts qualifying performance-based compensation from the deduction
limit if certain requirements are met. The compensation committee currently
intends to structure performance-based compensation, including stock option
grants and annual bonuses, to executive officers who may be subject to Section
162(m) in a manner that satisfies those requirements.
The compensation committee reserves the authority to award
non-deductible compensation as it may deem appropriate. Because of uncertainty
surrounding the interpretation of Section 162(m), the committee can give no
assurance, notwithstanding Verticalnet's efforts, that compensation intended to
satisfy the requirements for deductibility under Section 162(m) will in fact do
so.
THE COMPENSATION COMMITTEE
Jeffrey C. Ballowe, Chairman
Howard D. Ross
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee makes all compensation decisions. Messrs.
Ballowe and Ross served as the members of the compensation committee during
fiscal 2001. None of the executive officers, directors or compensation committee
members presently serve, or in the past served, on the compensation committee of
any other company whose directors or executive officers served on our
compensation committee.
EMPLOYMENT AGREEMENTS
On October 1, 2001, the Company entered into employment agreements with
Michael J. Hagan ($150,000 salary), James W. McKenzie, Jr. ($250,000 salary) and
David Kostman ($250,000 salary). The agreements have a term of two years, with
automatic renewal unless either party gives at least one-year advance notice of
nonrenewal. The agreements have a target bonus of 35% of salary for Messrs.
McKenzie and Kostman and 50% of salary for Mr. Hagan, which is not guaranteed.
If the executive is terminated without cause (with one month advance notice of
termination without cause), then the executive will receive, in exchange for a
mutual general release: a lump sum payment equal to salary for six months (one
year for Hagan), but if the executive has been employed by the company at least
one year, then equal to salary for one year (two years for Hagan); healthcare
coverage paid by the company for one year; unvested options granted in 2001 are
accelerated for a period equal to six months plus one additional month for each
month that the executive has been employed by the company; all vested options
granted in 2001 will be exercisable for five years after termination of
employment. Upon a "change of control" the employment agreement term would
automatically restart for two. If within two years after a change of control,
the executive is terminated without cause or chooses to leave for "good reason,"
then the executive will receive, in addition to the termination without cause
benefits above, a lump sum payment equal to salary for an additional six months,
but if the executive has been employed by the company at least one year, then
equal to salary for an additional one year; a lump sum payment equal to the
target bonus (three times the target bonus for Mr. Hagan) for the year in which
termination occurs. The agreement prevents excess parachute payments under
sections 280G and 4999 of the Internal Revenue Code, by applying a cap to the
executive's compensation if it produces a greater net benefit than an uncapped
award would after accounting for the increased tax obligation resulting from
being an excess parachute payment. The agreement defines "good reason" after a
change of control as (1) the executive is transferred more than 50 miles without
consent; or (2) a material reduction of authority, duties or responsibilities
after reasonable notice and a chance to cure; or (3) any failure of the company
materially to comply with and satisfy the terms of the agreement; or (4)
non-renewal of the agreement by the company.
Mr. Larsen entered into a letter agreement upon the commencement of his
employment with the company on April 25, 2001. The agreement provided for a
$300,000 salary, a $25,000 signing bonus, a 2001 guaranteed bonus of $200,000,
and a target bonus thereafter of 50% of salary. The agreement provided for the
following severance benefits, in exchange for a general release, if Mr. Larsen
terminated his employment with the company
11
for "good reason," which he did in April 2002: salary continuation payments for
six months; a severance payment equal to $150,000, representing his 2002 target
bonus; accelerated vesting of 25% of his options granted in 2001; and all vested
options remain exercisable for 180 days after termination of employment.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning total
compensation earned or paid to the all individuals serving as Verticalnet's
chief executive officer during the 2001 fiscal year, as well as the four other
most highly compensated executive officers of Verticalnet who served in such
capacities as of December 31, 2001, and one additional individual who would have
been one of the four most highly compensated executive officers if he had been
an executive officer at year end (the "named executive officers"), for services
rendered to Verticalnet during each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION NUMBER
-------------------------- OF STOCK
FISCAL ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITIONS(1) YEAR SALARY BONUS GRANTED COMPENSATION
------------------------------- ---- ------ ----- ------- ------------
Mark L. Walsh................... 2001 $ 176,917 $ 0 0 $ --
Chairman 2000 300,000 0 400,000(2) --
1999 200,000 100,000 0 --
Michael J. Hagan................ 2001 $ 206,250 $ 150,000 0 $ --
President and Chief Executive 2000 212,500 90,000 400,000(2) --
Officer(3) 1999 125,000 50,000 100,000 --
James W. McKenzie, Jr........... 2001 $ 250,000 $ 100,000 975,000 $ --
Executive Vice President, 2000(3) 183,333 125,000 580,000(4) --
General Counsel and Secretary
David Kostman................... 2001 $ 250,000 $ 75,000 1,200,000 $ --
Chief Operating Officer and 2000(5) 119,318 75,000 300,000 --
Interim Chief Financial
Officer
Christopher Larsen.............. 2001(6) $ 204,545 $ 225,000 1,100,000 $ --
Executive Vice President of
Sales and Marketing
Gene S. Godick.................. 2001(7) $ 216,989 $ 0 275,000 $ --
Executive Vice President and 2000 207,500 100,000 0 --
Chief Financial Officer 1999 148,352 60,000 198,000 --
---------------
(1) Since January 1, 2002, the positions held by certain of the named executive
officers have changed, primarily as a result of the merger between
Verticalnet and Atlas Commerce on December 28, 2001, as follows:
- Mr. Hagan currently serves as Chairman.
- Kevin S. McKay currently serves as President and Chief Executive
Officer.
- Mr. Walsh currently serves as a member of the board of directors.
- Mr. Larsen resigned in April 2002.
- John A. Milana replaced Mr. Kostman as Chief Financial Officer in
February 2002.
(2) On December 19, 2000, the grants of 400,000 stock options to each of
Mr. Walsh and Mr. Hagan were voluntarily surrendered.
(3) Mr. McKenzie commenced employment in January 2000.
(4) In April 2002, Mr. McKenzie voluntarily surrendered his stock options
granted in fiscal 2000.
(5) Mr. Kostman commenced employment in July 2000.
(6) Mr. Larsen commenced employment in April 2001.
(7) Mr. Godick was not an executive officer at December 31, 2001. He
resigned in October 2001.
12
OPTION GRANTS IN LAST FISCAL YEAR
The table below shows information about stock options granted during
fiscal 2001 to each of the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATE OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS EXERCISE FOR OPTION TERM(4)
OPTIONS GRANTED TO PRICE PER EXPIRATION -----------------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
------------------------ ------------- ---------- --------- ---------- ----------- ------------
Mark L. Walsh........... 0 0.00 N/A N/A N/A N/A
Michael J. Hagan........ 0 0.00 N/A N/A N/A N/A
James W. McKenzie, Jr... 400,000(1) 1.48 $1.94 03/15/2011 488,022 1,236,744
575,000(2) 2.13 $0.34 09/30/2011 122.949 311,577
David Kostman........... 500,000(1) 1.85 $1.94 03/15/2011 610,028 1,545,930
700,000(2) 2.60 $0.34 09/30/2011 149,677 379,311
Christopher Larsen...... 400,000(1)(3) 1.48 $1.94 03/15/2011 472,929 1,198,494
700,000(2)(3) 2.60 $0.34 09/30/2011 149,677 379,311
Gene S. Godick.......... 275,000 1.02 N/A N/A 335,515 850,261
---------------
(1) 12.5% of the grant vests on each of May 15, August 15, November 15 and
February 15 from May 15, 2001 through February 15, 2003.
(2) 25% of the grant vests on each of April 1 and October 1 from April 1,
2002 through October 1, 2003.
(3) 50% of Mr. Larsen's options expired unvested upon his separation of
employment in April 2002.
(4) These columns show gains that may exist for the respective options,
assuming that the market price for the common stock appreciates from
the date of grant over a period of 10 years at annual rates of growth
of 5% and 10%, respectively. These rates of growth are mandated by
rules of the Securities and Exchange Commission. There can be no
assurance that the actual stock price appreciation over the 10-year
option term will be at the assumed 5% and 10% levels or at any other
defined level. If the market price of the common stock does not
appreciate over the option term, no value will be realized from the
option grants.
OPTION EXERCISES AND VALUES FOR FISCAL 2001
The table below sets forth information with respect to option exercises
during fiscal 2001 by each of the named executive officers and the status of
their options at December 31, 2001:
AGGREGATED OPTION EXERCISES DURING FISCAL 2001
AND
OPTION VALUES ON DECEMBER 31, 2001
NUMBER OF
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED UPON OPTIONS AT 12/31/01 MONEY OPTIONS AT 12/31/01(2)
EXERCISE OF VALUE REALIZED ---------------------------- ------------------------------
NAME OPTIONS UPON EXERCISE(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------ ------------- ---------------- ----------- ------------- ----------- --------------
Mark L. Walsh........ 193,000 $1,047,025 1,017,093 214,224 $ 969,744 $ 159,061
Michael J. Hagan..... 0 0 357,538 50,154 361,846 7,385
James W. McKenzie, Jr. 0 0 530,000 1,025,000 0 609,500
David Kostman........ 0 0 312,364 1,187,636 0 742,000
Christopher Larsen... 0 0 100,000 1,000,000 0 742,000
Gene S. Godick....... 153,848 $241,002 214,005 258,995 0 0
---------------
(1) Represents the difference between the market price on the exercise date and
the exercise price, multiplied by the number of options exercised. Does not
necessarily reflect the value received if the individual sells the shares
acquired by the option exercise, since the market price of the shares at
the time of sale may be higher or lower than the market price on the date
of exercise.
(2) Represents the difference between the year-end stock price ($1.40 per
share) and the exercise price associated with each option, multiplied
by the number of shares underlying the options.
13
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return of Verticalnet's
common stock with that of the Nasdaq Composite Index and The Street.com Internet
Index from February 11, 1999 (the date the common stock began to trade publicly)
through March 31, 2002. Verticalnet's fiscal year ends on December 31. The graph
assumes that you invested $100 at the close of market on February 11, 1999 in
Verticalnet common stock and $100 invested at that same time in each of the
indexes. The comparison assumes that all dividends, if any, are reinvested. The
comparisons in this graph are provided in accordance with Securities and
Exchange Commission disclosure requirements and are not intended to forecast or
be indicative of the future performance of the common stock.
PROPOSAL NO. 3 AND NO. 4 - APPROVAL OF THE VERTICALNET, INC. EQUITY COMPENSATION
PLAN FOR EMPLOYEES (1999) AND APPROVAL OF THE VERTICALNET, INC. 1999 LONG TERM
INCENTIVE PLAN
Verticalnet uses four equity compensation plans to grant stock options
to employees. Verticalnet shareholders have previously approved two of these
plans: the 1996 Equity Compensation Plan and the 2000 Equity Compensation Plan.
Our board approved the other two plans, but they have not been approved by
Verticalnet shareholders, as permitted by Nasdaq rules: the Equity Compensation
Plan for Employees (1999) and the 1999 Long Term Incentive Plan.
The Verticalnet board originally approved the Equity Compensation Plan
for Employees (1999) on October 20, 1999. The 1999 Long Term Incentive Plan was
originally approved by the board and shareholders of Atlas Commerce, Inc. in
January 1999. When Atlas Commerce merged with Verticalnet on December 28, 2001,
the Verticalnet board assumed the 1999 Long Term Incentive Plan, and amended it
to be consistent with Verticalnet's other equity compensation plans. Verticalnet
has decided to seek shareholder approval at the annual meeting for the two
existing 1999 plans. These plans do not currently require shareholder approval
because they meet the requirements of The Nasdaq Stock Market to be as
broadly-based plans primarily available to non-executive officers. The
Securities and Exchange Commission has expressed the view that all stock option
plans should be approved by shareholders as a matter of good corporate
governance. Nasdaq has been actively considering proposed rule changes that
would be consistent with the views of the Securities and Exchange Commission. If
Nasdaq adopts these rule changes, we may be required to seek shareholder
approval for the 1999 plans at that time if we have not obtained shareholder
approval at the annual meeting. Our board has also approved amendments to the
1999 plans to make them available to all employees, including officers, but not
to non-employee directors, consultants or advisors. If shareholders do not
approve the 1999 plans at the annual meeting, these amendments will not become
effective but we will continue to use the plans as broadly-based employee plans
under current Nasdaq rules unless those rules are no longer available.
14
The board believes it is in Verticalnet's best interest to approve the
plans. The plans are intended to encourage employees to contribute materially to
the growth of the company, thereby benefiting its shareholders, and aligning the
interests of the employees with shareholders. At the annual meeting, a proposal
to approve the Equity Compensation Plan for Employees (1999) and a proposal to
approve the 1999 Long Term Incentive Plan will be presented to Verticalnet
shareholders.
THE EQUITY COMPENSATION PLAN FOR EMPLOYEES (1999) IS SET FORTH IN ANNEX
B TO THIS PROXY STATEMENT. THE 1999 LONG TERM INCENTIVE PLAN IS SET
FORTH IN ANNEX C TO THIS PROXY STATEMENT. THE FOLLOWING DESCRIPTION OF
THE EQUITY COMPENSATION PLAN FOR EMPLOYEES (1999) AND THE 1999 LONG
TERM INCENTIVE PLAN ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO
ANNEX B AND ANNEX C.
SUMMARY OF THE PLANS
The plans are administered by the compensation committee. The
compensation committee has the sole authority to determine the individuals that
receive grants; determine the type, size and terms of grants, and timing of
grants and period grants will be exercisable or when restrictions will lapse;
amend the terms of previously issued grants; and deal with any other matters
arising under the plans. Nonetheless, the compensation committee may delegate to
Verticalnet's Chief Executive Officer the authority to make certain grants in
accordance with applicable law and subject to any conditions and limitations
imposed by the compensation committee. The board may ratify and approve any
grants it deems appropriate.
The number of shares originally reserved for issuance under the Equity
Compensation Plan for Employees (1999) was 18,500,000 shares of common stock. As
of April 1, 2002, _______ shares have been issued, _______ shares are reserved
for outstanding grants and _______ shares are available for future grants. The
number of shares reserved for issuance under the 1999 Long Term Incentive Plan
is 2,359,927. As of April 1, 2002, _______ shares are reserved for outstanding
grants and _______ shares are available for future grants. All shares subject to
grants that expire or are cancelled, surrendered or terminated for any reason
will be available for new grants under the plans. Each plan limits the aggregate
number of shares for which options or stock awards may be granted to any person
during any calendar year to 750,000 shares. The compensation committee may
adjust these limits, as well as the number of shares covered by outstanding
grants, and the price per share of outstanding grants if there is any change in
the number or class of shares because of stock dividends, stock split, merger,
reclassification, or other similar changes in Verticalnet's stock because of a
corporate transaction.
If approved by shareholders, all of Verticalnet's employees and
employees of its subsidiaries will be eligible to participate in the plans,
including employees who are officers or members of the board and individuals who
have accepted employment with Verticalnet or any of its subsidiaries.
Verticalnet's non-employee directors, consultants and advisors will not be
eligible to participate in the plans.
Both plans permit grants of nonqualified stock options. The 1999 Long
Term Incentive Plan also permits the grant of incentive stock options.
Incentive stock options may be granted only to employees. Nonqualified
stock options may be granted to employees or individuals who have accepted
employment. The exercise price underlying the option will be determined by the
compensation committee. The exercise price for non-qualified stock options may
be equal to, greater than, or less than the fair market value of Verticalnet's
stock on the date of grant. The exercise price for incentive stock options may
be equal to or greater than the fair market value of Verticalnet's stock on the
date of grant, and an incentive stock option granted to a 10% shareholder must
have an exercise price of not less than 110% of the fair market of Verticalnet's
stock on the date of grant.
Participants may pay the exercise price of an option by (i) cash, (ii)
with the approval of the compensation committee, by delivering shares of common
stock owned by the grantee, (iii) payment though a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board, or (iv) by
such other method as the compensation committee may approve.
15
Options will become exercisable according to the terms and conditions
determined by the compensation committee and specified in the grant instrument.
The compensation committee may accelerate the exercisability of any or all
outstanding options at any time for any reason. The compensation committee will
determine the term of each option, up to a maximum ten-year term. Options may be
exercised while the grantee is an employee, consultant, advisor or member of the
board, or within a specified period of time after termination of employment or
service.
The compensation committee may issue shares of common stock to
employees, individuals who have accepted employment, consultants, advisors and
non-employee directors subject to restrictions or no restrictions. Unless the
compensation committee determines otherwise, during any restriction period,
grantees will have the right to vote shares of stock awards and to receive
dividends or other distributions paid on such shares. Unless the compensation
committee determines otherwise, if a grantee's employment or service terminates
during any restriction period or if any other conditions are not met, the stock
awards will terminate as to all shares on which restrictions are still
applicable, and the shares must be immediately returned to Verticalnet.
Grants under the Plans may not be transferred except upon the grantee's
death or, with respect to grants other than incentive stock options, if
permitted by the compensation committee pursuant to a domestic relations order.
The compensation committee, on such terms as it deems appropriate, may permit a
grantee to transfer nonqualified stock options to family members or other
entities that benefit or are owned by family members.
The board may amend or terminate the Plans at any time. However, the
board may not make any amendment without shareholder approval if such approval
is required under the applicable provisions of the Internal Revenue Code or
stock exchange requirements. Each Plan will terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the board
terminates a Plan earlier or extends it with the approval of the shareholders.
The Equity Compensation Plan for Employees (1999) became effective on October
20, 1999 and the 1999 Long Term Incentive Plan became effective on January 1,
1999.
Each plan provides that in the event of a change of control, unless the
compensation committee determines otherwise, each outstanding option will
continue in effect according to its terms. The compensation committee may take
any of the following actions in the event of a change of control: (i) require
that all outstanding options be assumed by or replaced with comparable options
of the surviving company and that restricted stock be replaced with restricted
stock of the surviving company, (ii) provide that all outstanding options are
fully exercisable and that all restrictions on outstanding restricted stock
immediately lapse, (iii) require grantees to surrender their outstanding options
in exchange for payment by Verticalnet, in cash or common stock, of an amount
equal to the amount by which the fair market value of Verticalnet's common stock
exceeds the option price of the options, or (iv) determine that all outstanding
options not exercised within a certain period will terminate.
A "change of control" will be deemed to occur if (i) any person becomes
a beneficial owner, directly or indirectly, of Verticalnet's securities
representing more than 50% of the voting power of Verticalnet's then outstanding
securities, or (ii) its shareholders approve (or, if shareholder approval is not
required, the board approves) an agreement providing for (x) the merger or
consolidation of Verticalnet where the shareholders immediately before the
transaction will not hold, immediately after the transaction, a majority of the
stock of the surviving corporation, (y) a sale of substantially all of
Verticalnet's assets, or (z) a liquidation or dissolution.
FEDERAL INCOME TAX CONSEQUENCES
The current federal income tax consequences of grants under the plans
are generally described below. This description of tax consequences is not a
complete description, and is based on the Internal Revenue Code as presently in
effect, which is subject to change, and is not intended to be a complete
description of the federal income tax aspects of options and stock awards under
the plans.
16
NONQUALIFIED STOCK OPTIONS
An optionee will not be subject to federal income tax upon the grant of
a nonqualified stock option. Upon the exercise of a nonqualified stock option,
the optionee will recognize ordinary compensation income in an amount equal to
the excess, if any, of the then fair market value of the shares acquired over
the exercise price. Verticalnet will generally be able to take a deduction with
respect to this compensation income for federal income tax purposes. The
optionee's tax basis in the shares acquired will equal the exercise price plus
the amount taxable as compensation to the optionee. Upon a sale of the shares
acquired upon exercise, any gain or loss is generally long-term or short-term
capital gain or loss, depending on how long the shares are held. The required
holding period for long-term capital gain is presently more than one year. The
optionee's holding period for shares acquired upon exercise will begin on the
date of exercise.
INCENTIVE STOCK OPTIONS
An optionee who receives incentive stock options generally incurs no
federal income tax liability at the time of grant or upon exercise of the
options. However, the spread will be an item of tax preference which may give
rise to alternative minimum tax liability at the time of exercise. If the
optionee does not dispose of the shares before the date that is two years from
the date of grant and one year from the date of exercise, the difference between
the exercise price and the amount realized upon disposition of the shares will
constitute long-term capital gain or loss, as the case may be. Assuming both
holding periods are satisfied, no deduction will be allowable to Verticalnet for
federal income tax purposes in connection with the option. If, within two years
of the date of grant or within one year from the date of exercise, the holder of
shares acquired upon exercise of an incentive stock option disposes of the
shares, the optionee will generally realize ordinary compensation income at the
time of the disposition equal to the difference between the exercise price and
the lesser of the fair market value of the stock on the date of exercise or the
amount realized on the disposition. The amount realized upon such a disposition
will generally be deductible by Verticalnet for federal income tax purposes.
TAX DEDUCTIBILITY UNDER SECTION 162(M)
Section 162(m) of the Internal Revenue Code disallows a public
company's deductions for employee compensation exceeding $1,000,000 per year for
the chief executive officer and the four other most highly compensated executive
officers. Section 162(m) contains an exception for performance-based
compensation that meets specific requirements. The plans are intended to permit
all options granted after shareholder approval is obtained to qualify as
performance-based compensation.
WITHHOLDING
Verticalnet has the right to deduct from all grants paid in cash or
other compensation, any taxes required to be withheld with respect to grants
under the plans. Verticalnet may require that the participant pay to it the
amount of any required withholding. The compensation committee may permit the
participant to elect to have withheld from the shares issuable to him or her
with respect to an option and restricted stock a number of shares with a value
equal to the required tax withholding amount.
FUTURE GRANTS
At present, the compensation committee does not have definitive plans
for granting of awards under the plans. No determination has been made as to the
number of stock options to be granted, or the number or identity of optionees or
recipients of awards.
The closing price of Verticalnet's stock as reported on the Nasdaq
National Market on May __, 2002 was $_________.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE EQUITY COMPENSATION PLAN FOR
EMPLOYEES (1999) AND FOR THE APPROVAL OF THE 1999 LONG TERM INCENTIVE PLAN.
17
PROPOSAL NO. 5 - BOARD DISCRETION TO EFFECT REVERSE STOCK SPLIT
OVERVIEW
You are being asked to vote upon a proposed amendment to our articles
of incorporation which would grant to our board of directors the discretion to
effect a reverse split of all outstanding shares of our common stock, if the
board deems that it is in the company's and our shareholders' best interests, at
an exchange ratio of not less than 1-for-5 and not more than 1-for-10. The board
would have the sole discretion to elect, as it determines to be in the best
interests of the company and our shareholders, whether or not to effect a
reverse stock split, and if so, at which exchange ratio within the approved
range, at any time before our 2003 annual shareholders meeting. The board of
directors believes that approval of a proposal granting this discretion to the
board, rather than approval of an immediate reverse stock split at a specified
ratio, would provide the board with maximum flexibility to react to current
market conditions and to therefore achieve the purposes of the reverse stock
split, if implemented, and to act in the best interests of the company and our
shareholders.
To effect the reverse stock split, our board would file an amendment
with the Pennsylvania Secretary of State. The form of amendment to our articles
of incorporation to effect the proposed reverse stock split is attached to this
proxy statement as Annex D. If the board elects to implement a reverse stock
split within the range approved by shareholders, then the number of issued and
outstanding shares of our common stock would be reduced in accordance with the
exchange ratio for the selected reverse stock split. The par value of common
stock would remain unchanged at $.01 per share, and the number of authorized
shares of common stock would remain unchanged. The reverse stock split would
become effective upon filing the amendment to our articles of incorporation with
the Pennsylvania Secretary of State. The board may elect not to implement a
reverse stock split at its sole discretion, even if the proposal to grant the
board the discretion to effect a reverse stock split is approved by our
shareholders.
Our board of directors has approved the proposed grant of discretion to
effect a reverse stock split. By approving the proposal, however, our
shareholders will give our board the maximum flexibility to determine the best
stock split ratio.
PURPOSES OF THE PROPOSED REVERSE SPLIT
Our board of directors believes that we should maintain the right to
implement a reverse split for the following reasons:
- To enhance the acceptability and marketability of our common
stock to the financial community and the investing public.
- To enable us to use the reverse split if it is required to
maintain, and our board believes it is in our and our
shareholders' best interests to maintain, our listing as a
Nasdaq SmallCap or Nasdaq National Market security.
- To reduce the number of outstanding shares of our common stock
to a number that is more comparable with those of similar
technology and software companies.
We completed two separate two-for-one splits of our common stock on
August 20, 1999 and March 31, 2000. In part due to the shares we issued in these
splits, we have approximately 114 million shares outstanding, which is more than
other technology and software companies of a comparable size to us. A reverse
split would reduce the number of shares outstanding to a number that is more
comparable with those of similar technology and software companies.
Our board of directors believes that the reverse split should enhance
the acceptability and marketability of our common stock to the financial
community and the investing public and may mitigate any reluctance on the part
of brokers and investors to trade in our common stock. Many institutional
investors have policies prohibiting them from holding lower-priced stocks in
their own portfolios, which reduces the number of potential buyers of our
18
common stock. In addition, analysts at many leading brokerage firms are
reluctant to recommend lower-priced stocks to their clients or monitor the
activity of lower-priced stock. A variety of brokerage house policies and
practices also tend to discourage individual brokers within those firms from
dealing in lower-priced stocks. Some of those policies and practices pertain to
the payment of brokers' commissions and to time-consuming procedures that
function to make the handling of lower-priced stocks unattractive to brokers
from an economic standpoint. Additionally, because brokers' commissions on
lower-priced stocks generally represent a higher percentage of the stock price
than commissions on higher-priced stocks, the current share price of our common
stock can result in an individual stockholder paying transaction costs that
represent a higher percentage of total share value than would be the case if our
share price were substantially higher. This factor may also limit the
willingness of institutions to purchase our stock.
Our common stock has been trading below $1.00 per share for several
months. With the shares trading in such a range, small moves in absolute terms
in the price-per-share of our common stock translate into disproportionately
large swings in the price on a percentage basis, and these swings tend to bear
little relationship to our financial condition and results of operations.
In the board's view, these factors have contributed to an unjustified,
relatively low level of interest in our company on the part of investment
analysts, brokers and professionals and individual investors, which tends to
depress the market for our common stock. The board has thus proposed having the
discretion to effect a reverse split as a means of increasing the per-share
market price of our common stock.
For our common stock to continue to be eligible for quotation on The
Nasdaq National Market or The Nasdaq SmallCap Market our common stock must
maintain a minimum bid price per share of $1.00, as well as meet other
requirements. Our common stock currently does not meet the $1.00 minimum bid
price requirement. Management and our board of directors believe that listing on
The Nasdaq National Market or The Nasdaq SmallCap Market is the preferred
listing market for our common stock.
In addition, as of the end of our 2001 fiscal year we did not meet a
condition for continued listing on The Nasdaq National Market that requires us
to have $10 million of shareholders' equity. The Nasdaq National Market
maintains an alternative listing test that does not require $10 million of
shareholders equity, but does require the company to maintain a minimum bid
price of $3.00 per share, as well as meet other requirements.
Accordingly, we need to increase our share price to maintain our
listing on The Nasdaq National Market or The Nasdaq SmallCap Market, management
and our board believe that the implementation of the reverse split may be in the
best interests of our company and our shareholders.
The board intends to implement a reverse stock split if it believes
that this action is in the best interests of our company and our shareholders.
Such determination shall be based upon certain factors, including but not
limited to, existing and expected marketability and liquidity of our common
stock, The Nasdaq Stock Market's listing requirements, prevailing market
conditions and the likely effect on the market price of our common stock. If our
board ultimately determines to effect a reverse split, the board will select a
stock split ratio within the range approved by shareholders that it believes
will result in the greatest marketability of our common stock based on
prevailing market conditions. No further action on the part of our shareholders
would be required to either effect or abandon the reverse split. Notwithstanding
approval of reverse split proposal by the shareholders, the board may, in its
sole discretion, determine to delay the effectiveness of the reverse split up
until the 2003 annual meeting of our shareholders.
POTENTIAL EFFECTS OF THE PROPOSED REVERSE STOCK SPLIT
The immediate effect of a reverse stock split would be to reduce the
number of shares of our outstanding common stock and to increase the trading
price of our common stock. However, we cannot predict the effect of any reverse
stock split upon the market price of our common stock, and the history of
reverse stock splits for companies in similar circumstances sometimes improves
stock performance and sometimes does not. We cannot assure you that the trading
price of our common stock after the reverse stock split will rise in proportion
to the reduction in the number of shares of our common stock outstanding as a
result of the reverse stock split. Also, we cannot assure you that a reverse
stock split would lead to a sustained increase in the trading price of our
common stock, that the trading
19
price would remain above the thresholds required by The Nasdaq National Market
or The Nasdaq SmallCap Market or that we will be able to continue to meet the
other continued listing requirements of The Nasdaq National Market or The Nasdaq
SmallCap Market. The trading price of our common stock may change due to a
variety of other factors, including our operating results and other factors
related to our business and general market conditions.
The following table reflects the approximate number of shares of our
common stock that would be outstanding as a result of each proposed reverse
stock split based on ___________ shares of our common stock outstanding as of
the record date for our annual meeting, without accounting for fractional shares
which will be cancelled and paid for in cash:
PROPOSED REVERSE PERCENTAGE SHARES TO BE
STOCK SPLIT REDUCTION OUTSTANDING
1-for-5 80% __________
1-for-6 83% __________
1-for-7 86% __________
1-for-8 88% __________
1-for-9 89% __________
1-for-10 90% __________
The resulting decrease in the number of shares of our common stock
outstanding could potentially impact the liquidity of our common stock on The
Nasdaq Stock Market, especially in the case of larger block trades.
EFFECTS ON OWNERSHIP BY INDIVIDUAL SHAREHOLDERS. If we implement a
reverse stock split, the number of shares of our common stock held by each
shareholder would be reduced by multiplying the number of shares held
immediately before the reverse split by the exchange ratio, and then rounding
down to the nearest whole share. We would pay cash to each shareholder in lieu
of any fractional interest in a share to which each shareholder would otherwise
be entitled as a result of the reverse split, as described in further detail
below. The reverse stock split would not affect any shareholder's percentage
ownership interests in Verticalnet or proportionate voting power, except to the
extent that interests in fractional shares would be paid in cash.
EFFECT ON OPTIONS, WARRANTS AND OTHER SECURITIES. In addition, we would
adjust all outstanding shares of any options, warrants and other securities
entitling their holders to purchase shares of our common stock as a result of
the reverse stock split, as required by the terms of these securities. In
particular, we would reduce the conversion ratio for each instrument, and would
increase the exercise price in accordance with the terms of each instrument and
based on the exchange ratio of the reverse stock split. Also, we would reduce
the number of shares reserved for issuance under our existing stock option and
employee stock purchase plans proportionately based on the exchange ratio of the
reverse stock split. A reverse stock split would not affect any of the rights
currently accruing to holders of our common stock, options, warrants or other
securities convertible into our common stock.
OTHER EFFECTS ON OUTSTANDING SHARES. If we implement a reverse stock
split, then the rights and preferences of the outstanding shares of our common
stock would remain the same after the reverse stock split. Each share of our
common stock issued pursuant to the reverse stock split would be fully paid and
nonassessable.
The reverse stock split would result in some stockholders owning
"odd-lots" of less than 100 shares of our common stock. Brokerage commissions
and other costs of transactions in odd-lots are generally higher than the costs
of transactions in "round-lots" of even multiples of 100 shares.
Our common stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934. As a result, we are subject to the periodic
reporting and other requirements of the Securities Exchange Act. The proposed
reverse stock split would not affect the registration of our common stock under
the Securities Exchange Act.
20
AUTHORIZED SHARES OF COMMON STOCK
If we implement the reverse stock split, we would also reduce the
number of authorized shares of our common stock as designated by our articles of
incorporation. The number of issued and outstanding shares of common stock and
the number of shares remaining available for issuance under our authorized pool
of common stock would decrease proportionately.
We would still have a substantial number of these additional shares of
common stock available for issuance from time to time for corporate purposes
such as raising additional capital, acquisitions of companies or assets and
sales of stock or securities convertible into common stock. We believe that the
availability of the additional shares provide us with the flexibility to meet
business needs as they arise, to take advantage of favorable opportunities and
to respond to a changing corporate environment. We have no current plan to issue
shares from these additional shares.
PROCEDURE FOR EFFECTING THE PROPOSED REVERSE STOCK SPLIT AND EXCHANGE OF STOCK
CERTIFICATES
If our shareholders approve the proposed amendment to our articles of
incorporation, the board of directors may elect whether or not to declare a
reverse stock split, as well as the exchange ratio, at any time before our 2003
annual shareholders meeting. The reverse stock split would be implemented by
filing the appropriate amendment to our articles of incorporation with the
Pennsylvania Secretary of State, and the reverse stock split would become
effective on the date the filing is accepted by the Pennsylvania Secretary of
State.
As of the effective date of the reverse stock split, each certificate
representing shares of our common stock before the reverse stock split would be
deemed, for all corporate purposes, to evidence ownership of the reduced number
of shares of our common stock resulting from the reverse stock split, except
that holders of unexchanged shares would not be entitled to receive any
dividends or other distributions payable by Verticalnet after the effective date
until they surrender their old stock certificates for exchange. All shares
underlying options and warrants and other securities would also be automatically
adjusted on the effective date.
Our transfer agent would act as the exchange agent for purposes of
implementing the exchange of stock certificates. As soon as practicable after
the effective date, shareholders and holders of securities convertible into our
common stock would be notified of the effectiveness of the reverse split.
Shareholders of record would receive a letter of transmittal requesting them to
surrender their stock certificates for stock certificates reflecting the
adjusted number of shares as a result of the reverse stock split. Persons who
hold their shares in brokerage accounts or "street name" would not be required
to take any further actions to effect the exchange of their certificates. No new
certificates would be issued to a shareholder until the shareholder has
surrendered the shareholder's outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the exchange agent.
Until surrender, each certificate representing shares before the reverse stock
split would continue to be valid and would represent the adjusted number of
shares based on the exchange ratio of the reverse stock split, rounded down to
the nearest whole share. Shareholders should not destroy any stock certificate
and should not submit any certificates until they receive a letter of
transmittal.
FRACTIONAL SHARES
We would not issue fractional shares in connection with the reverse
stock split. Instead, any fractional share resulting from the reverse stock
split would be rounded down to the nearest whole share. Shareholders who
otherwise would be entitled to receive fractional shares because they hold a
number of shares not evenly divisible by the exchange ratio would instead
receive cash upon surrender to the exchange agent of the certificates and a
properly completed and executed letter of transmittal. The cash amount to be
paid to each shareholder would be equal to the resulting fractional interest in
one share of our common stock to which the shareholder would otherwise be
entitled, multiplied by the closing trading price of our common stock on the
trading day immediately preceding the effective date of the reverse stock split.
21
NO APPRAISAL RIGHTS
No appraisal rights are available under the Pennsylvania Business
Corporation Law or under our articles of incorporation or bylaws to any
shareholder who dissents from this proposal. There may exist other rights or
actions under state law for shareholders who are aggrieved by reverse stock
splits generally.
ACCOUNTING CONSEQUENCES
The par value of our common stock would remain unchanged at $0.01 per
share after the reverse stock split. Also, our capital account would remain
unchanged, and we do not anticipate that any other accounting consequences would
arise as a result of the reverse stock split.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material federal income tax consequences
of the reverse stock split and does not purport to be complete. It does not
discuss any state, local, foreign or minimum income or other tax consequences.
Also, it does not address the tax consequences to holders that are subject to
special tax rules, including banks, insurance companies, regulated investment
companies, personal holding companies, foreign entities, nonresident alien
individuals, broker-dealers and tax-exempt entities. We have based this
discussion on the provisions of the United States federal income tax law as of
the date of this proxy statement, which are subject to change retroactively as
well as prospectively. This summary also assumes that shareholders hold the
shares as a "capital asset," as defined in the Internal Revenue Code of 1986
(generally, property held for investment). The tax treatment of a shareholder
may vary depending upon the particular facts and circumstances of the
shareholder. We urge each shareholder to consult with the shareholder's own tax
advisor with respect to the consequences of the reverse stock split.
Other than the cash payments for fractional shares discussed below, a
shareholder should recognize no gain or loss upon the shareholder's exchange of
shares pursuant to the reverse stock split. The aggregate tax basis of the
shares received in the reverse stock split, including any fraction of a share
deemed to have been received, would be the same as the shareholder's aggregate
tax basis in the shares exchanged. Shareholders who receive cash upon redemption
of their fractional share interests in the shares as a result of the reverse
stock split will generally recognize gain or loss based on their adjusted basis
in the fractional share interests redeemed. The federal income tax liabilities
generated by the receipt of cash in lieu of a fractional interest should not be
material in amount in view of the low value of the fractional interest. The
shareholder's holding period for the shares would include the period during
which the shareholder held the pre-split shares surrendered in the reverse stock
split.
Our beliefs regarding the tax consequence of the reverse stock split
are not binding upon the Internal Revenue Service or the courts, and there can
be no assurance that the Internal Revenue Service or the courts will accept the
positions expressed above. The state and local tax consequences of the reverse
stock split may vary significantly as to each shareholder, depending upon the
state in which he or she resides.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
THE PROPOSED AMENDMENTS TO OUR ARTICLES OF INCORPORATION AND TO GRANT THE BOARD
THE DISCRETION TO EFFECT A REVERSE STOCK SPLIT, AND YOUR PROXY WILL BE SO VOTED
UNLESS YOU SPECIFY OTHERWISE.
OTHER MATTERS
As of the date of this proxy statement, the board knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by shareholders, proxies properly completed and returned to
Verticalnet will be voted in accordance with the recommendation of the board of
directors or, in the absence of such a recommendation, in the discretion of the
proxy holder.
22
A COPY OF THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCLUDING EXHIBITS, MAY BE OBTAINED BY SHAREHOLDERS WITHOUT CHARGE BY WRITTEN
REQUEST ADDRESSED TO: VERTICALNET, INC., 300 CHESTER FIELD PARKWAY, MALVERN,
PENNSYLVANIA 19355, ATTENTION: INVESTOR RELATIONS.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Any shareholder who intends to present a proposal at the annual meeting
in the year 2002 must deliver the proposal to the Secretary of Verticalnet at
300 Chester Field Parkway, Malvern, Pennsylvania 19355
- not later than December 11, 2002, if the proposal is submitted
for inclusion in our proxy materials for that meeting pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934; and
- not later than March 3, 2003, if the proposal is submitted
outside the processes of Rule 14a-8 under the Securities and
Exchange Act of 1934, in which case we are not required to
include the proposal in our proxy materials.
By order of the Board of Directors,
/s/ James W. McKenzie, Jr.
James W. McKenzie, Jr.
Executive Vice President, General Counsel
and Secretary
May 6, 2002
23
ANNEX A
VERTICALNET, INC. AUDIT COMMITTEE CHARTER
I. QUARTERLY ACTIVITIES - GENERAL
1. Provide an open avenue of communication between the
independent auditor and the Board of Directors.
2. Meet four times per year or more frequently as circumstances
require. The Audit Committee may ask members of management or
others to attend meetings and provide pertinent information as
necessary.
3. Confirm and assure the independence of the independent
auditor.
4. Inquire of management and the independent auditor about
significant risks or exposures and assess the steps management
has taken to minimize such risk to the Company.
5. Consider and review with the independent auditor:
(a) The adequacy of the Company's internal controls
including computerized information system controls
and security.
(b) Related findings and recommendations of the
independent auditor together with management's
responses.
6. Consider and review with management and the independent
auditor:
(a) Significant findings during the year, including the
status of previous audit recommendations.
(b) Any difficulties encountered in the course of audit
work including any restrictions on the scope of
activities or access to required information.
7. Meet periodically with the independent auditor and management
in separate executive sessions to discuss any matters that the
Audit Committee or the independent auditors believe should be
discussed privately with the Audit Committee.
8. Report periodically to the Board of Directors on significant
results of the foregoing activities.
II. QUARTERLY ACTIVITIES - RE: REPORTING SPECIFIC POLICIES
1. Advise financial management and the independent auditor that
they are expected to provide a timely analysis of significant
current financial reporting issues and practices.
2. Provide that financial management and the independent auditor
discuss with the Audit Committee their qualitative judgments
about the appropriateness, not just the acceptability, of
accounting principles and financial disclosure practices used
or proposed to be adopted by the Company and, particularly,
about the degree of aggressiveness or conservatism of its
accounting principles and underlying estimates.
3. Inquire as to the independent auditor's views about whether
management's choices of accounting principles are
conservative, moderate, or aggressive from the perspective of
income, asset, and liability recognition, and whether those
principles are common practices or are minority practices.
A-1
4. Determine, as regards to new transactions or events, the
independent auditor's reasoning for the appropriateness of the
accounting principles and disclosure practices adopted by
management.
5. Assure that the independent auditor's reasoning is described
in determining the appropriateness of changes in accounting
principles and disclosure practices, if applicable.
6. Inquire as to the independent auditor's views about how the
Company's choices of accounting principles and disclosure
practices may affect shareholders and public views and
attitudes about the Company.
III. SCHEDULED ACTIVITIES
1. Recommend the selection of the independent auditor for
approval by the Board of Directors, review and approve the
compensation of the independent auditor, and review and
approve the discharge of the independent auditor.
2. Review with management and the independent auditor the results
of annual audits and related comments as deemed appropriate
including:
(a) The independent auditor's audit of the Company's
annual financial statements, accompanying footnotes
and its report thereon.
(b) Any significant changes required in the independent
auditor's audit plans.
(c) Any difficulties or disputes with management
encountered during the course of the audit.
(d) Other matters related to the conduct of the audit,
which are to be communicated to the Audit Committee
under Generally Accepted Auditing Standards.
3. Assure that the independent auditor's reasoning is described
in accepting or questioning significant estimates by
management.
4. Review and update the Audit Committee's Charter annually.
IV. "WHEN NECESSARY" ACTIVITIES
1. Review periodically with general counsel legal and regulatory
matters that may have a material impact on the Company's
financial statements, compliance policies and programs.
2. Conduct or authorize investigations into any matters within
the Audit Committee's scope of responsibilities. The Audit
Committee shall be empowered to retain independent counsel and
other professionals to assist in the conduct of any
investigation.
A-2
ANNEX B
VERTICALNET, INC.
EQUITY COMPENSATION PLAN FOR EMPLOYEES (1999)
(Amended and Restated, Effective November 15, 1999)
The purpose of the Verticalnet, Inc. Equity Compensation Plan for
Employees (1999) (the "Plan"), as amended and restated effective November 15,
1999, is to provide designated employees of Verticalnet, Inc. (the "Company")
and its subsidiaries with the opportunity to receive grants of nonqualified
stock options. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's shareholders, and will align the economic interests of
the participants with those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by the
Board of Directors of the Company (the "Board") or by a committee appointed by
the Board. References in the Plan to the "Committee" shall refer to the Board or
committee that is authorized to administer the Plan. The committee shall consist
of two or more persons who are "outside directors," as defined under section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and related
Treasury regulations, and "non-employee directors" as defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
However, the Board may ratify or approve any grants as it deems appropriate.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise period, including the criteria for
exercisability and the acceleration of exercisability, (iv) amend the terms of
any previously issued grant, and (v) deal with any other matters arising under
the Plan.
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
(d) Delegation of Authority. Notwithstanding the foregoing, the
Committee may delegate to the Chief Executive Officer of the Company the
authority to make grants under the Plan to employees of the Company and its
subsidiaries who are not subject to the restrictions of
B-1
section 16(b) of the Exchange Act and who are not expected to be subject to the
limitations of section 162(m) of the Code. The grant of authority under this
subsection 1(d) shall be subject to such conditions and limitations as may be
determined by the Committee.
2. Options
Awards under the Plan shall consist of grants of nonqualified stock
options as described in Section 5 ("Options"). All Options shall be subject to
the terms and conditions set forth herein and to such other terms and conditions
consistent with this Plan as the Committee deems appropriate and as are
specified in writing by the Committee to the individual in a grant instrument or
an amendment to the grant instrument (the "Grant Instrument"). The Committee
shall approve the form and provisions of each Grant Instrument. Options under a
particular Section of the Plan need not be uniform as among the grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 18,500,000 shares. The maximum
aggregate number of shares of Company Stock that shall be subject to grants of
Options under the Plan to any individual during any calendar year shall be
750,000 shares. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised, the shares subject to
such Options shall again be available for purposes of the Plan. If shares of
Company Stock are used to pay the exercise price of an Option, only the net
number of shares received by the grantee pursuant to such exercise shall be
considered to have been issued or transferred under the Plan with respect to
such Option, and the remaining number of shares subject to the Option shall
again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Options, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Options, the kind of shares issued under the
Plan, and the price per share of such Options may be appropriately adjusted by
the Committee to reflect any increase or decrease in the number of, or change in
the kind or value of, issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Options; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive.
B-2
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its
subsidiaries, including persons who have accepted employment with the Company
("Employees").
(b) Selection of Grantees. The Committee shall select the Employees to
receive Options and shall determine the number of shares of Company Stock
subject to a particular Option in such manner as the Committee determines.
Employees who receive Options under this Plan shall hereinafter be referred to
as "Grantees".
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each grant of Options to
Employees.
(b) Type of Option and Price.
(i) The Committee may grant nonqualified stock options under
the Plan.
(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be equal
to, greater than, or less than the Fair Market Value (as defined below) of a
share of Company Stock on the date the Option is granted.
(iii) The Fair Market Value per share shall be determined as
follows: (x) if the principal trading market for the Company Stock is a national
securities exchange or the Nasdaq Stock Market, the last reported sale price
thereof on the relevant date or (if there were no trades on that date) the
latest preceding date upon which a sale was reported, (y) if the Company Stock
is not principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines, or (z) if the Company
Stock is not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option.
The term of an Option shall not exceed ten years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument. The Committee
may accelerate the exercisability of any or all outstanding Options at any time
for any reason.
(e) Termination of Employment, Disability or Death.
B-3
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by the Company. In the event that a Grantee ceases
to be employed by the Company for any reason other than Disability, death, or
termination for Cause, any Option which is otherwise exercisable by the Grantee
shall terminate unless exercised within 90 days after the date on which the
Grantee ceases to be employed by the Company (or within such other period of
time as may be specified by the Committee), but in any event no later than the
date of expiration of the Option term. Except as otherwise provided by the
Committee, any of the Grantee's Options that are not otherwise exercisable as of
the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(ii) In the event the Grantee ceases to be employed by the
Company on account of a termination for Cause by the Company, any Option held by
the Grantee shall terminate as of the date the Grantee ceases to be employed by
the Company. In addition, notwithstanding any other provisions of this Section
5, if the Committee determines that the Grantee has engaged in conduct that
constitutes Cause at any time while the Grantee is employed by the Company or
after the Grantee's termination of employment or service, any Option held by the
Grantee shall immediately terminate, and the Grantee shall automatically forfeit
all shares underlying any exercised portion of an Option for which the Company
has not yet delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares. Upon any exercise of an
Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a forfeiture.
(iii) In the event the Grantee ceases to be employed by the
Company because the Grantee is Disabled, any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee, any of the Grantee's Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by the Company or
within 90 days after the date on which the Grantee ceases to be employed or
provide service on account of a termination specified in Section 5(e)(i) above
(or within such other period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the Grantee's
Options that are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by the Company shall terminate as of such date.
(v) For purposes of this Section 5(e):
(A) The term "Company" shall mean the Company and its parent
and subsidiary corporations.
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(B) "Employed by the Company" shall mean employment or service
as an Employee, consultant or member of the Board (so that, for
purposes of exercising Options, a Grantee shall not be considered to
have terminated employment until the Grantee ceases to be an Employee,
consultant and member of the Board), unless the Committee determines
otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Internal Revenue Code of
1986, as amended.
(D) "Cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that the Grantee
(i) has breached his or her employment or services contract with the
Company, (ii) has engaged in disloyalty to the Company, including,
without limitation, fraud, embezzlement, theft, commission of a felony
or proven dishonesty in the course of his or her employment, (iii) has
disclosed trade secrets or confidential information of the Company to
persons not entitled to receive such information or (iv) has engaged in
such other behavior detrimental to the interests of the Company as the
Committee determines.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) with
the approval of the Committee, by delivering shares of Company Stock owned by
the Grantee (including Company Stock acquired in connection with the exercise of
an Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or by attestation (on a form prescribed by the Committee) to ownership of shares
of Company Stock having a Fair Market Value on the date of exercise equal to the
Exercise Price, or (z) by such other method as the Committee may approve,
including payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. Shares of Company Stock used to
exercise an Option shall have been held by the Grantee for the requisite period
of time to avoid adverse accounting consequences to the Company with respect to
the Option. The Grantee shall pay the Exercise Price and the amount of any
withholding tax due (pursuant to Section 6) at the time of exercise.
6. Withholding of Taxes
(a) Required Withholding. All Options under the Plan shall be subject
to applicable federal (including FICA), state and local tax withholding
requirements. The Company may require that the Grantee or other person
exercising Options pay to the Company the amount of any federal, state or local
taxes that the Company is required to withhold with respect to such Options, or
the Company may deduct from other wages paid by the Company the amount of any
withholding taxes due with respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option by having shares withheld up to an amount that does not
exceed the Grantee's minimum applicable
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withholding tax rate for federal (including FICA), state and local tax
liabilities. The election must be in a form and manner prescribed by the
Committee and may be subject to the prior approval of the Committee.
7. Transferability of Options
(a) Nontransferability of Options. Except as provided below, only the
Grantee may exercise rights under an Option during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or if permitted in any specific case by the Committee, pursuant
to a domestic relations order. When a Grantee dies, the personal representative
or other person entitled to succeed to the rights of the Grantee ("Successor
Grantee") may exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Option under the
Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Options. Notwithstanding the foregoing, the Committee
may provide, in a Grant Instrument, that a Grantee may transfer Options to
family members, or one or more trusts or other entities for the benefit of or
owned by family members, consistent with applicable securities laws, according
to such terms as the Committee may determine; provided that the Grantee receives
no consideration for the transfer of an Option and the transferred Option shall
continue to be subject to the same terms and conditions as were applicable to
the Option immediately before the transfer.
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the voting power of the then outstanding
securities of the Company; or
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to more than 50% of all votes to which all
shareholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.
9. Consequences of a Change of Control
(a) Subject to subsection (b) below, in the event of a Change of
Control, the Board may take any of the following actions with respect to any or
all outstanding Grants: the Board
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may (i) determine that outstanding Options shall be assumed by, or replaced with
comparable options by the surviving corporation and that outstanding Stock
Awards shall be converted to Stock Awards of the surviving corporation, (ii)
determine that outstanding Options shall automatically accelerate and become
fully exercisable and that the restrictions and conditions on outstanding Stock
Awards shall immediately lapse, (iii) require that Grantees surrender their
outstanding Options in exchange for a payment by the Company, in cash or Company
Stock as determined by the Board, in an amount equal to the amount by which the
then Fair Market Value of the shares of Company Stock subject to the Grantee's
unexercised Options exceeds the Exercise Price of the Options or (iv) after
giving Grantees an opportunity to exercise their outstanding Options, terminate
any or all unexercised Options at such time as the Board deems appropriate. Such
surrender or termination shall take place as of the date of the Change of
Control or such other date as the Board may specify. The Board shall have no
obligation to take any of the foregoing actions, and, in the absence of any such
actions, outstanding Options and Stock Awards shall continue in effect according
to their terms.
(b) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the right to
take any actions described in the Plan (including without limitation actions
described in Subsection (a) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
10. Requirements for Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Committee shall deem necessary or advisable,
and certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
11. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time as
it deems appropriate.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or extended by the Board.
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(c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after an Option is granted shall not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 17(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Option. Whether or not the Plan has terminated, an outstanding Option may be
terminated or amended under Section 17(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
12. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Options under this Plan. In no event shall
interest be paid or accrued on any Option.
13. Rights of Participants
Nothing in this Plan shall entitle any Employee or other person to any
claim or right to be granted an Option under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Company or any other employment
rights.
14. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Option. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
15. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
16. Effective Date of the Plan.
The Plan was initially effective as of October 20, 1999. The effective
date of the amended and restated Plan was November 15, 1999. Subject to approval
of the Company's shareholders, the Plan shall be amended effective on June 5,
2002.
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17. Miscellaneous
(a) Options in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to grant Options under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Options to employees
thereof who become Employees of the Company, or for other proper corporate
purposes, or (ii) limit the right of the Company to grant stock options or make
other awards outside of this Plan. Without limiting the foregoing, the Committee
may grant an Option to an employee of another corporation who becomes an
Employee by reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Company or any of its
subsidiaries in substitution for a stock option granted by such corporation. The
terms and conditions of the substitute Options may vary from the terms and
conditions required by the Plan and from those of the substituted stock
incentives. The Committee shall prescribe the provisions of the substitute
Options.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In addition,
it is the intent of the Company that the Plan and applicable Grants under the
Plan comply with applicable provisions of sections 162(m) of the Code. To the
extent that any legal requirement of section 16 of the Exchange Act or sections
162(m) of the Code as set forth in the Plan ceases to be required under section
16 of the Exchange Act or sections 162(m) of the Code, that Plan provision shall
cease to apply. The Committee may revoke any Option if it is contrary to law or
modify an Option to bring it into compliance with any valid and mandatory
government regulation. The Committee may, in its sole discretion, agree to limit
its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of the Commonwealth
of Pennsylvania, without giving effect to the conflict of laws provisions
thereof.
B-9
ANNEX C
VERTICALNET, INC.
1999 LONG TERM INCENTIVE PLAN
The purpose of the Verticalnet, Inc. 1999 Long Term Incentive Plan (the
"Plan") is to provide designated employees of Verticalnet, Inc. (the "Company")
and its subsidiaries with the opportunity to receive grants of stock options.
The Company believes that the Plan will encourage the participants to contribute
materially to the growth of the Company, thereby benefitting the Company's
shareholders, and will align the economic interests of the participants with
those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by the
Board of Directors of the Company (the "Board") or by a committee appointed by
the Board. References in the Plan to the "Committee" shall refer to the Board or
committee that authorized to administer the Plan. The committee shall consist of
two or more persons who are "outside directors," as defined under section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code") and related
Treasury regulations, and "non-employee directors" as defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
However, the Board may ratify or approve any grants as it deems appropriate.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise period, including the criteria for
exercisability and the acceleration of exercisability, (iv) amend the terms of
any previously issued grant, and (v) deal with any other matters arising under
the Plan.
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
(d) Delegation of Authority. Notwithstanding the foregoing, the
Committee may delegate to the Chief Executive Officer of the Company the
authority to make grants under the Plan to employees of the Company and its
subsidiaries who are not subject to the restrictions of section 16(b) of the
Exchange Act and who are not expected to be subject to the limitations of
section 162(m) of the Code. The grant of authority under this subsection 1(d)
shall be subject to such conditions and limitations as may be determined by the
Committee.
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2. Options
Awards under the Plan shall consist of grants of nonqualified stock
options and incentive stock options as described in Section 5 ("Options"). All
Options shall be subject to the terms and conditions set forth herein and to
such other terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the individual
in a grant instrument or an amendment to the grant instrument (the "Grant
Instrument"). The Committee shall approve the form and provisions of each Grant
Instrument. Options under a particular Section of the Plan need not be uniform
as among the grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 2,359,927 shares. The maximum
aggregate number of shares of Company Stock that shall be subject to grants of
Options under the Plan to any individual during any calendar year shall be
750,000 shares. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised, the shares subject to
such Options shall again be available for purposes of the Plan. If shares of
Company Stock are used to pay the exercise price of an Option, only the net
number of shares received by the grantee pursuant to such exercise shall be
considered to have been issued or transferred under the Plan with respect to
such Option, and the remaining number of shares subject to the Option shall
again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Options, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Options, the kind of shares issued under the
Plan, and the price per share of such Options may be appropriately adjusted by
the Committee to reflect any increase or decrease in the number of, or change in
the kind or value of, issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Options; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive.
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4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its
subsidiaries, including persons who have accepted employment with the Company
("Employees").
(b) Selection of Grantees. The Committee shall select the Employees to
receive Options and shall determine the number of shares of Company Stock
subject to a particular Option in such manner as the Committee determines.
Employees who receive Options under this Plan shall hereinafter be referred to
as "Grantees".
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each grant of Options to
Employees.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code ("Incentive Stock Options") or Nonqualified Stock Options that
are not intended so to qualify or any combination of Incentive Stock Options and
Nonqualified Stock Options, all in accordance with the terms and conditions set
forth herein. Incentive Stock Options may be granted only to Employees.
(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be equal
to, greater than, or less than the Fair Market Value (as defined below) of a
share of Company Stock on the date the Option is granted; provided, however,
that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or
greater than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, unless the Exercise
Price per share is not less than 110% of the Fair Market Value of Company Stock
on the date of grant.
(iii) The Fair Market Value per share shall be determined as
follows: (x) if the principal trading market for the Company Stock is a national
securities exchange or the Nasdaq Stock Market, the last reported sale price
thereof on the relevant date or (if there were no trades on that date) the
latest preceding date upon which a sale was reported, (y) if the Company Stock
is not principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines, or (z) if the Company
Stock is not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
C-3
(c) Option Term. The Committee shall determine the term of each Option.
The term of an Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an Employee who, at the
time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of
grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument. The Committee
may accelerate the exercisability of any or all outstanding Options at any time
for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by the Company. In the event that a Grantee ceases
to be employed by the Company for any reason other than Disability, death, or
termination for Cause, any Option which is otherwise exercisable by the Grantee
shall terminate unless exercised within 90 days after the date on which the
Grantee ceases to be employed by the Company (or within such other period of
time as may be specified by the Committee), but in any event no later than the
date of expiration of the Option term. Except as otherwise provided by the
Committee, any of the Grantee's Options that are not otherwise exercisable as of
the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(ii) In the event the Grantee ceases to be employed by the
Company on account of a termination for Cause by the Company, any Option held by
the Grantee shall terminate as of the date the Grantee ceases to be employed by
the Company. In addition, notwithstanding any other provisions of this Section
5, if the Committee determines that the Grantee has engaged in conduct that
constitutes Cause at any time while the Grantee is employed by the Company or
after the Grantee's termination of employment or service, any Option held by the
Grantee shall immediately terminate, and the Grantee shall automatically forfeit
all shares underlying any exercised portion of an Option for which the Company
has not yet delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares. Upon any exercise of an
Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a forfeiture.
(iii) In the event the Grantee ceases to be employed by the
Company because the Grantee is Disabled, any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee, any of the Grantee's Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by the Company shall terminate as of such date.
C-4
(iv) If the Grantee dies while employed by the Company or
within 90 days after the date on which the Grantee ceases to be employed or
provide service on account of a termination specified in Section 5(e)(i) above
(or within such other period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the Grantee's
Options that are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by the Company shall terminate as of such date.
(v) For purposes of this Section 5(e):
(A) The term "Company" shall mean the Company and its parent
and subsidiary corporations.
(B) "Employed by the Company" shall mean employment or service
as an Employee, consultant or member of the Board (so that, for
purposes of exercising Options, a Grantee shall not be considered to
have terminated employment until the Grantee ceases to be an Employee,
consultant and member of the Board), unless the Committee determines
otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Internal Revenue Code of
1986, as amended.
(D) "Cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that the Grantee
(i) has breached his or her employment or services contract with the
Company, (ii) has engaged in disloyalty to the Company, including,
without limitation, fraud, embezzlement, theft, commission of a felony
or proven dishonesty in the course of his or her employment, (iii) has
disclosed trade secrets or confidential information of the Company to
persons not entitled to receive such information or (iv) has engaged in
such other behavior detrimental to the interests of the Company as the
Committee determines.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) with
the approval of the Committee, by delivering shares of Company Stock owned by
the Grantee (including Company Stock acquired in connection with the exercise of
an Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or by attestation (on a form prescribed by the Committee) to ownership of shares
of Company Stock having a Fair Market Value on the date of exercise equal to the
Exercise Price, or (z) by such other method as the Committee may approve,
including payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. Shares of Company Stock used to
exercise an Option shall have been held by the Grantee for the requisite period
of time to avoid adverse accounting consequences to the Company with respect to
the Option. The Grantee shall
C-5
pay the Exercise Price and the amount of any withholding tax due (pursuant to
Section 6) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the Option, as to the excess, shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any person who
is not an Employee of the Company or a parent or subsidiary (within the meaning
of section 424(f) of the Code).
6. Withholding of Taxes
(a) Required Withholding. All Options under the Plan shall be subject
to applicable federal (including FICA), state and local tax withholding
requirements. The Company may require that the Grantee or other person
exercising Options pay to the Company the amount of any federal, state or local
taxes that the Company is required to withhold with respect to such Options, or
the Company may deduct from other wages paid by the Company the amount of any
withholding taxes due with respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option by having shares withheld up to an amount that does not
exceed the Grantee's minimum applicable withholding tax rate for federal
(including FICA), state and local tax liabilities. The election must be in a
form and manner prescribed by the Committee and may be subject to the prior
approval of the Committee.
7. Transferability of Options
(a) Nontransferability of Options. Except as provided below, only the
Grantee may exercise rights under an Option during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or if permitted in any specific case by the Committee, pursuant
to a domestic relations order. When a Grantee dies, the personal representative
or other person entitled to succeed to the rights of the Grantee ("Successor
Grantee") may exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Option under the
Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee may
transfer Nonqualified Stock Options to family members, or one or more trusts or
other entities for the benefit of or owned by family members, consistent with
applicable securities laws, according to such terms as the Committee may
determine; provided that the Grantee receives no consideration for the transfer
of a Nonqualified Stock Option and the transferred Nonqualified Stock Option
shall continue to be subject to the same terms and conditions as were applicable
to the Nonqualified Stock Option immediately before the transfer.
C-6
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the voting power of the then outstanding
securities of the Company; or
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to more than 50% of all votes to which all
shareholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.
9. Consequences of a Change of Control
(b) Subject to subsection (b) below, in the event of a Change of
Control, the Board may take any of the following actions with respect to any or
all outstanding Grants: the Board may (i) determine that outstanding Options
shall be assumed by, or replaced with comparable options by the surviving
corporation and that outstanding Stock Awards shall be converted to Stock Awards
of the surviving corporation, (ii) determine that outstanding Options shall
automatically accelerate and become fully exercisable and that the restrictions
and conditions on outstanding Stock Awards shall immediately lapse, (iii)
require that Grantees surrender their outstanding Options in exchange for a
payment by the Company, in cash or Company Stock as determined by the Board, in
an amount equal to the amount by which the then Fair Market Value of the shares
of Company Stock subject to the Grantee's unexercised Options exceeds the
Exercise Price of the Options or (iv) after giving Grantees an opportunity to
exercise their outstanding Options, terminate any or all unexercised Options at
such time as the Board deems appropriate. Such surrender or termination shall
take place as of the date of the Change of Control or such other date as the
Board may specify. The Board shall have no obligation to take any of the
foregoing actions, and, in the absence of any such actions, outstanding Options
and Stock Awards shall continue in effect according to their terms.
(b) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the right to
take any actions described in the Plan (including without limitation actions
described in Subsection (a) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
C-7
10. Requirements for Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Committee shall deem necessary or advisable,
and certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
11. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time as
it deems appropriate.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or extended by the Board.
(c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after an Option is granted shall not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 17(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Option. Whether or not the Plan has terminated, an outstanding Option may be
terminated or amended under Section 17(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
12. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Options under this Plan. In no event shall
interest be paid or accrued on any Option.
13. Rights of Participants
Nothing in this Plan shall entitle any Employee or other person to any
claim or right to be granted an Option under this Plan. Neither this Plan nor
any action taken hereunder shall be
C-8
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.
14. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Option. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
15. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
16. Effective Date of the Plan.
The Plan was initially effective as of January 1, 1999. The effective
date of this amendment and restatement of the Plan is December 28, 2001. Subject
to approval of the Company's shareholders, the Plan shall be amended effective
on June 5, 2002.
17. Miscellaneous
(a) Options in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to grant Options under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Options to employees
thereof who become Employees of the Company, or for other proper corporate
purposes, or (ii) limit the right of the Company to grant stock options or make
other awards outside of this Plan. Without limiting the foregoing, the Committee
may grant an Option to an employee of another corporation who becomes an
Employee by reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Company or any of its
subsidiaries in substitution for a stock option granted by such corporation. The
terms and conditions of the substitute Options may vary from the terms and
conditions required by the Plan and from those of the substituted stock
incentives. The Committee shall prescribe the provisions of the substitute
Options.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In addition,
it is the intent of the Company that the Plan and applicable Grants under the
Plan comply with applicable provisions of sections 162(m) and 422 of the Code.
To the extent that any legal requirement of section 16 of the Exchange Act or
sections 162(m) or 422 of the Code as set forth in the Plan ceases to be
required
C-9
under section 16 of the Exchange Act or sections 162(m) or 422 of the
Code, that Plan provision shall cease to apply. The Committee may revoke any
Option if it is contrary to law or modify an Option to bring it into compliance
with any valid and mandatory government regulation. The Committee may, in its
sole discretion, agree to limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of the Commonwealth
of Pennsylvania, without giving effect to the conflict of laws provisions
thereof.
C-10
ANNEX D
PROPOSED AMENDMENT TO VERTICALNET'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
Article SEVENTH is hereby amended to read in its entirety as follows:
SEVENTH; Capital Stock. The aggregate number of shares which the
corporation shall have authority to issue is _________________ shares, par value
one cent ($0.01) per share, consisting of:
(a) _________________ shares of Common Stock ("Common Stock"); and
(b) 10,000 shares of Preferred Stock.
Effective immediately upon the filing of the Articles of Amendment
containing this Amendment with the Pennsylvania Secretary of State, every [ ]
outstanding shares of Common Stock shall without further action by this
Corporation or the holder thereof be combined into and automatically become one
share of Common Stock. The authorized shares of Common Stock of the Corporation
shall be reduced proportionately to the number of shares set forth above in this
Article SEVENTH. No fractional share shall be issued in connection with the
foregoing stock split; all shares of Common Stock so split that are held by a
shareholder will be aggregated and each fractional share resulting from such
aggregation shall be rounded down to the nearest whole share. In lieu of any
interest in a fractional share of Common Stock to which a shareholder would
otherwise be entitled as a result of the foregoing split, the Corporation shall
pay a cash amount to such shareholder equal to the fair value, as determined by
the Board of Directors, of such fractional share as of the effective date of the
foregoing split.
D-1
FORM OF PROXY
VERTICALNET ANNUAL SHAREHOLDERS' MEETING
ADMISSION TICKET
To be held
10:00 am June 5, 2002
Penn State Great Valley
30 East Swedesford Road
Routes 202 and 29
Malvern, PA 19355
Advance registration for the Verticalnet Annual Meeting will expedite your entry
into the meeting.
Attendance at the Annual Meeting is limited to Verticalnet share owners, members
of their immediate family or their named representative. We reserve the right to
limit the number of representatives who may attend the meeting. Share owners may
register at the door on the day of the meeting by showing this Admission Ticket
as proof of ownership of Verticalnet shares and a photo ID.
- If you plan to attend the Annual Meeting, you may call
610-407-4754 and pre-register your attendance. When
pre-registering, you will be asked to identify your registered
share owner account number listed on top of the reverse side
of this Admission Ticket. You will also need to bring this
Admission Ticket and photo ID for admission to the meeting.
ELECTRONIC DISTRIBUTION
If you would like to receive future Verticalnet proxy statements and annual
reports electronically, please visit http://www.investpower.com. Please refer to
the company number and account number on top of the reverse side of this card.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
VERTICALNET, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please sign and date this proxy, and indicate your vote, on the back of this
card. Please return this card in the enclosed envelope as soon as possible. Your
vote is important. When you sign and return this proxy card, you:
- Appoint James W. McKenzie, Jr. and John A. Milana, and each of
them (or any substitutes they may appoint to take their
place), as proxies to vote your shares as you have instructed
on the reverse side of this card, at the Annual Meeting to be
held on June 5, 2002 and at any adjournments or postponements
of the meeting;
- Authorize the proxies to vote, in their discretion, upon any
other business properly presented at the meeting; and
- Revoke any previous proxy you may have signed.
IF YOU DO NOT SPECIFY HOW YOU WISH TO VOTE, THE PROXIES WILL VOTE FOR EACH
NOMINEE AND IN THEIR DISCRETION AS TO ANY OTHER MATTER PROPERLY PRESENTED AT THE
MEETING.
(Continued and to be Signed and Dated on the Reverse Side)
ANNUAL MEETING OF SHAREHOLDERS OF
VERTICALNET, INC.
June 5, 2002
Co. # Acct. #
--------------------- ---------------------
PROXY VOTING INSTRUCTIONS
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed, and returned your proxy card.
Verticalnet encourages you to use either of these cost-effective and convenient
ways of voting.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES (1-800-776-9437) at any time and follow the
instructions. Have your control number and the proxy card available when you
call.
TO VOTE BY INTERNET AT ANY TIME
Please access the web page at www.voteproxy.com and follow the on-screen
instructions. Have your control number available when you access the web page.
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible. If you vote by telephone or the Internet, please do not mail your
proxy card.
YOUR CONTROL NUMBER IS
----------------------------------------
Please Detach and Mail in the Envelope Provided
[X] Please mark your votes as in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY for Nominees: Kevin S. McKay
listed at right all nominees listed at Howard D. Ross
(except as indicated right Marl. Walsh
to the contrary)
[ ]
[ ]
* To withhold authority to vote for any individual nominee, write the nominee's
name on the space provided below:
----------------------------------
2. APPROVAL OF THE VERTICALNET EQUITY COMPENSATION PLAN FOR EMPLOYEES (1999).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF THE VERTICALNET 1999 LONG TERM INCENTIVE PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION AND TO PERMIT THE BOARD, AT ITS DISCRETION, AT ANY TIME PRIOR
TO THE NEXT ANNUAL MEETING, TO EFFECT A REVERSE SPLIT OF THE COMMON STOCK
AT AN EXCHANGE RATIO OF NOT LESS THAN 1-FOR-5 AND NOT MORE THAN 1-FOR-10.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or at any adjournments or
postponements of the meeting.
SIGNATURE Date , 2002
------------------------- ------------------------- ---------
SIGNATURE IF HELD JOINTLY
NOTE: PLEASE DATE THIS PROXY AND SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD.
Include your title if you are signing as an attorney, executor, administrator,
trustee or guardian, or on behalf of a corporation or partnership. All joint
owners must sign.