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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-26275
drkoop.com, Inc.
(Exact name of registrant as specified in its charter)
Delaware 95-4697615
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8920 Business Park Drive, Suite 200
Austin, Texas 78759
(Address of principal executive offices)
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(512) 726-5110 (Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days
(1) Yes No X
------- -------
(2) Yes No X
------- -------
As of July 31, 1999 there were 29,563,169 shares of the Registrant's common
stock outstanding.
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drkoop.com, Inc.
FORM 10-Q
For the Quarter Ended June 30, 1999
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Balance Sheets at June 30, 1999 (Unaudited) and December 31,
1998.................................................................3
Condensed Statements of Operations for the three and six month
periods ended June 30, 1999 and 1998 (Unaudited).....................4
Condensed Statements of Cash Flows for the six months ended
June 30, 1999 and 1998 (Unaudited)...................................5
Notes to Condensed Financial Statements (Unaudited)............................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................10
Item 3. Quantitative and Qualitative Disclosures about Market
Risk................................................................17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................30
Item 2. Changes in Securities and Use of Proceeds...........................30
Item 3. Defaults Upon Senior Securities.....................................30
Item 4. Submission of Matters to a Vote of Security Holders.................30
Item 5. Other Information...................................................31
Item 6. Exhibits and Reports on Form 8-K....................................31
SIGNATURES....................................................................32
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
drkoop.com, Inc.
Condensed Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1999 1998
--------- ------------
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 85,953 $ --
Trade accounts receivable 965 41
Prepaids and other 5,852 22
--------- ---------
Total current assets 92,770 63
Equipment, furniture and fixtures, net 657 306
Investment in affiliate, at cost 5,000 --
Intangible assets, net 3,444 --
Other assets 11 11
--------- ---------
Total assets $ 101,882 $ 380
========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Trade accounts payable $ 4,710 $ 804
Accrued liabilities 3,610 520
Related party payables 298 1,193
Deferred revenue 700 --
Convertible note payable 300 --
Convertible note payable to stockholder, net of discount of $49 at
December 31, 1998 -- 451
--------- ---------
Total current liabilities 9,618 2,968
--------- ---------
Commitments and contingencies (Note 4)
Mandatorily redeemable convertible (Series B) preferred stock;
liquidation preference of $2,998 at December 31, 1998 -- 18,406
Stockholders' equity (deficit):
Preferred stock, par value $.001; 15,000,000 shares authorized
Series A 750,000 shares designated; -0- and 619,102 shares issued
and outstanding at June 30, 1999 and December 31, 1998 -- 1
Common stock, par value of $.001; 75,000,000 shares authorized at
June 30, 1999 and 15,000,000 shares authorized at December 31,
1998; 29,563,169 and 8,550,360 shares issued and outstanding
at June 30, 1999 and December 31, 1998 30 8
Additional paid-in capital 132,640 --
Deferred stock compensation (3,859) (1,425)
Accumulated deficit (36,547) (19,578)
--------- ---------
Total stockholders' equity (deficit) 92,264 (20,994)
--------- ---------
Total liabilities and stockholders' equity (deficit) $ 101,882 $ 380
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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drkoop.com, Inc.
Condensed Statements of Operations
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Content subscription and software license $ 238 $ -- $ 454 $ --
Advertising and sponsorship 781 -- 969 --
--------------------------- ---------------------------
Total revenue 1,019 -- 1,423 --
--------------------------- ---------------------------
Operating expenses:
Production, content and product development 2,110 672 3,145 955
Sales and marketing 8,010 182 10,058 347
General and administrative 1,740 559 2,844 818
Amortization of deferred stock compensation 592 -- 1,074 --
--------------------------- ---------------------------
Total operating expenses 12,452 1,413 17,121 2,120
--------------------------- ---------------------------
Loss from operations (11,433) (1,413) (15,698) (2,120)
Interest income and expense, net 67 14 36 13
--------------------------- ---------------------------
Net loss (11,366) (1,399) (15,662) (2,107)
Accretion of redeemable securitites to fair value (6,319) -- (17,255) --
Dividend to preferred stockholders -- -- (9,147) --
--------------------------- ---------------------------
Loss attributable to common stockholders $ (17,685) $ (1,399) $ (42,064) $ (2,107)
=========================== ===========================
Basic and diluted net loss per share attributable
to common stockholders $ (1.28) $ (0.16) $ (3.75) $ (0.27)
=========================== ===========================
Weighted average shares used in computing basic and
diluted net loss per share attributable to common
stockholders 13,810 8,550 11,207 7,794
=========================== ===========================
</TABLE>
The accompanying notes are an integral part of the financial statements.
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drkoop.com, Inc.
Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
Operating Activities: 1999 1998
---------- -----------
<S> <C> <C>
Net loss $ (15,662) $ (2,107)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 654 12
Amortization of deferred stock compensation 1,074 --
Interest accretion on convertible notes payable 95 --
Changes in assets and liabilities:
Accounts receivable (924) --
Prepaids and other assets (3,590) (74)
Accounts payable 3,906 268
Accrued liabilities 3,090 144
Related party payables (895) (515)
Deferred revenue 700 --
---------- -----------
Cash used in operating activities (11,552) (2,272)
---------- -----------
Investing Activities:
Purchase of furniture, fixtures and equipment (450) (96)
---------- -----------
Cash used in investing activities (450) (96)
---------- -----------
Financing Activities:
Proceeds from issuance of preferred stock 3,500 5,056
Proceeds from issuance of convertible notes payable 5,775 --
Proceeds from exercise of stock options 248
Proceeds from issuance of common stock, net 88,432 --
---------- -----------
Cash provided by financing activities 97,955 5,056
---------- -----------
Increase in cash and cash equivalents 85,953 2,688
Cash and cash equivalents at beginning of period -- 8
---------- -----------
Cash and cash equivalents at end of period $ 85,953 $ 2,696
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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drkoop.com, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - ORGANIZATION
drkoop.com, Inc. (the "Company"), a Delaware corporation, was incorporated on
July 17, 1997 (date of inception). The Company operates an Internet-based
consumer healthcare network, consisting of an interactive Web site providing
consumers with healthcare information and services, as well as affiliate
relationships with portals, other websites, local healthcare organizations and
traditional media outlets.
Effective June 11, 1999, the Company completed an initial public offering of
10,781,250 shares, including the underwriter's over allotment, at $9 per share.
Offering proceeds, net of aggregate expenses to the Company (including
underwriters' discount) totaled approximately $88.4 million. Simultaneous with
the closing of the initial public offering, each outstanding share of Series A
convertible preferred stock was automatically converted into 1.085 shares of
common stock, Series B redeemable convertible preferred stock was automatically
converted into 1.029 shares of common stock, Series C convertible preferred
stock was automatically converted into one share of common stock. The conversion
resulted in the issuance of 8,594,835 shares of common stock, including the
issuance of 1,345,185 shares of common stock to satisfy in full a purchase
option and related anti-dilution adjustment rights. An additional 876,180 shares
of common stock were issued upon conversion of certain convertible notes
payable.
NOTE 2 - BASIS OF PRESENTATION
The condensed financial statements included herein are unaudited and reflect all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary to fairly state the Company's financial
position, results of operations and cash flows for the periods presented. These
financial statements should be read in conjunction with the Company's financial
statements and notes thereto for the year ended December 31, 1998, which are
contained in the Company's Registration Statement filed on Form S-1 with the
Securities and Exchange Commission (File No. 333-73459). The results of
operations for the three month periods ended June 30, 1999 and 1998 are not
necessarily indicative of results that may be expected for any other interim
period or for the full fiscal year.
NOTE 3 - NET LOSS PER SHARE
Diluted net loss per share has not been presented as the effect of the assumed
exercise of stock options and warrants for common stock shares is antidilutive
due to the Company's net loss.
The following pro forma calculation of net loss per share for the three and six
months ended June 30, 1999 and 1998, respectively, assumes the conversion of all
convertible notes payable, preferred stock and mandatorily redeemable
convertible preferred stock into common stock upon the Company's initial public
offering using the if-converted method from their respective dates of issuance.
This presentation is provided as the Company's historical capital structure is
not indicative of its current capital structure due to the automatic conversion
of all shares of convertible notes payable, preferred stock and mandatorily
redeemable convertible preferred stock into common stock concurrent with the
closing of the Company's recent initial public offering.
6
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<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
(in thousands, except per share data) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $(11,366) $ (1,399) $(15,662) $ (2,107)
======== ======== ======== ========
Basic and diluted:
Shares used in computing basic and diluted
net loss 13,810 8,550 11,207 7,794
======== ======== ======== ========
Basic and diluted net loss per share $ (0.82) $ (.16) $ (3.75) $ (.27)
======== ======== ======== ========
Pro forma:
Shares used above 13,810 8,550 11,207 7,794
Pro forma adjustment to reflect weighted
effect of assumed conversion of convertible
notes payable and preferred stock 7,669 2,267 7,806 1,174
-------- -------- -------- --------
Shares used in computing pro forma basic and
diluted net loss per share 21,479 10,817 19,013 8,968
======== ======== ======== ========
Pro forma basic and diluted net loss per
share $ (.53) $ (.13) $ (.82) $ (.23)
======== ======== ======== ========
</TABLE>
NOTE 4 - COMMITMENTS & CONTINGENCIES
Infoseek and Buena Vista portal agreements
On April 9, 1999, the Company entered into agreements with Infoseek Corporation
and the Buena Vista Internet Group, a unit of The Walt Disney Company, under
which the Company will be the exclusive provider of health and related content
on three websites of the Go Network: Go.com Health Center on Infoseek, ESPN.com
Training Room and the Family.com Health Channel. Under the Infoseek agreement,
the Company will also be the premier health content provider for ABCnews.com. In
addition, the Company will be the exclusive pharmacy and drugstore, health
insurance and clinical trials partner in the Go.com Health Center. Under these
agreements, users on the Go Network will be able to access various health
information, services, interactive tools and commerce opportunities through a
co-branded website served by the Company. In the event the Company elects not to
provide specific content, content may be obtained from a third party.
The term of both agreements is for three years, except that each of the parties
may elect to terminate the relationship after two years. The Company will pay
Infoseek and the Buena Vista Internet Group $57.9 million in total consideration
consisting of cash and warrants to purchase 775,000 shares of common stock at an
exercise price of $8.60 per share over the full three year term. The cash
portion of this obligation is payable approximately as follows: $16.2 million in
the first year of the agreements, $18.2 million in the second year of the
agreements and $21.3 million in the third year. None of the warrants are
exercisable prior to one year after issuance.
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The warrants have been recorded at a fair value of $2.89 per share which was
calculated at the time of issuance using the Black-Scholes option-pricing model
with the following weighted average assumptions: zero dividend yield; 0.5
volatility; risk-free interest rate of 5.0% and an expected life of 3 years.
The Company will recognize the costs associated with the agreements ratably over
the term of agreements.
Purchase Obligation
Effective June 30, 1999, in connection with the America Online, Inc. ("AOL")
agreement (see Note 7), the Company entered into a purchase commitment with
Netscape Communications Corporation ("Netscape") totaling $5.6 million. The
purchase commitment provides for $5.1 million for software products and
technology and $500,000 for service fees.
Legal Matters
On April 12, 1999, a civil complaint was filed against the Company attempting to
allege, among other things, fraud and breach of contract regarding a terminated
consulting arrangement and seeking recovery of damages of $4 million, punitive
damages exceeding $5 million, attorney's fees and an injunction prohibiting the
Company from offering stock for sale to the public unless and until it
recognizes plaintiff's claim to options to acquire 232,500 shares of the
Company's common stock alleged to be owed under the consulting agreement. The
Company believes that the plaintiff is not entitled to recover and intends to
defend this lawsuit vigorously.
On July 28, 1999 adam.com filed a lawsuit seeking to terminate a content
agreement among the two companies. The lawsuit also seeks relief related to
distribution of some of this content in a manner which adam.com alleges violates
the agreement. The Company believes that the claims are without merit and
intends to defend this lawsuit vigorously.
NOTE 5 - CHANGES IN CAPITAL STRUCTURE
Effective June 11, 1999, the Company completed an initial public offering of
10,781,250 shares, including the underwriter's over allotment, at $9 per share.
(See Note 1).
In June 1999, the Company effected a five-for-two stock split. The effect of
this stock split has been recorded retroactively to the inception of the Company
in the accompanying financial statements.
In June 1999, the Company increased its authorized capital stock to 75,000,000
shares of common stock, par value $0.001 per share.
8
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NOTE 6 - SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Six Months Ended
June 30,
- ------------------------------------------------------------------------------------------------------
(in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Supplemental Disclosure of Noncash Financing Activities:
- ------------------------------------------------------------------------------------------------------
Conversion of related party payable to common stock $ - $ 216
- ------------------------------------------------------------------------------------------------------
Deferred stock compensation related to options granted $ 3,507 $ -
- ------------------------------------------------------------------------------------------------------
Accretion of redeemable securities to fair value $ 17,255 $ -
- ------------------------------------------------------------------------------------------------------
Amortization of deferred stock compensation $ 1,074 $ -
- ------------------------------------------------------------------------------------------------------
Issuance of preferred stock for investment in affiliate $ 5,000 $ -
- ------------------------------------------------------------------------------------------------------
Issuance of preferred stock for intangible asset $ 4,000 $ -
- ------------------------------------------------------------------------------------------------------
Obligation to issue common stock pursuant to option
cancellation agreement $ 9,147 $ -
- ------------------------------------------------------------------------------------------------------
Conversion of convertible notes payable to common stock $ 5,990 $ -
- ------------------------------------------------------------------------------------------------------
Conversion of Series B preferred stock to common stock at IPO $ 35,660 $ -
- ------------------------------------------------------------------------------------------------------
Issuance of warrants $ 2,240 $ -
- ------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 7 - SUBSEQUENT EVENT
Effective July 1, 1999, the Company and America Online, Inc. ("AOL") signed a
four-year Interactive Services Agreement (the "Agreement") pursuant to which
the Company was designated as AOL's premier provider of healthcare content. The
Agreement obligates the Company to make portal payments aggregating $89.0
million in cash and to provide AOL warrants to purchase drkoop.com common stock.
The warrants have the following characteristics:
. Warrants to purchase 1,570,932 shares of the Company's common stock for a
purchase price of $15.94 per share (the closing price on June 30, 1999).
These warrants are fully vested and may be exercised at any time on or
after June 30, 2000 and on or prior to June 30, 2008, subject to limited
exceptions relating to a change in control of drkoop.com or the early
termination of the Agreement between AOL and drkoop.com.
. Warrants to purchase up to 1,570,932 shares of the Company's common stock
for a purchase price of $20.00 per share. These warrants are not
exercisable, and will not become exercisable unless the AOL relationship
delivers to drkoop.com during the four years of the Agreement traffic
objectives, measured in page views, at or above agreed upon levels.
Accordingly, one-fourth of these warrants (i.e., 392,733 warrants) could
become vested in each of the next four years if those performance
objectives are met. Any warrants that become vested will be exercisable at
any time on or prior to June 30, 2008 .
. Warrants to purchase up to 2,749,131 shares of the Company's common stock.
These warrants are not exercisable, and will not become exercisable unless
the AOL relationship delivers specified usage of a new personal medical
records software tool to be developed by drkoop.com and jointly deployed by
drkoop.com and AOL. The warrant specifies four performance hurdles,
measured by usage of the new tool, which if accomplished will result in
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392,733, 392,733, 785,466 and 1,178,199 warrants becoming vested and
exercisable. The exercise price of these warrants will be established at
the time they become vested and will be calculated as 80%, 75%, 70% and 65%
of fair market value at such time. Any warrants that become vested will be
exercisable at any time on or prior to June 30, 2008.
All of the warrants include customary ancillary provisions, including anti-
dilution adjustments for stock splits, stock dividends and similar structural
changes. None of the warrants may be transferred prior to December 8, 1999 or
if the related warrants have not vested. A change in control transaction
involving drkoop.com could result in an acceleration of the vesting of these
warrants.
The parties also entered into a registration rights agreement which could
require that drkoop.com register any shares of common stock issued to AOL upon
exercise of any warrant for resale under the Securities Act of 1933, although
these rights are subordinated to the rights previously granted in the Amended
and Restated Registration Rights Agreement dated January 29, 1999.
Under a separate arrangement AOL will pay $8.0 million to drkoop.com related to
specified technology to be provided to AOL by drkoop.com. As noted above,
drkoop.com has agreed to purchase software and services totaling $5.6 million
from Netscape in connection with the improvement of the Company's infrastructure
required to support the AOL agreement.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
The following discussion of the financial condition and results of operations
should be read in conjunction with our Financial Statements and the related
Notes thereto included elsewhere in this report. This document contains certain
forward-looking statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and intentions. When used in
this document, the words "expects," "anticipates," "intends" and "plans" and
similar expressions are intended to identify certain of these forward-looking
statements. The cautionary statements made in this document should be read as
being applicable to all related forward-looking statements wherever they appear
in this document. Our actual results could differ materially from those
discussed in this document. We are under no duty to update any of the forward-
looking statements after the date of this filing on Form 10-Q to conform these
statements to actual results. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed in our
Prospectus dated June 8,1999.
Overview
Our company operates drkoop.com, an Internet-based consumer healthcare network.
Our network consists of a consumer-focused interactive website which provides
users with comprehensive healthcare information and services, as well as
affiliate relationships with portals, other websites, healthcare organizations
and traditional media outlets. Our website, www.drkoop.com, is a healthcare
portal which integrates dynamic healthcare content on a wide variety of
subjects, interactive communities and tools as well as opportunities to purchase
healthcare related products and services on-line.
Revenues
Sources of revenues for the quarter and six months ended June 30, 1999 were
revenues from content subscription and software licensing fees, and advertising
and sponsorship fees. Content
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subscription and software licensing fees are facilitated through our Community
Partnership Program ("CPP"). Subscriptions to our Community Partnership Program
run from one to three years. Under this program, we develop co-branded Internet
pages and software consisting of visual icons containing embedded links back to
our drkoop.com website for local healthcare organizations, such as hospitals and
payor organizations. Advance billings and collections relating to future
services are recorded as deferred revenue and recognized when revenue is earned.
Sales of software licenses to CPP affiliates are recognized as revenue upon
shipment of the software, provided that the portion of the contract allocated to
the software license is based upon vendor specific objective evidence of fair
value, and collectibility is probable. Content subscription revenue is
recognized ratably over the term of the CPP contract, generally ranging from one
to three years. Software licenses are also sold as a stand-alone product
independent of the Community Partnership Program.
Advertising revenues are derived primarily from short-term advertising contracts
in which we typically guarantee a minimum number of user "impressions" to be
delivered over a specific period of time for a fixed fee. Impressions are the
number of times that users on our website view an advertisement. We recognize
advertising revenues at the lesser of the ratio of impressions delivered over
the guaranteed impressions or the straight-line rate over the term of the
contract, provided that no significant obligations remain and collection of the
resulting receivable is probable. During the quarter and six months ended June
30, 1999, we have utilized a combination of third party firms and in-house staff
for the sales and insertion of advertisements on the drkoop.com website.
Advertising rates, measured on a cost per thousand impressions basis, are
dependent on whether the impressions are for general rotation throughout the
drkoop.com website or for target audiences and properties within specific areas
of the website.
Sponsorship revenues are derived from contracts ranging from one to twelve
months in which we commit to provide sponsors enhanced promotional opportunities
that go beyond traditional banner advertising. Sponsorships are designed to
support broad marketing objectives, including branding, awareness, product
introductions, research and transactions. Sponsorship arrangements typically
include the delivery of a guaranteed minimum number of impressions and the
design and implementation of customized pages on the website that enhance the
promotional objective of the sponsor. Costs associated with the development of
the web pages are minimal and are expensed when occurred. Sponsorship revenues
are recognized at the lesser of the ratio of impressions delivered over the
total guaranteed impressions or the straight-line rate over the term of the
contract, provided that no significant obligations remain and collection of the
resulting receivable is probable.
From time to time, and dependent upon the complexity of an advertising or
sponsorship revenue arrangement, we provide initial site design and engineering
services which require the development and implementation of specific website
enhancements prior to launching a co-branded site. Revenues and related costs
for initial site design and engineering services are recognized under contract
accounting.
As our market develops, seasonal and cyclical patterns may emerge. These
patterns may affect our revenues. We cannot yet predict to what extent our
operations will prove to be seasonal.
Results of Operations
Revenues. Our website, www.drkoop.com, was launched July 1998. Revenues
increased to $1.0 million and $1.4 million for the three and six months ended
June 30, 1999, respectively, as compared to $0 revenues for the comparable
periods of 1998. Recurring revenue from content
11
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subscription and software licenses for the quarter ended June 30, 1999 totaled
$238,000 or 23% of total revenues, and $454,000 or 32% of total revenue for the
six months then ended. The increase is attributable to the continued expansion
of the Community Partner Program, resulting in the addition of seven new
contracts during the three months ended June 30, 1999, bringing the total number
of contracts to 15 at June 30, 1999.
Advertising and sponsorship revenues totaled $781,000, or 77%, of total
revenues, for the quarter ended June 30, 1999, and $969,000, or 68%, of total
revenues for the six months ended June 30, 1999. Advertising and sponsorship
revenues included non-recurring engineering services revenues of $203,000
recognized in the quarter ended June 30, 1999, which represented 20% and 14% of
total revenues for the three and six months ended June 30, 1999, respectively.
Additionally, included in advertising and sponsorship revenues were recurring
revenues from sponsorship agreements of $245,000, or 24% of total revenues, and
$273,000, or 19% of total revenues, for the quarter and six months ended June
30, 1999, respectively. The remaining advertising revenues of $333,000, or 33%
of total revenues, and $493,000, or 35% of total revenues, for the quarter and
six months ended June 30, 1999 were derived from non-recurring short-term
advertising and sponsorship arrangements. The increase in advertising and
sponsorship revenues was primarily due to an increase in the number of
advertising arrangements combined with an increase in traffic to our website
resulting in a higher number of impressions delivered.
Included in content subscription and software licensing revenues are barter
transactions that accounted for $30,000 and $50,000 for the three and six months
ended June 30, 1999, respectively. Barter revenues accounted for $84,000 and
$116,000 of the advertising and sponsorship revenues for the three and six
months ended June 30, 1999, respectively. In total, barter revenues represented
$114,000, or 11%, and $166,000, or 12%, of total revenues for the quarter and
six months ended June 30, 1999.
Production, content and product development expenses. Production, content and
product development expenses consist primarily of salaries and benefits,
consulting fees and other costs related to content acquisition and licensing,
software development, application development and website operations expense.
Production, content and product development expense increased by $1.4 million,
or 214%, from $672,000 for the quarter ended June 30, 1998 to $2.1 million for
the quarter ended June 30, 1999, and by $2.2 million, or 229%, from $955,000 for
the six months ended June 30, 1998 to $3.1 million for the six months ended June
30 1999. Included in these totals are royalty fees paid to Dr. C. Everett Koop
of $20,000 and $29,000 for the three and six months ended June 30, 1999,
respectively. The increase in production, content and product development costs
was primarily due to the addition of personnel, resulting in higher salaries,
benefits and travel costs, combined with an increase in consulting fees and
content licensing required as our website has continued to develop and expand.
We believe that in order to remain competitive, significant investments in
content development and operating infrastructure will be required; therefore, we
expect that production, content and product development expenses will continue
to increase in absolute dollars for the foreseeable future.
Sales and marketing expenses. Sales and marketing expenses consist primarily of
salaries and related costs, portal fees, web-based advertising, commissions,
general advertising and other related expenses. Sales and marketing expense
increased by $7.8 million, from $182,000 to $8.0 million, for the quarters ended
June 30, 1998 and 1999, respectively, and by $9.7 million, from $347,000 to
$10.1 million, for the six months ended June 30, 1998 and 1999, respectively.
The primary reasons for the increases were costs associated with the portal
distribution agreements totaling $2.8 million for the six months ended June 30,
1999 as compared to $0 for the same period in 1998; increases in advertising and
promotion of the drkoop.com website totaling $4.9 million during the six months
ended June 30, 1999 as compared to less than $1,000 for the comparable period in
the prior year; and a significant increase in sales and marketing personnel,
resulting in increased salary and related expenses of approximately $820,000
during
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the six months ended June 30, 1999 over the same period for the prior year. We
anticipate that sales and marketing expenses will continue to increase in
absolute dollars in the foreseeable future as we continue to hire additional
personnel and increase expenditures for distribution, advertising, brand
promotion, public relations and other marketing activities.
General and administrative expenses. General and administrative expenses
consist primarily of salaries and related costs for general corporate functions,
including executive, finance, accounting, investor relations, human resources,
facilities and fees for professional services. General and administrative
expenses increased by $1.2 million, or 211%, from $559,000 to $1.7 million for
the quarters ended June 30, 1998 and 1999, respectively, and by $2.0 million, or
248%, from $818,000 to $2.8 million for the six months periods ended June 30,
1998 and 1999, respectively. The primary reason for the increases were the
addition of personnel, including the investment in a more experienced senior
management team, and the resultant increase in salaries, benefits, facilities
and travel. We anticipate that general and administrative expenses will
continue to increase in absolute dollars for the foreseeable future, although at
a slower rate than the other expense categories.
Amortization of Deferred stock compensation expense. We have recorded non-cash
deferred stock compensation costs in the aggregate of $5.0 million in connection
with the grant of certain stock options to our employees in 1998 and 1999. The
deferred stock compensation is being amortized over the four-year vesting period
of such options. Of the total deferred stock compensation, $592,000 and $1.1
million was amortized in the three and six months ended June 30, 1999,
respectively. There were no such expenses in the comparable periods in 1998.
Net interest income. Net interest income includes interest income from our
cash balances offset by interest expenses related to our financing obligations,
particularly on the convertible notes payable prior to conversion. Net interest
income was $67,000 and $14,000 for the three months ended June 30, 1999 and
1998, respectively, and $36,000 and $13,000 for the six months ended June 30,
1999 and 1998, respectively. The increase was primarily due to higher average
net cash and cash equivalents balances resulting from the investment of the
proceeds from our IPO completed in June 1999.
Income tax. We have incurred net losses to date. As of June 30, 1999, we had
net operating loss carryforwards of $14.5 million for financial reporting
purposes. We have recorded a valuation reserve equal to the amount of the
carryforward due to the uncertain realization of these tax benefits.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through equity sales
and convertible notes payable debt financing. At June 30, 1999 we had $86.0
million in cash and cash equivalents and working capital of $83.0 million.
In June 1999, we completed an initial public offering and issued 10,781,250
shares of our common stock at a price of $9.00 per share. We received
approximately $88.4 million in cash, net of underwriting discounts, commissions
and other offering costs. Simultaneous with the closing of the initial public
offering, each outstanding share of Series A convertible preferred stock was
automatically converted into 1.085 shares of common stock, Series B redeemable
convertible preferred stock was automatically converted into 1.029 shares of
common stock, Series C convertible preferred stock was automatically converted
into one share of common stock. Additionally, at the discretion of the
convertible note holders, the principal balance plus accrued
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interest was convertible into shares of common stock at a predetermined price.
As of June 30, 1999 the note holders converted principal balances of $6.0
million plus accrued interest of $77,000 into 876,180 shares of common stock. As
of June 30, 1999, a convertible note payable in the principal amount of $300,000
plus accrued interest of $3,000, representing 40,728 shares if converted,
remained outstanding.
Cash used in operating activities for the six months ended June 30, 1999 of
$11.6 million was due primarily to a net operating loss of $15.7 million and
increases in accounts receivable of $924,000 and prepaid expenses of $3.6
million. These amounts were offset by non cash charges for amortization of
deferred stock compensation of $1.1 million and depreciation of $654,000 and
increases in accounts payable and accrued liabilities of $3.9 million and $3.1
million, respectively. The increases in accounts payable and accrued
liabilities are attributable to the increased expenses associated with
developing and promoting our website. The increase in prepaid expenses is
primarily the result of prepayments required under the terms of various portal
and content contracts. Cash used in operating activities for the six months
ended June 30, 1998 of $2.3 million was due primarily to a net operating loss of
$2.1 million and a decrease in related party payables of $515,000, offset by
increases in accounts payable of $268,000 and accrued liabilities of $152,000.
Cash used in investing activities was $450,000 and $96,000 for the six months
ended June 30, 1999 and 1998, respectively. Net cash used for investing
activities for these periods consisted primarily of capital expenditures for
computer equipment.
Net cash provided by financing activities was $98.0 million for the six months
ended June 30, 1999, compared to $5.1 million during the same period of 1998.
Net cash provided by financing activities resulted primarily from proceeds of
our initial public offering which resulted in net proceeds of approximately
$88.4 million and, to a lesser extent, net proceeds from the issuance of Series
C Convertible Preferred Stock of $3.5 million, net proceeds from the issuance of
convertible notes payable of $5.8 million, and the exercise of stock options
resulting in $248,000 of net proceeds. The $5.1 million in proceeds received
during the first six months of 1998 was from the issuance of preferred stock.
We currently believe that our available cash resources are sufficient to meet
our anticipated working capital and capital expenditure requirements for at
least the next 12 months. No assurance can be given that we will not be
required to raise additional financing prior to such time. If additional funds
are raised through the issuance of equity securities, our stockholders may
experience significant dilution. Furthermore, there can be no assurance that
additional financing will be available when needed or that if available, such
financing will include terms favorable to our stockholders or us. If such
financing is not available when required or is not available on acceptable
terms, we may be unable to develop or enhance our products and services, take
advantage of business opportunities or respond to competitive pressures, any of
which could have a material adverse effect on our business, financial condition
and results of operations.
Impact of the Year 2000
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These systems
may recognize a date using "00" as the year 1900 rather than the year 2000. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded to comply with such Year 2000 requirements or
risk system failure or miscalculations causing disruptions of normal business
activities.
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State of Readiness
Costs. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. We do not presently anticipate that such expenditures will be
material.
Risks. We have made a preliminary assessment of the Year 2000 readiness of our
operating and administrative systems and the third-party software, hardware and
services used to host the drkoop.com website. Our assessment plan consists of:
. contacting third-party vendors of material software, hardware and
services that are both directly and indirectly related to the delivery
of drkoop.com services to our users;
. assessing and implementing repair or replacement of such components as
required; and
. creating contingency plans in the event of Year 2000 failures.
We plan to perform a Year 2000 simulation on our systems, including the
drkoop.com website, during the third quarter of 1999 to test Year 2000 system
readiness. Many of our vendors of material software, hardware and services have
indicated that the products used by us are currently Year 2000 compliant. We are
not currently aware of any internal Year 2000 compliance problems that could
reasonably be expected to have a material adverse effect on our business,
results of operations and financial condition, without taking into account our
efforts to avoid or fix such problems. However, there can be no assurance that
we will not discover Year 2000 compliance problems in our computer
infrastructure that will require substantial revisions or replacements. In
addition, there can be no assurance that third-party software, hardware or
services incorporated into our material systems or other systems upon which we
are reliant will not need to be revised or replaced, which could be time
consuming and expensive.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of our control will be Year 2000 compliant. The failure by such entities
to be Year 2000 compliant could result in a systemic failure beyond our control,
such as a prolonged Internet, telecommunications or electrical failure, which
could also prevent us from delivering drkoop.com, decrease the use of the
Internet or prevent users from accessing drkoop.com, any of which would have a
material adverse effect on our business, results of operations and financial
condition.
Contingency Plan.
As discussed above, we are engaged in an ongoing Year 2000 assessment and have
developed preliminary contingency plans. The results of our analyses and the
responses received from third-party vendors and service providers will be taken
into account to revise our contingency plans as necessary. It is our goal to
finalize our contingency plans by the end of the third quarter of 1999.
New Accounting Pronouncements
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In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
We currently do not engage in or plan to engage in derivative instruments or
hedging activities.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Risks Related to Our Business
Our business is difficult to evaluate because we have an extremely limited
operating history.
We were incorporated in July 1997 and launched our Internet operations in July
1998. Accordingly, we have an extremely limited operating history. An investor
in our common stock must consider the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets,
including the Internet market. These risks and difficulties include our ability
to:
. attract a larger audience of users to our Internet-based consumer
healthcare network;
. increase awareness of our brand;
. strengthen user loyalty and increase the number of registered
users;
. offer compelling on-line content, services and e-commerce
opportunities;
. maintain our current, and develop new, affiliate relationships;
. attract a large number of advertisers who desire to reach our
users;
. respond effectively to the offerings of competitive providers of
healthcare information on the Internet;
. continue to develop and upgrade our technology; and
. attract, retain and motivate qualified personnel.
We also depend on the growing use of the Internet for advertising, commerce
and communication, and on general economic conditions. We cannot assure you that
our business strategy will be successful or that we will successfully address
these risks or difficulties. If we fail to address adequately any of these risks
or difficulties our business would likely suffer. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements for detailed information on our extremely limited
operating history.
Our business is changing rapidly, which could cause our quarterly operating
results to vary and our stock price to fluctuate.
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Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors, not all of which are within our control. If
we have a shortfall in revenues in relation to our expenses, or if our expenses
precede increased revenues, then our business would be materially adversely
affected. This would likely affect the market price of our common stock in a
manner which may be unrelated to our long-term operating performance.
Important factors which could cause our results to fluctuate materially include:
. our ability to attract and retain users;
. our ability to attract and retain advertisers and sponsors and
maintain advertiser and sponsor satisfaction;
. traffic levels on our Internet site;
. our ability to attract and retain customers and maintain customer
satisfaction for our existing and future e-commerce offerings;
. new Internet sites, services or products introduced by us or our
competitors;
. the level of Internet and other on-line services usage;
. our ability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;
. our ability to successfully integrate operations and technologies from
any acquisitions, joint ventures or other business combinations or
investments; and
. technical difficulties or system downtime affecting the operation of
our website.
Our revenues for the foreseeable future will remain dependent on user traffic
levels, advertising and e-commerce activity on drkoop.com and the level of
affiliate subscriptions. Such future revenues are difficult to forecast. In
addition, we plan to increase our sales and marketing operations, obtain broader
distribution for our service, expand and develop content and upgrade and enhance
our technology and infrastructure development in order to support our growth.
Many of the expenses associated with these activities-for example, personnel
costs, portal fees, and technology and infrastructure costs-are relatively
fixed in the short-term. We may be unable to adjust spending quickly enough to
offset any unexpected revenue shortfall, in which case our results of operations
would suffer.
We have a history of losses and negative cash flow and anticipate continued
losses.
Since our inception, we have incurred significant losses and negative cash flow,
and as of June 30, 1999, had an accumulated deficit of approximately $36.5
million, which included $11.2 million for accretion to fair value of the
mandatory redeemable Series B convertible preferred stock (all of which has been
converted into common stock). We have not achieved profitability and expect to
continue to incur operating losses for the foreseeable future as we fund
operating and capital expenditures in areas such as expansion of our network,
distribution, advertising, brand promotion, content development, sales and
marketing, and operating infrastructure. Our business model assumes that
consumers will be attracted to and use healthcare information and related
content available on our Internet-based consumer
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healthcare network which will, in turn, allow us the opportunity to sell
advertising designed to reach those consumers. Our business model also assumes
that those consumers will access important healthcare needs through electronic
commerce using our website and that local healthcare organizations will
affiliate with us. This business model is not yet proven, and we cannot assure
you that we will ever achieve or sustain profitability or that our operating
losses will not increase in the future.
We must establish, maintain and strengthen our brand in order to attract users
to our network and generate advertising, sponsorship and e-commerce revenue.
In order to expand our audience of users and increase our on-line traffic, we
must establish, maintain and strengthen our brand. For us to be successful in
establishing our brand, healthcare consumers must perceive us as a trusted
source of healthcare information, and advertisers, merchants and manufacturers
must perceive us as an effective marketing and sales channel for their products
and services. We expect that we will need to increase substantially our
marketing budget in our efforts to establish brand recognition and brand
loyalty. Our business could be materially adversely affected if our marketing
efforts are not productive or if we cannot strengthen our brand.
Key elements of our marketing and brand building strategies are dependent on our
relationship with Dr. C. Everett Koop.
A key element of our strategy is to associate our company with former U.S.
Surgeon General C. Everett Koop, Chairman of the Board of our company and a
person who we believe is viewed by consumers as a trustworthy and credible
leader in the healthcare field. We are a party to an agreement, dated January 5,
1999, as amended, with Dr. C. Everett Koop which permits us to use his image,
name and likeness in connection with healthcare-related services and products.
Under this agreement, our use of Dr. C. Everett Koop's name, image or likeness
is subject to his prior written approval of the resulting products, which may
not be unreasonably withheld. As consideration for the Koop agreement, we are
obligated to pay Dr. C. Everett Koop a royalty equal to 2% of our revenues
derived from sales of our current products and up to 4% of our revenues derived
from sales of new products during the term of the agreement, including any
rebranding period. The Koop agreement is exclusive and for a term of five years,
subject to automatic renewal for additional three-year terms unless it is
terminated by either party within 120 days of the end of each term. If a
voluntary termination is requested by Dr. C. Everett Koop and is not the result
of a breach or default by us, we will have the right on a non-exclusive basis
for three years following the end of the term to rebrand and sell approved
products bearing the name, image or likeness of Dr. C. Everett Koop. If we
default in our obligations and do not promptly cure the default, Dr. C. Everett
Koop may terminate the Koop agreement, no rebranding period will apply and we
would immediately lose all rights to use Dr. C. Everett Koop's name and
likeness. Dr. C. Everett Koop may also terminate the Koop agreement upon a
change in control of our company.
If our agreement with Dr. C. Everett Koop were terminated prior to the end of
its current term or not renewed at the end of its current term, we would need to
change the name of our website and devote substantial resources towards building
a new marketing and brand strategy. Without our ability to use Dr. C. Everett
Koop's name and likeness or Dr. C. Everett Koop's participation in our business,
we may not be able to continue to attract a significant amount of user traffic
and advertisers to our website. The potential also exists that if Dr. C. Everett
Koop ends his affiliation
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with our company, we could suffer a significant loss of credibility and trust
with healthcare consumers as a result. Any development that would cause Dr. C.
Everett Koop to exercise his right to terminate his relationship with our
company or which otherwise would cause us to lose the benefits of our
affiliation with him would have a material adverse effect on our business,
results of operation and financial condition. We do not maintain "key person"
life insurance for Dr. C. Everett Koop or any of our personnel.
We have committed significant financial and marketing resources to expand our
network; if we are unable to earn revenues in excess of these commitments, our
business will suffer.
In order to expand our network, we have entered into a number of strategic
partnerships which involve the payment of significant funds for prominent or
exclusive carriage of our healthcare information and services. These
transactions are premised on the assumption that the traffic we obtain from
these arrangements will permit us to earn revenues in excess of the payments
made to partners. This assumption is not yet proven, and if we are unsuccessful
in generating sufficient resources to offset these expenditures, we will likely
be unable to operate our business. On April 9, 1999 we entered into agreements
with Infoseek Corporation and the Buena Vista Internet Group, a unit of The Walt
Disney Company, under which we will be the exclusive provider of health and
related content on three websites of the Go Network. Under the Infoseek
agreement, drkoop.com will also be the premier health content provider for
ABCnews.com. The term of these agreements is for three years for total
consideration of approximately $57.9 million, including warrants to purchase
shares of our common stock. Additionally, on July 1, 1999 we entered into
agreements with America Online, Inc under which we will be the premier health
content provider across five AOL brands: America Online, CompuServe, AOL.COM,
Netscape Netcenter and Digital City. The term of the agreement is for four
years for cash payments of $89 million, plus fully vested and performance based
warrants to purchase shares of our common stock.
In order to attract and retain our audience of users, we must provide healthcare
content, tools and other features which meet the changing demands of those
users.
One of our fundamental business objectives is for drkoop.com to be a trusted
source for healthcare information and services. As with any form of consumer-
oriented media, we have to provide editorial content and other features such as
interactive tools, that consumers demand in order to continue to attract and
retain our audience of users. We expect that competitive factors will create a
continuing need for us to retain, improve and add to our editorial content,
interactive tools and other features. We will not only have to expend
significant funds and other resources to continue to improve our network, but we
must also properly anticipate and respond to consumer preferences and demands.
Competition for content will likely increase the fees charged by high quality
content providers. The addition of new features will also require that we
continue to improve the technology underlying our website. These requirements
are significant, and we may fail to execute on them quickly and efficiently. If
we fail to expand the breadth of our offerings quickly, or these offerings fail
to achieve market acceptance, our business will suffer significantly.
Our business model relies on Internet advertising and sponsorship activities
which may not be effective or profitable marketing media.
Our future is highly dependent on increased use of the Internet as an
advertising medium. We expect to derive a substantial portion of our revenues
from advertising and sponsorships. The Internet advertising market is new and
rapidly evolving, and we cannot yet predict its
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effectiveness as compared to traditional media advertising. As a result,
demand and market acceptance for Internet advertising solutions is uncertain.
Most of our current or potential advertising customers have little or no
experience advertising over the Internet and have allocated only a limited
portion of their advertising budgets to Internet advertising. The adoption of
Internet advertising, particularly by those entities that have historically
relied upon traditional media for advertising, requires the acceptance of a new
way of conducting business, exchanging information and advertising products and
services. Such customers may find Internet advertising to be less effective for
promoting their products and services relative to traditional advertising media.
We cannot assure you that the market for Internet advertising will continue to
emerge or become sustainable. If the market for Internet advertising fails to
develop or develops more slowly than we expect, then our ability to generate
advertising revenues would be materially adversely affected.
Various pricing models are used to sell advertising on the Internet. It is
difficult to predict which, if any, will emerge as the industry standard,
thereby making it difficult to project our future advertising rates and
revenues. Our advertising revenues could be adversely affected if we are unable
to adapt to new forms of Internet advertising. Moreover, "filter" software
programs are available that limit or prevent advertising from being delivered to
an Internet user's computer. Widespread adoption of this software could
adversely affect the commercial viability of Internet advertising.
In order to execute our growth plan we must attract, retain and motivate highly
skilled employees, and we face significant competition from other Internet and
new media companies in doing so.
Our ability to execute our growth plan and be successful also depends on our
continuing ability to attract, retain and motivate highly skilled employees. In
addition to Dr. C. Everett Koop, Chairman of the Board, we depend on the
continued services of key board members, our senior management and other
personnel, particularly Donald W. Hackett, President and Chief Executive
Officer. As we continue to grow, we will need to hire additional personnel in
all operational areas. Competition for personnel throughout the Internet and
related new-media industry is intense. We may be unable to retain our key
employees or attract, assimilate or retain other highly qualified employees in
the future. We have from time to time in the past experienced, and we expect to
continue to experience in the future, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications. If we do not succeed in
attracting new personnel or retaining and motivating our current personnel, our
business will be adversely affected.
Due to the factors noted above and the other risks discussed in this section,
you should not rely on quarter-to-quarter comparisons of our results of
operations as indicators of future performance. It is possible that in some
future periods our operating results may be below the expectations of public
market analysts and investors. In this event, the price of our common stock may
underperform or fall. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
We depend on third-party relationships, many of which are short-term or
terminable, to generate advertising and provide us with content.
We depend, and will continue to depend, on a number of third-party relationships
to increase traffic on drkoop.com and thereby generate advertising and other
revenues. Outside parties on which we depend include large Portal companies,
including AOL and Infoseek, unrelated website operators that provide links to
drkoop.com, providers
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of healthcare content and portals which provide us with carriage. Many of our
arrangements with third-party Internet sites and other third-party service
providers are not exclusive and are short-term or may be terminated at the
convenience of either party. We cannot assure you that third parties regard our
relationship with them as important to their own respective businesses and
operations. They may reassess their commitment to us at any time in the future
and may develop their own competitive services or products.
We intend to produce only a portion of the healthcare content that will be found
on the drkoop.com network. We will rely on third-party organizations that have
the appropriate expertise, technical capability, name recognition, reputation
for integrity, and willingness to syndicate product content for branding and
distribution by others. As health-related content grows on the Internet, we
believe that there will be increasing competition for the best product
suppliers, which may result in a competitor acquiring a key supplier on an
exclusive basis, or in significantly higher content prices. Such an outcome
could make the drkoop.com network less attractive or useful for an end user
which could reduce our advertising and e-commerce revenues.
We cannot assure you that we will be able to maintain relationships with third
parties that supply us with content, carriage, software or related products or
services that are crucial to our success, or that such content, software,
products or services will be able to sustain any third-party claims or rights
against their use. Also, we cannot assure you that the content, software,
products or services of those companies that provide access or links to our
website will achieve market acceptance or commercial success. Accordingly, we
cannot assure you that our existing relationships will result in sustained
business partnerships, successful product or service offerings or the generation
of significant revenues for us.
We have recently experienced and are currently experiencing rapid growth in our
business, and our inability to manage this growth could harm our business.
We have experienced and are currently experiencing a period of significant
growth. This growth has placed, and the future growth we anticipate in our
operations will continue to place, a significant strain on our resources. As
part of this growth, we will have to implement new operational and financial
systems and procedures and controls, expand, train and manage our employee base,
and maintain close coordination among our technical, accounting, finance,
marketing, sales and editorial staffs. If we are unable to manage our growth
effectively, our business, results of operations and financial condition could
be adversely affected.
Any future acquisitions we make of companies or technologies may result in
disruptions to our business and/or the distraction of our management, due to
difficulties in assimilating acquired personnel and operations.
We may acquire or make investments in complementary businesses, technologies,
services or products if appropriate opportunities arise. For example, we
recently commenced the adoption of Netscape technology to our operations in
connection with our relationship with AOL. From time to time we
engage in discussions and negotiations with companies regarding our acquiring or
investing in such companies' businesses, products, services or technologies, and
we regularly engage in such discussions and negotiations in the ordinary course
of our business. Some of those discussions also contemplate the other party
making an investment or otherwise obtaining an equity interest in our company.
To date we have entered into such relationships with Superior Consultant
Holdings Corporation, HealthMagic, Inc., Infoseek and AOL. We cannot assure you
that we will be able to identify future suitable acquisition or investment
candidates, or if we do identify suitable candidates, that we will be able to
make such acquisitions or investments on commercially acceptable terms or at
all. If we acquire or invest in another company, we could
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have difficulty in assimilating that company's personnel, operations, technology
and software. In addition, the key personnel of the acquired company may decide
not to work for us. If we make other types of acquisitions or enter into new
strategic relationships, we could have difficulty in integrating the related
products, services or technologies into our operations. These difficulties could
disrupt our ongoing business, distract our management and employees, increase
our expenses and adversely affect our results of operations. Furthermore, we may
incur indebtedness or issue equity securities to pay for any future
acquisitions. The issuance of equity securities would be dilutive to our
existing stockholders. As of the date of this prospectus, we have no agreement
to enter into any material investment or acquisition transaction.
If our ability to expand our network infrastructure is constrained in any way we
could lose customers and suffer damage to our operating results.
Presently, a relatively limited number of consumers use our website. We must
continue to expand and adapt our network infrastructure to accommodate
additional users, increase transaction volumes and respond to changing consumer
and customer requirements. We may not be able to accurately project the rate or
timing of increases, if any, in the use of our website or to expand and upgrade
our systems and infrastructure to accommodate such increases. Our systems may
not accommodate increased use while maintaining acceptable overall performance.
Service lapses could cause our users to instead use the on-line services of our
competitors.
Many of our service agreements, such as those with our Community Partners,
contain performance standards. If we fail to meet these standards, our customers
could terminate their agreements with us or require that we refund part or all
of the license fees. The loss of any of our service agreements and/or associated
revenues would directly and significantly impact our business. We may be unable
to expand or adapt our network infrastructure to meet additional demand or our
customers' changing needs on a timely basis, at a commercially reasonable cost,
or at all.
We may have liability for information we provide on our website or which is
accessed from our website.
Because users of our website access health content and services relating to a
condition they may have or may distribute our content to others, third parties
may sue us for defamation, negligence, copyright or trademark infringement,
personal injury or other matters. We could also become liable if confidential
information is disclosed inappropriately. These types of claims have been
brought, sometimes successfully, against on-line services in the past. Others
could also sue us for the content and services that are accessible from our
website through links to other websites or through content and materials that
may be posted by our users in chat rooms or bulletin boards. While our
agreements, including those with content providers, in some cases provide that
we will be indemnified against such liabilities, such indemnification, if
available, may not be adequate. Our insurance may not adequately protect us
against these types of claims. Further, our business is based on establishing
the drkoop.com network as a trustworthy and dependable provider of healthcare
information and services. Allegations of impropriety, even if unfounded, could
therefore have a material adverse effect on our reputation and our business.
Any failure or inability to protect our intellectual property rights could
adversely affect our ability to establish our brand.
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Our intellectual property is important to our business. We rely on a combination
of copyright, trademark and trade secret laws, confidentiality procedures and
contractual provisions to protect our intellectual property. Federal
registrations are pending for the trademark "drkoop.com," as well as other
service and trademarks which incorporate the Dr. Koop name. Our right to use the
Dr. Koop name is granted to us under an agreement with Dr. C. Everett Koop. If
we lose our right to use the Dr. Koop name, we would be forced to change our
corporate name and adopt a new domain name. These changes could confuse current
and potential customers and would adversely impact our business. We also rely on
a variety of technologies that are licensed from third parties, including our
database and Internet server software, which is used in the drkoop.com website
to perform key functions. These third-party licenses may not be available to us
on commercially reasonable terms in the future.
Year 2000 problems may disrupt our operations which could result in lost
revenues and increased operating costs.
Because our business depends on computer software, we have begun to assess the
Year 2000 readiness of our systems. We are also in the process of contacting
certain third-party vendors, licensors and providers of hardware, software and
services regarding their Year 2000 readiness. Following our Year 2000 assessment
and after contacting these third parties, we will be able to make a final
evaluation of our state of readiness, potential risks and costs, and to
determine to what extent a contingency plan is necessary. Third-party software,
hardware or services incorporated into our systems may need to be revised or
replaced, which could be time consuming and expensive, potentially resulting in
lost revenues and increased costs for us. For a preliminary evaluation of the
potential impact of these Year 2000-related issues on us, please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Impact of the Year 2000."
Business Litigation
In the ordinary course of business we are involved in certain legal disputes
including those disclosed in this document. Such litigation inherently involves
risks and uncertainties.
We do not expect to pay dividends, and investors should not buy our common stock
expecting to receive dividends.
We have never declared or paid any cash dividends on our capital stock. We
presently intend to retain future earnings, if any, to finance the expansion of
our business and do not expect to pay any cash dividends in the foreseeable
future. Investors should not purchase our common stock with the expectation of
receiving cash dividends
We are subject to anti-takeover provisions in our charter and in our contracts
that could delay or prevent an acquisition of our company, even if such an
acquisition would be beneficial to our stockholders.
Certain provisions of our certificate of incorporation, our bylaws, Delaware law
and material contracts to which we are party could make it more difficult for a
third party to acquire us, even if doing so might be beneficial to our
stockholders.
Our business may face additional risks and uncertainties not presently known to
us which could cause our business to suffer.
In addition to the risks specifically identified in this Risk Factors section or
elsewhere in this filing, we may face additional risks and uncertainties not
presently known to us or that we currently deem immaterial which ultimately
impair our business, results of operations and financial condition.
23
<PAGE>
Risks Related to Our Industry
Consumers and the healthcare industry must accept the Internet as a source of
healthcare content and services for our business model to be successful.
To be successful, we must attract to our network a significant number of
consumers as well as other participants in the healthcare industry. To date,
consumers have generally looked to healthcare professionals as their principal
source for health and wellness information. Our business model assumes that
consumers will use healthcare information available on our network, that
consumers will access important healthcare needs through electronic commerce
using our website, and that local healthcare organizations and other
participants in the healthcare industry will affiliate with us. This business
model is not yet proven, and if we are unable to successfully implement our
business model, our business will be materially adversely affected.
The Internet industry is highly competitive and changing rapidly, and we may not
have the resources to compete adequately.
The number of Internet websites offering users healthcare content, products and
services is vast and increasing at a rapid rate. These companies compete with us
for users, advertisers, e-commerce transactions and other sources of on-line
revenues. In addition, traditional media and healthcare providers compete for
consumers' attention both through traditional means as well as through new
Internet initiatives. We believe that competition for healthcare consumers will
continue to increase as the Internet develops as a communication and commercial
medium.
We compete directly for users, advertisers, e-commerce merchants, syndication
partners and other affiliates with numerous Internet and non-Internet
businesses, including:
. health-related on-line services or websites targeted at consumers,
such as accesshealth.com, ahn.com, betterhealth.com, drweil.com,
healthcentral.com, healthgate.com, intelihealth.com, mayohealth.org;
mediconsult.com, onhealth.com, thriveonline.com and webmd.com;
. on-line and Internet portal companies, such as America Online, Inc.;
Microsoft Network; Yahoo! Inc.; Excite, Inc.; Lycos Corporation and
Infoseek Corporation, which commonly distribute multiple sources of
healthcare data;
. electronic merchants and conventional retailers that provide
healthcare goods and services competitive to those available from
links on our website;
. hospitals, HMOs, managed care organizations, insurance companies and
other healthcare providers and payors which offer healthcare
information through the Internet; and
. other consumer affinity groups, such as the American Association of
Retired Persons, SeniorNet and ThirdAge Media, Inc. which offer
healthcare-related content to specific demographic groups.
Many of these potential competitors are likely to enjoy substantial competitive
advantages compared to our company, including:
24
<PAGE>
. the ability to offer a wider array of on-line products and services;
. larger production and technical staffs;
. greater name recognition and larger marketing budgets and resources;
. larger customer and user bases; and
. substantially greater financial, technical and other resources.
To be competitive, we must respond promptly and effectively to the challenges of
technological change, evolving standards and our competitors' innovations by
continuing to enhance our products and services, as well as our distribution,
sales and marketing channels. Increased competition could result in a loss of
our market share or a reduction in our prices or margins. Competition is likely
to increase significantly as new companies enter the market and current
competitors expand their services.
Since we operate an Internet-based network, our business is subject to
government regulation relating to the Internet which could impair our
operations.
Because of the increasing use of the Internet as a communication and commercial
medium, the government has adopted and may adopt additional laws and regulations
with respect to the Internet covering such areas as user privacy, pricing,
content, taxation, copyright protection, distribution and characteristics and
quality of production and services.
Since we operate a healthcare network over the Internet, our business is subject
to government regulation specifically relating to medical devices, the practice
of medicine and pharmacology, healthcare regulation, insurance and other matters
unique to the healthcare area.
Laws and regulations have been or may be adopted with respect to the provision
of healthcare-related products and services on-line, covering areas such as:
. the regulation of medical devices;
. the practice of medicine and pharmacology and the sale of controlled
products such as pharmaceuticals on-line;
. the regulation of government and third-party cost reimbursement; and
. the regulation of insurance sales.
FDA Regulation of Medical Devices. Some computer applications and software are
considered medical devices and are subject to regulation by the United States
Food and Drug Administration. We do not believe that the FDA will regulate our
current applications or services; however, our applications and services may
become subject to FDA regulation. Additionally, we may expand our application
and service offerings into areas that subject us to FDA regulation. We have no
experience in complying with FDA regulations. We believe that complying with FDA
regulations would be time consuming, burdensome and expensive and could delay or
prevent our introduction of new applications or services.
25
<PAGE>
Regulation of the Practice of Medicine and Pharmacology. The practice of
medicine and pharmacology requires licensing under applicable state law. We have
endeavored to structure our website and affiliate relationships to avoid
violation of state licensing requirements, but a state regulatory authority may
at some point allege that some portion of our business violates these statutes.
Any such allegation could result in a material adverse effect on our business.
Further, any liability based on a determination that we engaged in the practice
of medicine without a license may be excluded from coverage under the terms of
our current general liability insurance policy.
Federal and State Healthcare Regulation. We earn a service fee when users on our
website purchase prescription pharmacy products from certain of our e-commerce
partners. The fee is not based on the value of the sales transaction. Federal
and state "anti-kickback" laws prohibit granting or receiving referral fees in
connection with sales of pharmacy products that are reimbursable under federal
Medicare and Medicaid programs and other reimbursement programs. Although there
is uncertainty regarding the applicability of these regulations to our e-
commerce revenue strategy, we believe that the service fees we receive from our
e-commerce partners are for the primary purpose of marketing and do not
constitute payments that would violate federal or state "anti-kickback" laws.
However, if our program were deemed to be inconsistent with federal or state
law, we could face criminal or civil penalties. Further, we would be required
either not to accept any transactions which are subject to reimbursement under
federal or state healthcare programs or to restructure our compensation to
comply with any applicable anti-kickback laws or regulations. In addition,
similar laws in several states apply not only to government reimbursement but
also to reimbursement by private insurers. If our activities were deemed to
violate any of these laws or regulations, it could cause a material adverse
affect on our business, results of operations and financial condition.
State Insurance Regulation. In addition, we market insurance on-line, offered by
unrelated third parties, and receive referral fees from those providers in
connection with this activity. The use of the Internet in the marketing of
insurance products is a relatively new practice. It is not clear whether or to
what extent state insurance licensing laws apply to our activities. If we were
required to comply with such licensing laws, compliance could be costly or not
possible. This could have a material adverse effect on our business.
There is no established market for the consumer healthcare e-commerce
transactions we facilitate.
We plan to develop relationships with retailers, manufacturers and other
providers to offer healthcare products and services through direct links from
our website to their website. Such a strategy involves numerous risks and
uncertainties. There is no established business model for the sale of healthcare
products or services over the Internet. Accordingly, we have limited experience
in the sale of products and services on-line and the development of
relationships with retailers, manufacturers or other providers of such products
and services, and we cannot predict the rate at which consumers will elect to
engage in this form of commerce or the compensation that we will receive for
enabling these transactions.
Consumers may sue us if any of the products or services that are sold through
our website are defective, fail to perform properly or injure the user, even if
such goods and services are provided by unrelated third parties. Some of our
agreements with manufacturers, retailers and other providers contain provisions
intended to limit our exposure to liability claims. These limitations may not
however prevent all potential claims, and our insurance may not adequately
protect us
26
<PAGE>
from these types of claims. Liability claims could require us to spend
significant time and money in litigation or to pay significant damages. As a
result, any such claims, whether or not successful, could seriously damage our
reputation and our business.
Internet capacity constraints may impair the ability of consumers to access our
website, which could hinder our ability to generate advertising revenues.
Our success will depend, in large part, upon a robust communications industry
and infrastructure for providing Internet access and carrying Internet traffic.
The Internet may not prove to be a viable commercial medium because of:
. inadequate development of the necessary infrastructure such as a
reliable network backbone;
. timely development of complementary products such as high speed
modems;
. delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity; or
. increased government regulation.
If the Internet continues to experience significant growth in the number of
users and the level of use, then the Internet infrastructure may not be able to
continue to support the demands placed on it.
Our business is dependent on the continuous, reliable and secure operation of
our website and related tools and functions we provide.
We rely on the Internet and, accordingly, depend upon the continuous, reliable
and secure operation of Internet servers and related hardware and software.
Recently, several large Internet commerce companies have suffered highly
publicized system failures which resulted in adverse reactions to their stock
prices, significant negative publicity and, in certain instances, litigation. We
have also suffered service outages from time to time, although to date none of
these interruptions has materially adversely effected our business operations or
financial condition. To the extent that our service is interrupted, our users
will be inconvenienced, our commercial customers will suffer from a loss in
advertising or transaction delivery and our reputation may be diminished. Some
of these outcomes could directly result in a reduction in our stock price,
significant negative publicity and litigation. Our computer and communications
hardware are protected through physical and software safeguards. However, they
are still vulnerable to fire, storm, flood, power loss, telecommunications
failures, physical or software break-ins and similar events. We do not have full
redundancy for all of our computer and telecommunications facilities and do not
maintain a back-up data facility. Our business interruption insurance may be
inadequate to protect us in the event of a catastrophe. We also depend on third
parties to provide potential users with web browsers and Internet and on-line
services necessary for access to our website. In the past, our users have
occasionally experienced difficulties with Internet and other on-line services
due to system failures, including failures unrelated to our systems. Any
sustained disruption in Internet access provided by third parties could
adversely impact our business.
We retain confidential customer information in our database. Therefore, it is
critical that our facilities and infrastructure remain secure and are perceived
by consumers to be secure. Despite
27
<PAGE>
the implementation of security measures, our infrastructure may be vulnerable to
physical break-ins, computer viruses, programming errors or similar disruptive
problems. A material security breach could damage our reputation or result in
liability to us.
28
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 12, 1999, a civil complaint was filed as Agrawal v. drkoop.com, Inc.,
Donald W. Hackett and John F. Zaccaro in the District Court of Travis County,
Texas, 126 Judicial District, Case No. 99-04294. In the lawsuit, plaintiff
attempts to allege causes of action including fraud, constructive fraud,
promissory estoppel, negligent misrepresentation, breach of contract,
conversion, stock fraud, defamation and misrepresentation. Plaintiff claims,
among other things, that misrepresentations were made to him regarding his
involvement in the early stages of development of drkoop.com and we breached a
consulting agreement entered into between him and our company in September 1998.
Plaintiff seeks recovery of actual damages which he alleges to be $4 million,
punitive damages alleged to be in excess of $5 million, attorneys fees and costs
and a temporary and permanent injunction prohibiting drkoop.com from offering
stock for sale to the public unless and until we recognize plaintiff's alleged
right to options to acquire 232,500 shares of our common stock which he claims
are owed to him under the consulting agreement. No injunction has been issued.
We believe that plaintiff is not entitled to recover on his claims and intend to
defend this lawsuit vigorously. We filed a counterclaim against the plaintiff on
April 27, 1999 in which we allege causes of action including breach of contract,
fraudulent inducement, breach of fiduciary duty and professional malpractice.
On July 28, 1999 adam.com filed a lawsuit seeking to terminate a content
agreement among the two companies. The lawsuit also seeks relief related to
distribution of some of this content in a manner which adam.com alleges violates
the agreement. The Company believes that the claims are without merit and
intends to defend this lawsuit vigorously.
Item 2. Changes in Securities and Use of Proceeds
The effective date of our first registration statement, filed on Form S-1 under
the Securities Act of 1933 (File No. 333-73459) relating to an initial public
offering of our common stock, was June 7, 1999. A total of 10,781,250 shares of
our common stock were sold to an underwriting syndicate, including the exercise
of the 15% over allotment. The managing underwriters were Bear, Stearns & Co.
Inc., Hambrecht & Quist LLC, and Wit Capital Corporation. The offering commenced
and completed on June 8, 1999, at an initial public offering price of $9.00 per
share. The initial public offering resulted in gross proceeds of $97.0 million,
$6.8 million of which was applied to the underwriting discount and approximately
$1.8 million of which was applied to related expenses. As a result, net proceeds
of the offering to us were approximately $88.4 million. From the date of receipt
through June 30, 1999, the net proceeds of the initial public offering were used
to fund operating losses and for general corporate purposes, including expansion
of our network, advertising, brand promotion, content development and working
capital or invested in an interest bearing money market account. None of the net
proceeds of the offering were paid, directly or indirectly, to any director,
officer or general partner of drkoop.com, Inc., or any of their associates, or
to any persons owning ten percent or more of any class of our equity securities,
or any affiliates.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
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None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
The Exhibit Index attached hereto is hereby incorporated by reference to this
Item.
(b) Reports on Form 8-K for the quarter ended June 30, 1999.
None
30
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
drkoop.com, Inc.
Date: August 13, 1999 /s/ Susan Georgen Saad
-------------------------------
Name: Susan Georgen Saad
Title: Chief Financial Officer
31
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
Number Description
------- -----------
1.1** Form of Underwriting Agreement
3.1** Restated Certificate of Incorporation of drkoop.com, Inc., a
Delaware corporation, as currently in effect
3.2** Bylaws of drkoop.com, Inc., a Delaware corporation, as currently in
effect
3.3** Form of Bylaws of drkoop.com, Inc., a Delaware corporation, as in
effect after the closing of the offering made under this
registration statement
3.4** Form of Restated Certificate of Incorporation of drkoop.com, Inc., a
Delaware corporation, to be filed after the closing of the offering
made under this registration statement
3.5** Certificate of Amendment of Restated Certificate of Incorporation of
drkoop.com, Inc., a Delaware corporation
4.1** Specimen common stock certificate
5.1** Opinion of Latham & Watkins
10.1** Amended and Restated 1997 Stock Option Plan
10.2** 1999 Equity Participation Plan
10.3** Amended and Restated Registration Rights Agreement, dated as of
January 29, 1999
10.4** Employment Agreement dated January 27, 1999 by and between Company
and Susan M. Georgen-Saad
10.5** Employment Agreement dated August 1, 1997 by and between Company and
Donald W. Hackett
10.6** Employment Agreement dated August 1, 1997 by and between Company and
Robert C. Hackett, Jr.
10.7** Employment Agreement dated August 1, 1997 by and between Company and
Louis A. Scalpati
10.8** Employment Agreement dated January 15, 1999 by and between Company
and Dennis J. Upah
10.9+** Distribution Agreement dated April 9, 1999 by and between Company
and Infoseek Corporation
10.10+** Content Agreement dated March 30, 1999 by and between Company and
the Trustees of Dartmouth College
10.11+** D.A.R.T. Service Agreement dated November 15, 1998 by and between
Company and DoubleClick, Inc.
10.12+** Distribution Agreement dated April 9, 1999 by and between Company
and Buena Vista Internet Group
10.13** Software Sale, License and Development Agreement dated January
29, 1999 by and between Company and HealthMagic, Inc.
10.14+** Content License and Distribution Agreement dated March 10, 1999 by
and between Company and @Home Network
10.15** Tradename License Agreement dated January 5, 1999 by and between
Company and C. Everett Koop, M.D.
10.16** Consulting Letter Agreement dated October 1, 1997 by and between
Company and C. Everett Koop, M.D.
10.17+** License Agreement dated
July 13, 1998 by and between Company and Multum Information
Services, Inc.
10.18+** Linking Agreement dated February 10, 1999 by and between Company and
Physicians' Online
10.19+** Content License Agreement dated December 11, 1998 by and between
Company and Excite, Inc. (terminated on March 1, 1999)
10.20+** Interim Linking Agreement dated January 28, 1999 by and between
Company and Quotesmith.com
10.21+** First Amendment to License Agreement dated March 25, 1999 by and
between Company and Multum Information Services, Inc.
10.22** Tradename License Agreement dated June 1, 1998 by and between
Company and Nancy Snyderman, M.D.
10.23 Reserved
10.24** Agreement for Sub-Sublease dated May 20, 1998 by and between Company
and The Software Atelier L.L.C.
10.25 Reserved
10.26+** Internet Advertising Sales Agreement dated October 16, 1998 by and
between Company and WinStar Interactive Media Sales, Inc.
10.27** Consulting Letter Agreement dated October 1, 1997 by and between
Company and John Zaccaro
10.28+** Sponsorship Agreement dated March 11, 1999 by and between Company
and Vitamin Shoppe Industries, Inc.
10.29+** Preferred Partner Agreement dated April 1999 by and between Company
and Salon Internet, Inc.
10.30** Master Community Partner Program Agreement dated January 29, 1999 by
and between Company and Adventist Health System Sunbelt Healthcare
Corporation
10.31 Reserved
10.32** Form of Community Partner Program Agreement
10.33** Form of Indemnification Agreement
10.34** 1999 Employee Stock Purchase Plan
10.35** Investment Agreement dated January 29, 1999 by and among Company,
Adventist Health System Sunbelt Healthcare Corporation and
HealthMagic, Inc .
10.36** Letter Agreement dated February 25, 1999 by and among Company,
Superior Consultant Holdings Corporation and Donald W. Hackett
10.37** Letter Agreement dated January 29, 1999 by and among Company,
Superior Consultant Holdings Corporation, Adventist Health System
Sunbelt Healthcare Corporation, HealthMagic, Inc. and Donald W.
Hackett
10.38** Stock Restriction Agreement dated January 29, 1999 by and among
Company, HealthMagic, Inc. and Adventist Health System Sunbelt
Healthcare Corporation
10.39** Loan Agreement dated December 24, 1998 between Company and Neal
Longwill
10.40** Form of Loan Agreement between Company and accredited investors
10.41** Loan Agreement dated March 3, 1999 between Company and Adventist
Health System Sunbelt Healthcare Corporation
10.42** Warrant to Purchase Shares of Common Stock Issued to Infoseek
Corporation as of April 9, 1999
10.43** Agreement for Issuance and Sale of Stock between Company and
Superior Consultant Holdings Corporation dated April 28, 1998
10.44** Letter of Donald W. Hackett dated April 28, 1998 constituting a
Voting Agreement between Donald W. Hackett and Superior Consultant
Holdings Corporation
10.45** Option and Put Agreement dated April 28, 1998 between Company and
Superior Consultant Holdings Corporation
10.46** Service Agreement dated April 29, 1998 between Company and Superior
Consultant, Inc., a wholly owned subsidiary of Superior Consultant
Holdings Corporation
10.47** Warrant to Purchase Shares of Common Stock Issued to Buena Vista
Interactive Group as of April 9, 1999
23.1 Consent of PricewaterhouseCoopers LLP
10.48 Netscape Agreement
23.2** Consent of Latham & Watkins (included in Exhibit 5.1)
24.1** Powers of Attorney
27.1 Financial Data Schedule
** Previously filed.
+ Registrant has requested confidential treatment pursuant to Rule 406 for
a portion of the referenced exhibit and has separately filed such exhibit
with the Commission.
(b) Financial Statement Schedules.
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EXHIBIT 10.48
drkoop.com, Inc.
Master Statement of Work
Netscape Professional Services
June 28, 1999
[LOGO OF NETSCAPE PROFESSIONAL SERVICES APPEARS HERE]
<PAGE>
TABLE OF CONTENTS
3 Executive Summary
4 Statement of Work
4 Project Approach
5 Project Management
7 Proposal Assumptions
8 Project Investment
10 Signature Page
Information contained herein includes confidential and proprietary material of
Netscape and should not be disclosed in written or oral form to any third
parties, contractors, subsidiaries or any other affiliates of drkoop.com without
the advance written consent of Netscape.
This proposal is non-binding and cannot be referenced by incorporation in any
documentation. To bind Netscape, you must sign an agreement with Netscape which
describes the terms and conditions.
This document is valid until June 30, 1999.
Contact: Noreen Henry, 972.733.6802 or [email protected].
Netscape Proprietary & Confidential
Page 2
<PAGE>
EXECUTIVE SUMMARY
INTRODUCTION
Netscape is the leader in providing companies with the products and services
necessary to capture the benefits of Internet-enabled business processes. The
combination of Netscape's Service Ready Infrastructure (SRI) and CommerceXpert
products with strategy and implementation leadership from Netscape Professional
Services will enable drkoop.com to develop an industry-leading electronic
commerce capability.
Netscape Professional Services has been invited to assist in migrating
drkoop.com web site to a Netscape infrastructure platform and to implement the
appropriate Netscape E-Commerce technologies required to support the initiatives
with American Online.
Based on our understanding of drkoop.com's initiatives, the overall goals of the
project are to:
. Migrate the existing drkoop.com web site to a Netscape Service Ready
Infrastructure (Enterprise, Directory, Certificate and Messaging Server)
including application development services via Netscape Application Server
and data conversion to Oracle.
. Implementation of the CommerceXpert products including ECXpert, TradingXpert
and MerchantXpert.
Based our experience in the Internet and electronic commerce markets, Netscape
Professional Services has developed an approach to discovering, initiating, and
effectively executing the many projects necessary to reach drkoop.com goals.
This document describes our proposed project approach, general assumptions,
project management practices and financial process that will apply to all
Statements of Work executed between Netscape and drkoop.com.
NETSCAPE WORLDWIDE PROFESSIONAL SERVICES (WWPS)
Netscape Worldwide Professional Services is the consulting and services arm of
Netscape Communications. With a rapidly expanding staff of highly skilled
professionals, it provides a variety of services ranging from Internet
Architecture Assessments to Systems Integration, Internet Application
Development, and deployment of large-scale solutions for Messaging &
Collaboration, Publishing Systems, and Electronic Commerce.
Netscape Worldwide Professional Services has been instrumental in the creation
of very sophisticated architectures, applications and business solutions for a
variety of customers. Our work has included installation and customization of
Netscape software, redesign of Web sites for optimal visual impact and
performance, creation of corporate directory and security architectures,
migration of corporate users to open Internet standard mail and calendar
systems, advanced publishing systems for major newspapers, electronic commerce
storefronts, Internet-based corporate purchasing/EDI with Legacy and ERP
integration, and scaleable integration of Web applications with various database
and transactional systems.
Professional Services employs a modern structured methodology tailored
specifically for web applications and Enterprise Internet Commerce that enables
a customer to identify a given solution's specifics, constraints, anticipated
performance, and associated costs. Our project managers draw on years of
experience in delivering large-scale technology projects on time and within
budget, utilizing the latest in project management tools and techniques.
The Professional Services organization currently maintains offices in many major
American cities, as well as Canada. Professional Services offices can also be
found in France, Germany, U.K., Ireland, Italy, Sweden, Japan, and Australia.
Netscape Proprietary & Confidential
Page 3
<PAGE>
STATEMENT OF WORK
STATEMENT OF WORK
PROJECT APPROACH
Netscape Professional Services proposes to use a Master Statement of Work
(Master) and Project Statements of Work (Project SOW). This document is the
Master document and it corresponds to the overall agreed upon approach between
Netscape and drkoop.com
The Master describes the general approach and also notes various standards,
assumptions, and controls that will apply to all projects executed between
Netscape and drkoop.com. Netscape Professional Services will prepare
corresponding Project SOWs for our involvement. Since much of the information
in a typical Project SOW has already been described in the Master, each Project
SOW will simply consist of an executive summary, project and task descriptions,
and projected fees.
Planning
- --------
During the planning stage Netscape Professional Services will review all tasks
and resources necessary for the successful execution of the project. In
preparation for this phase, drkoop.com should gather the following information:
. availability and skills of all internal resources that will be participating
in the project;
. current hardware and network environment;
. application requirements; and
. customer requirements.
Netscape Professional Services will be prepared to discuss the required
resources, inputs, and duration for each task on the project. Netscape will
work together to create an actionable plan based on availability of the
necessary resources and inputs.
These sessions will be conducted with major project stakeholders; including
business line owners, technical staff, Internet design staff, participating
partners, and appropriate users. The project team will investigate business
plans and goals, user and technical processes, and target users. If other areas
are deemed necessary, Netscape will utilize change control process to reflect
these additional requirements.
Requirements Review
- -------------------
The goal of this phase is to understand the overall requirements and to develop
the appropriate project approach. The critical input into this phase is the
application and customer requirements. The Netscape Professional Services team
for this task will include architects and application designers with the
combined expertise necessary to understand both the business and technical
requirements. Netscape will work closely together in interactive sessions
including review of the existing information, clarification of requirements and
priorities, review of technical possibilities, and discussion of desired
solution characteristics. It will be critical in this phase to understand the
full scope of requirements.
Design
- ------
In this phase, Netscape will construct the technical architecture for the
project. This architecture will consist of the appropriate Netscape Service
Ready Infrastructure products along with the CommerceXpert products. These
products will be installed on servers as determined necessary.
Netscape Proprietary & Confidential
Page 4
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STATEMENT OF WORK
The activities to be performed during this phase may include:
. Develop system architecture - The test, development, and production
architectures, along with appropriate deployment processes.
. Document System Configuration - standard system configurations for catalog,
pricing, shipping, tax, payments, business rules.
. Develop specifications for areas to be customized - Document decisions for
customization areas - screen layout, rules for business flows, and legacy
integration.
. Migration - Determination of data (if any) to migrate. Plan and process for
exporting and migrating data from the existing implementation.
. Document solution sizing that architecture is based on.
. Identify test plans to be defined during construction - based on requirements
and design, identify which types of testing are relevant to this project.
Examples are integration test, external function test, regression test,
system test, acceptance test, and installation test.
. Netscape will assist in identifying the administrative roles and tasks
required to maintain the production environment.
Development &Test
- ------------------
Netscape will assist in the installation and configuration of a pre-production
environment that reflects the production environment as closely as possible
including development of any identified modules that will be needed for data
migration, integration, and co-existence purposes will be performed.
In addition, Netscape will develop customization of standard products, and
development of customized functions, as identified in the design phase.
Part of this phase includes a series of tests to verify the installation and
configuration of the appropriate products. Netscape will assist in developing
and implementing the test plans, test cases/scripts/data/predicted results, for
both integration testing and performance testing.
Pilot
- -----
During the Pilot Phase, Netscape Professional Services will support testing of
the provided solution in a limited production environment. The goal of the Pilot
Phase will be to understand the ramifications of the proposed solution in a
production environment, and review deployment expectations.
Rollout/Operations
- ------------------
Netscape will assist in rolling out the solution and provide support to resolve
production issues that may arise. Netscape may assist in performing tasks such
as server and system tuning to provide the appropriate user scalability.
Together we will also deliver enhancement requests and repair any discovered
anomalies.
Netscape Proprietary & Confidential
Page 5
<PAGE>
STATEMENT OF WORK
PROJECT MANAGEMENT
Project management is in place to monitor the progress and the quality of
project results, offer assistance in resolving key issues, manage the project
scope, and help to ensure that resources are available when required.
Status Reports
- --------------
Weekly status reports will be submitted to drkoop.com, and will consist of the
following information:
. Project activities, tasks, milestones and deliverables scheduled to be
completed during the time period that were or were not completed;
. Tasks that were not scheduled but that were completed by Netscape in order to
add value to the project;
. Outstanding issues affecting project progress and/or completion, plus time
frame and plan for resolution;
. Any changes or revisions to the agreed upon work plan; and
. Report indicating time provided by Netscape performing defined work plan
tasks. In the event that a task requires more than the originally estimated
time, the additional hours required would be noted in the work plan. In this
way, the task estimates, task actuals, and variance are available.
Change Control Mechanism
- ------------------------
Netscape strongly recommends that a mutually agreed upon change control
mechanism be implemented in order to evaluate, approve and track requested
changes and ongoing issues. Requests for changes in scope and ongoing issues
should be submitted to the Netscape Project Manager or Principal Consultant. We
will then conduct whatever research necessary to determine the time and resource
requirements of the requested change, as well as any potential impact on other
project tasks that might be affected. We will return a high-level, written
approach to the requested change along with our resource and time estimate. If
drkoop.com approves the requested change to our approach, resource, and time
estimates, the change will be incorporated into the detailed, task level work
plan and a revised work plan issued.
Netscape Resources
- ------------------
To meet the goals of this project, Netscape will utilize a team comprised of the
following:
Project Manager
- ---------------
An experienced Project Manager will facilitate clear understanding of
drkoop.com's direction, monitors progress and the quality of project results,
offers assistance in resolving key issues, manages project scope, and helps
ensure that resources are available when required.
Application Designer
- --------------------
The Application Designer will have experience in requirement analysis,
application architecture, and application design. He will lead the process of
documenting requirements and designing necessary object models, APIs, logic
flows, database tables, and product configurations. General application design
experience combined with knowledge of the use of Netscape products will allow
the Application Designer to create solutions utilizing an appropriate
combination of custom development and standard product capabilities.
Architect
- ---------
This consultant is an expert in the design of system and application
architectures based on Netscape products. He will lead in the design of an
architecture platform that will support the application with the necessary
levels of performance
Netscape Proprietary & Confidential
Page 6
<PAGE>
STATEMENT OF WORK
and scalability. The Architect will also be knowledgeable about the potential
interface points between various products and custom-developed features.
Senior Consultant
- -----------------
A Senior Consultant will have a combination of analysis, development, and
product skills. A Senior Consultant may assist with requirement documentation
and architecture, and also conduct development, implementation, and test
efforts.
Developer
- ---------
Developers will have the necessary product experience and general development
skills to implement features on the proposed technical platform.
Netscape Proprietary & Confidential
Page 7
<PAGE>
STATEMENT OF WORK
Proposal Assumptions
Netscape Professional Services makes the following assumptions with regards to
this project. These assumptions, which may or may not be correct, were used to
develop the proposed timing and fee estimates included in this proposal:
1. drkoop.com will make the appropriate personnel available to meet with
Netscape as necessary. These personnel may include project managers, user
representatives, and technical personnel with an understanding of the
current technical and network architecture.
2. drkoop.com will provide Netscape and its representatives information and
assistance in a timely manner.
3. drkoop.com will have experienced system administrators familiar with
operating system administration and TCP/IP networking.
4. drkoop.com will have experienced database administrators.
5. drkoop.com will be responsible for providing Netscape with all content
required.
6. drkoop.com will have a secure environment with regards to connectivity to
the Internet.
7. drkoop.com will provide the fully functioning hardware platform as described
in the Hardware Configuration document, which includes installation, and
configuration of the necessary hardware and networking equipment required
for this project. This also includes installing and configuring all
operating systems and required operating system patches to the vendor's
current release.
8. drkoop.com will provide complete and current implementation documentation
for all required EDI transactions, if applicable.
9. drkoop.com will provide Netscape with the appropriate business, customer,
and technical infrastructure requirements in a format and level of detail
adequate to complete this project and as agreed upon.
10. drkoop.com will provide ready access to documentation (technical, process
and organizational); staff and management deemed key to completing the
identified activities for these projects within the defined time frame.
11. Participation in the Requirements Gathering sessions is of critical
importance for key drkoop.com personnel and is required for the successful
completion of this project.
12. Periodic and timely reviews and approvals by drkoop.com are required to
keep the project on schedule.
13. drkoop.com will provide office space and supplies for the Netscape staff
while on site. Activities not required to be performed at a drkoop.com site
will be performed at a Netscape office to reduce the project's travel and
living expenses.
14. Netscape reserves the right to subcontract work in the delivery of this
proposal, and references in this project to Netscape refer to both Netscape
employees and Netscape subcontractors.
15. A formal change control process will be defined at project initiation. This
process will define the steps necessary for implementing system
functionality that is outside the scope of the original project plan
16. Formal project acceptance guidelines and success criteria will be defined
by the Program Manager and agreed upon by Netscape and drkoop.com during
the initial weeks of this project.
Netscape Proprietary & Confidential
Page 8
<PAGE>
STATEMENT OF WORK
Project Investment
Netscape Professional Services will assist drkoop.com in building a
comprehensive solution by capitalizing on the capabilities of Netscape products
and the expertise of Netscape's Professional Services organization. This
proposal represents a thorough and flexible agreement that will utilize the
Services essential to achieving drkoop.com's business goals. In addition, we
will work together with drkoop.com to provide the technical and managerial
support required to develop the underlying architecture, execute the tasks and
activities identified and to manage the projects in the timeframe required to
meet drkoop.com's identified business goals.
Netscape will organize, facilitate, and support the design and implementation of
the Master Statement of Work outlined in this document, and will give drkoop.com
the benefit of our expertise on appropriate strategies and tactics. In
addition, we will strive to transfer our knowledge and expertise to your
organization, as we will be mutually dependent upon one another to accomplish
the ambitious goals drkoop.com has established.
The fees for Netscape Professional Services are estimated to be $600,000. This
includes $500,000 in consulting to be performed by Netscape Professional
Services consultants, billed at the rates indicated below. We currently
estimate travel and expenses at approximately twenty percent (20%) of
Professional Services fees for an estimated $100,000.
Netscape Communications Corporation will provide the following discounted
Professional Services pricing schedule which reflects a two-tier blended rate.
The work performed by Netscape Professional Services consultants and its
subcontractors will be billed based on the roles performed. Each role will fall
into the two-tier rate as indicated below.
1. Senior Consultants will manage the overall delivery of quality work and
adherence to mutually agreed upon time frames. Their roles will include, but
not be limited to Engagement Manager, Program Managers, Project Managers,
Architects, Strategic Consultants, etc.
2. Junior Consultants will support application development and product
customization and configuration, when applicable. Junior Consultant roles
will include but not be limited to Application Developers, Network
Engineers, Systems Engineers, Analyst, Data Modelers, Testers, etc.
As new roles are added to the project, their billing tier and estimated work
will be defined at that time.
<TABLE>
<CAPTION>
Billing Tier Hourly Rate
- -----------------------------------------------
<S> <C>
Tier 1: Senior. Consultant $217
- -----------------------------------------------
Tier 2: Junior Consultant $192
- -----------------------------------------------
</TABLE>
To initiate this project, please submit this signed Statement of Work, along
with the Professional Services Agreement (PSA), and a drkoop.com purchase order
for $600,000 separated into labor and expenses. The pricing and terms of this
proposal are valid until June 30, 1999 and based upon receipt of a signed
purchase order by June 30, 1999.
Questions regarding this proposal can be directed to Noreen Henry at
972.733.6802 or [email protected].
These documents can be:
. Faxed to Netscape Professional Services Contracts, 972.733.6890; or
. Mailed to: Netscape Communications Corporation, Professional Services,
17304 N. Preston Rd., Suite 800, Dallas, TX 76051.
Netscape Proprietary & Confidential
Page 9
<PAGE>
Signature Page
This proposal, excluding the Introduction, constitutes the Professional Services
Agreement Exhibit, and is entered into by and between Netscape Communications
Corporation, a Delaware corporation ("Netscape"), and drkoop.com, pursuant to
the terms and conditions of the Netscape Communications Corporation Professional
Services Agreement ("Agreement"), signed by and between Netscape and drkoop.com,
and is effective as of the date of execution by Netscape. Any term used herein
shall have the meaning set forth in the Agreement. This agreement does not
include Netscape Products.
By signing below, each party acknowledges that they have read, understood, and
accepted the attached Exhibit, which will serve as an exhibit to the
Professional Services Agreement signed by Netscape and drkoop.com.
Accepted and Agreed by Accepted and Agreed by
drkoop.com, Inc. Netscape Communications Corporation:
Date: Date:
------------------------- ---------------------------------
(This is the effective date.)
By: By:
--------------------------- -----------------------------------
Title: Title:
------------------------ --------------------------------
CONFIDENTIAL
<PAGE>
confidential
CORPORATE END USER
SOFTWARE ORDER FORM
(With Terms and Conditions)
No. _______________
drkoop.com, Inc
Full Legal Name of Entity Signing This Order Form ("Licensee")
8920 Business Park Drive
Address of Principal Place of Business
Austin TX 78759 / USA
- --------------------------------------------------------------------------------
City State/Province Postal Code / Country
Contact Person: Lou Scalpati Telephone: (512) 726-5113 Fax: (512) 726-5130
-------------- ---------------- -----------------
Licensee is incorporated in the state/country of: Deleware
-------------------------------
IMPORTANT NOTICE: UPON EXECUTION OF THIS ORDER FORM BY THE PARTIES, LICENSEE
WILL HAVE CERTAIN RIGHTS AND OBLIGATIONS WITH RESPECT TO THE SOFTWARE PRODUCTS
LISTED IN THE ATTACHED PRODUCT SCHEDULE (THE "PRODUCTS") AND THE RELATED
DOCUMENTATION, AS SET FORTH IN THE ATTACHED LICENSE TERMS AND CONDITIONS. BY
SIGNING THIS ORDER FORM, LICENSEE AGREES TO ALL THE TERMS AND CONDITIONS
ATTACHED HERETO. THIS ORDER FORM, THE PRODUCT SCHEDULE AND THE LICENSE TERMS AND
CONDITIONS ARE REFERRED TO HEREIN COLLECTIVELY AS THE "AGREEMENT." At Licensee's
request, Licensor will provide the Products through a Netscape authorized
reseller selected by Licensee ("Reseller") provided Licensee independently (i)
seeks out the Reseller and (ii) negotiates pricing with the Reseller.
LICENSOR LICENSEE
By: By:
---------------------------------- ----------------------------------
Signature Signature
Name: Name:
-------------------------------- --------------------------------
Print or Type Print or Type
CONFIDENTIAL
<PAGE>
confidential
Title: Title:
---------------------------------- -------------------------------
Date of Acceptance: Date:
--------------------- --------------------------------
("Effective Date")
AGREEMENT CONSISTS OF:
1. Corporate End User Software Order Form
2. Product Schedule
3. General License Terms and Conditions
4. Product Specific License Terms and Conditions
CONFIDENTIAL
<PAGE>
confidential
PRODUCT SCHEDULE
If purchasing licenses from a Reseller, complete Section 1 only, and only
Section 1 applies.
1. Products, Support and Subscription:
<TABLE>
<CAPTION>
Products and Maintenance* Units (Users, Extended Price
copies, CPUs,
developers, as
applicable)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Products
Netscape ECXpert 16 CPU's
Netscape TradingXpert 8 CPU's
Netscape MerchantXpert 8 CPU's
Netscape PublishingXpert 8 CPU's
Netscape Applications Server unlimited**
Netscape Application Builder unlimited**
Netscape Extension Builder unlimited** not separately priced
Netscape Enterprise Server unlimited**
Netscape Certificate Server unlimited**
Netscape Messaging Server unlimited**
Netscape Directory Server unlimited**
</TABLE>
CONFIDENTIAL
<PAGE>
confidential
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
as above
Support and Subscription for Products: Netscape Gold
Maintenance support for 12 months initiating on the Effective
Date of the Agreement and provided in accordance with this
Agreement, including an ESAM.
- ------------------------------------------------------------------------------------------------------------------------
Total Nonrefundable*** Fees $5,125,000
</TABLE>
All above Products in most current version as of the Effective Date for all
platforms on which that version is available. Products are English language
non-export version.
"Designated System" means a specific computer system with a designated hardware
platform and CPU configuration and identified make and model. Each Designated
System upon which a per-CPU licensed Product will be installed must be described
above, including the hardware system and number of CPUs.
* All Products licensed hereunder may only be used in support of Licensee's
(drkoop.com) business needs in the consumer healthcare and/or medical field
(including related informational and ecommerce offerings), and all Products must
be installed on hardware owned or located at Licensee's facilities or at the
facilities of third parties contracted to provide services to Licensee (but
under no circumstances on the premises of a party for whom Licensee is providing
a service (except as otherwise permitted by Netscape in writing). Subject to
this Product Schedule, Licensee may use the above Products for Multi-Hosting use
purposes; no right of resale of the licenses is permitted. No Oracle or other
third party products are licensed hereunder.
** For 24 months from the Effective Date (the "Deployment Period"), Licensee
shall have the right to deploy (and thereby take license to) ,with no quantity
limitation, the Products designated with an asterisk ("*") above, subject to the
terms and conditions of this Agreement. All deployment must be actual
deployment for production, staging, or testing purposes, and no license is
granted unless such deployment is consistent with the preceding.. At the end of
this two year term (the "Final Deployment Date"), Licensee's right to continue
deploying and licensing the Products ceases, and Licensee shall provide a
written report to Netscape specifying the quantity of Products that have been
deployed during the Deployment Period. Licensee shall thereafter be licensed in
perpetuity for the number of such Products deployed during the Deployment Period
(e.g., if Licensee has deployed and licensed 120 CPU of the Netscape Application
Server during the Deployment Period, at the end of the Deployment Period,
Licensee shall be licensed for 120 CPU of the Netscape Application Server on a
going forward, perpetual basis, subject to the terms and conditions of this
Agreement). Licensee must acquire Maintenance support for the Products
licensed hereunder in the second year following the Effective Date of this
Agreement in order for the Final Deployment Date to be 24 months after the
Effective Date of this Agreement; if such Maintenance is not acquired, the
Final Deployment Date shall be 12 months after the Effective Date. Maintenance
for this second 12 month period shall be $623,000, and only covers the Products
initially licensed hereunder (including any deployed per the above). For an
additional 24 months after the Final Deployment Date, Licensee shall have the
right to acquire additional license quantities of the Products set forth in the
Product Chart above at a 60% discount off of Netscape's then current price list;
Maintenance for such Product is sold separately..
*** Nonrefundable except as otherwise set forth herein.
CONFIDENTIAL
<PAGE>
confidential
The following terms apply only if purchasing licenses directly from Licensor.
2. Payment Terms: The above Nonrefundable fee is due 50% net 30, and 50% net
180. All payments shall be made by wire transfer or remittance in accordance
with Licensor's instructions on such invoice. Past due amounts shall bear
interest at the lower of 1-1/2% per month or the maximum rate allowed by law
until paid in full. Licensee shall be responsible for any costs resulting from
collection by Licensor of any such past due amounts, including without
limitation reasonable attorneys' fees and court costs.
3. Deliverables: Licensor will deliver to Licensee 1 copy of the executable
code version of each Product above and associated documentation, in any format
generally available from Licensor as of the Effective Date. All deliveries
shall be F.C.A. Licensor origin (INCOTERMS 1990).
<TABLE>
<CAPTION>
<S> <C>
4. Ship To Address for Deliverables Bill To Address
-------------------------------- ---------------
(Not a P.O. address)
- ----------------------------------------------------------- -------------------------------------------------------
- ----------------------------------------------------------- -------------------------------------------------------
- ----------------------------------------------------------- -------------------------------------------------------
Attention: Attention:
- ----------------------------------------------------------- -------------------------------------------------------
Telephone: Telephone:
- ----------------------------------------------------------- -------------------------------------------------------
Fax:
-------------------------------------------------------
5. Sales Tax Resale / Exemption Certificate No. (if applicable):
--------------------------------------------------------------
(ORIGINAL CERTIFICATE MUST BE FURNISHED TO LICENSOR)
VAT Registration No. for Europe:
-------------------------------------------------
Netscape Sales Rep:
--------------------------------------------------------------
Telephone:
-----------------------------------------------------------------------
</TABLE>
<PAGE>
GENERAL LICENSE TERMS & CONDITIONS
- ----------------------------------
REDISTRIBUTION OR RENTAL NOT PERMITTED
THESE GENERAL TERMS APPLY TO ALL NETSCAPE LICENSED PRODUCTS
1. Agreement. The "Agreement" governing Licensee's use of the Product(s)
consists of these General License Terms and Conditions ("General Terms"), each
set of product specific license terms and conditions which follow ("Product
Terms"), and, if provided, the (i) Corporate End User Order Form and Product
Schedule or (ii) Quotation and Offer form, as applicable. If more than one
license agreement was provided for this Product, and the terms vary, the order
of precedence of those license agreements is as follows: a signed agreement, a
license agreement available for review on the Netscape website, a printed or
electronic agreement that states clearly that it supersedes other agreements, a
printed agreement provided with a Product, an electronic agreement provided with
a Product. The General Terms apply to all Products on the Product Schedule, and
each set of Product Terms applies only to the individual Products identified in
the Product Terms sheet. All Products are licensed independently of one another.
As used in this Agreement, for residents of Europe, the Middle East or Africa,
"Netscape" shall mean Netscape Communications Ireland Limited; for residents of
Japan, "Netscape" shall mean Netscape Communications (Japan), Ltd.; for
residents of all other countries, "Netscape" shall mean Netscape Communications
Corporation. In this Agreement "Licensor" shall mean Netscape except as
otherwise set forth herein. If Licensee acquired the Product(s) as a bundled
component of a third party product or service, then such third party shall be
Licensor. Any third party software provided together with a Product with such
third party's electronic or printed license agreement is included for use at
Licensee's option, and any use of such software shall be governed by the third
party's license agreement and not by this Agreement, except to the extent that
this Agreement indicates otherwise with respect to specific third party
software.
2. Term and Termination. This Agreement shall remain in effect until terminated
in accordance with this Section or as otherwise provided in this Agreement.
Licensee may terminate this Agreement at any time by written notice to Licensor.
Licensor may terminate this Agreement immediately in the event of (i) any breach
of Section 6 or 8 by Licensee or (ii) a material breach by Licensee which is not
cured within 30 days of written notice by Licensor. Upon termination, Licensee
shall discontinue use and certify as destroyed, or return to Licensor, all
copies of the Product(s). Licensee's obligation to pay accrued charges and fees
shall survive any termination of this Agreement. Within 30 calendar days after
termination of the Agreement, Licensee shall pay to Licensor all sums then due
and owing.
3. Fees and Taxes. All payment amounts in this Agreement are in US dollars and
are exclusive of any applicable taxes and shall be made free and clear of,
without reduction for, (and Participant shall be responsible for and shall
indemnify Netscape against) any applicable U.S. and foreign, state and local
taxes, value added or sales taxes, withholding taxes, duties or levies and
assessments, howsoever designated or computed, pertaining to the payments under
this Agreement (excluding taxes based upon the net income of Netscape).
Participant shall promptly furnish Netscape with tax receipts evidencing the
payment of any taxes referred to in the preceding sentence. Netscape and
Participant shall cooperate with each other in minimizing any applicable tax and
in obtaining any exemption from or reduced rate of tax available under any
applicable law or tax treaty.
4. Records; Audit. Licensee shall maintain accurate records as necessary to
verify compliance with this Agreement. Licensor may conduct one or more audits
to verify such compliance. Audits will be conducted during normal business
hours. All audits shall be conducted at Licensor's expense unless the results
establish that Licensee has underpaid Licensor by more than 5% of the amount
actually due, in which case Licensee shall pay all amounts due and bear the
expense of the audit. Licensee acknowledges that Licensor is required by its
suppliers of the relational database product provided with certain Products to
disclose, and Licensee agrees that Licensor may disclose, the make/model,
operating system and number of CPUs of the Designated System(s), as defined in
the Product Schedule. Netscape shall keep Licensee's identity confidential
under clause 10 of this Agreement in making any reports to third parties as a
consequence of an audit under this Section 4.
5. Proprietary Rights. Title, ownership rights, and intellectual property
rights in the Product(s) shall remain in Netscape and/or its suppliers. Licensee
acknowledges such ownership and intellectual property rights and will not take
any action to jeopardize, limit or interfere in any manner with Netscape's or
its suppliers' ownership of or rights with respect to the Product(s). The
Product(s) are protected by copyright and other intellectual property laws and
by international treaties. Title and related rights in the content accessed
through the Product(s) are the property of the applicable content owner and are
protected by applicable law. The license granted under this Agreement gives
Licensee no rights to such content. Any copy shall contain all notices regarding
proprietary rights as contained in the Product originally delivered by Licensor.
6. Restrictions. Except as otherwise expressly permitted in this Agreement,
Licensee may not: (i) modify or create any derivative works of any Product or
documentation, including translation or localization (Licensee's code written to
published APIs (application programming interfaces) for the Product(s) shall not
be deemed derivative works); (ii) decompile, disassemble, reverse engineer, or
otherwise attempt to derive the source code for any Product (except to the
extent applicable laws specifically prohibit such restriction); (iii)
redistribute, encumber, sell, rent, lease, sublicense, use the Products in a
timesharing or service bureau arrangement, or otherwise transfer (except as part
of an assignment of the Agreement to a third party, per Paragraph 17(j) of the
Agreement) rights to any Product; (iv) copy any Product (except for an archival
copy which must be stored on media other than a computer hard drive) or
documentation; (v) remove or alter any trademark, logo, copyright or other
proprietary notices, legends, symbols or labels in the Product(s); (vi) modify
any header files or class libraries in any Product; (vii) create or alter tables
or reports relating to the database portion of the Product (except as necessary
for operating the Product); (viii) publish any results of benchmark tests run on
any Product to a third party without Netscape's prior written consent; (ix) use
the database provided for use with any Product except in conjunction with the
relevant Product; or (x) use any Product on a system with more CPUs than the
number licensed, by more Users than have been licensed, on more computers than
the number licensed, or by more developers than the number licensed, as
applicable.
16
<PAGE>
7. Limited Warranty. Provided Licensee has paid the applicable license fees for
the Product(s), for 90 days after the date of shipment to Licensee (date of
shipment meaning either the date Licensor shipped the Product on media or the
date on which Licensee downloaded the Product from an authorized Netscape
download site) of each Product (the "Warranty Period"), Licensor warrants that
(i) the media on which the Product is delivered will be free of defects in
material and workmanship under normal use; and (ii) the unmodified Product, when
properly installed and used, will substantially achieve the functionality
described in the applicable documentation. THE EXPRESS WARRANTY SET FORTH HEREIN
CONSTITUTES THE ONLY WARRANTY WITH RESPECT TO THE PRODUCT(S). LICENSOR AND ITS
SUPPLIERS DO NOT MAKE, AND HEREBY EXCLUDE, ALL OTHER REPRESENTATIONS OR
WARRANTIES OF ANY KIND WHETHER EXPRESS OR IMPLIED (EITHER IN FACT OR BY
OPERATION OF LAW) WITH RESPECT TO ANY PRODUCT OR TEST DATA INCLUDED IN ANY
PRODUCT. LICENSOR AND ITS SUPPLIERS EXPRESSLY DISCLAIM ALL WARRANTIES OF TITLE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT OF THIRD
PARTIES' RIGHTS (THE FOREGOING SHALL NOT BE DEEMED TO VOID LICENSOR'S
OBLIGATIONS UNDER SECTION 16 OF THIS AGREEMENT). LICENSOR AND ITS SUPPLIERS DO
NOT WARRANT THAT THE PRODUCT(S) WILL MEET LICENSEE'S REQUIREMENTS OR WILL
OPERATE IN THE COMBINATIONS WHICH MAY BE SELECTED BY LICENSEE OR THAT THE
OPERATION OF THE PRODUCT(S) WILL BE SECURE, ERROR-FREE OR UNINTERRUPTED AND
LICENSOR HEREBY DISCLAIMS ANY AND ALL LIABILITY ON ACCOUNT THEREOF. THE SECURITY
MECHANISMS IMPLEMENTED BY THE PRODUCT(S) HAVE INHERENT LIMITATIONS, AND LICENSEE
MUST DETERMINE THAT THE PRODUCT(S) SUFFICIENTLY MEET LICENSEE'S REQUIREMENTS.
LICENSOR AND ITS SUPPLIERS SHALL HAVE NO OBLIGATIONS UNDER THE WARRANTY
PROVISIONS SET FORTH HEREIN IF LICENSEE SUBJECTS THE MEDIA TO ACCIDENT OR ABUSE;
ALTERS, MODIFIES OR MISUSES THE PRODUCT(S), EXCEPT AS SPECIFICALLY AUTHORIZED OR
PROVIDED FOR BY NETSCAPE IN WRITING; USES THE PRODUCT(S) INCORPORATED, ATTACHED
OR IN COMBINATION WITH NON-NETSCAPE SOFTWARE OR ON ANY COMPUTER SYSTEM OTHER
THAN THAT FOR WHICH THE PRODUCT IS INTENDED, AS SUCH IS SPECIFIED IN THE
APPLICABLE DOCUMENTATION BY NETSCAPE; OR LICENSEE VIOLATES THE TERMS OF THIS
AGREEMENT. THE EXTENT OF LICENSOR'S DUTY UNDER THIS LIMITED WARRANTY SHALL BE
THE CORRECTION OR REPLACEMENT OF ANY PRODUCT WHICH FAILS TO MEET THIS WARRANTY.
IN THE EVENT OF A BREACH OF THIS WARRANTY, AND IF LICENSEE PROVIDES LICENSOR
WITH A WRITTEN REPORT DURING THE WARRANTY PERIOD, LICENSOR WILL USE REASONABLE
EFFORTS TO CORRECT OR REPLACE PROMPTLY, AT NO CHARGE TO LICENSEE, THE ERRORS OR
FAILURES; IN THE EVENT THAT NETSCAPE IS UNABLE TO CORRECT SUCH ERRORS OR
FAILURES, NETSCAPE WILL REFUND THE LICENSE FEES PAID TO NETSCAPE BY LICENSEE FOR
THE PRODUCT(S) GIVING RISE TO THE WARRANTY NON-CONFORMANCE. THIS IS LICENSEE'S
SOLE AND EXCLUSIVE REMEDY FOR BREACH OF ANY EXPRESS OR IMPLIED WARRANTIES
HEREUNDER. NOTWITHSTANDING THE FOREGOING, SOME JURISDICTIONS DO NOT ALLOW THE
EXCLUSION OF CERTAIN IMPLIED WARRANTIES; HOWEVER, THE EXCLUSIONS OF LICENSOR'S
WARRANTY IN THIS LIMITED WARRANTY SECTION SHALL APPLY TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW. THIS AGREEMENT DOES NOT EXCLUDE ANY WARRANTIES THAT
MAY NOT BE EXCLUDED BY LAW AND ANY LIABILITY ARISING HEREUNDER SHALL BE LIMITED
TO THE CORRECTION OR REPLACEMENT OF THE APPLICABLE PRODUCT, AT LICENSOR'S
OPTION.
8. Confidentiality. "Confidential Information" shall mean, except as otherwise
required by law, this Agreement, if the terms have been negotiated, pricing
information, and all information a party discloses to the other which has been
either (i) characterized in writing as confidential at the time of its
disclosure or (ii) orally characterized as confidential at the time of
disclosure, except for information which the receiving party can demonstrate:
(a) is previously rightfully known to the receiving party without restriction on
disclosure; (b) is or becomes, from no act or failure to act on the part of the
receiving party, generally known in the relevant industry or public domain; (c)
is disclosed to the receiving party by a third party as a matter of right and
without restriction on disclosure; or (d) is independently developed by the
receiving party without access to the Confidential Information. Each receiving
party shall at all times, both during the term hereof and for a period of at
least 3 years after termination, keep in confidence all such Confidential
Information using a standard of care such party uses with its own information of
this nature, but in no event less than reasonable care. The receiving party
shall not use any Confidential Information other than in the course of its
permitted activities hereunder. Without the prior written consent of the
disclosing party, the receiving party shall not disclose any Confidential
Information except on a "need to know" basis to an employee or contractor under
binding obligations of confidentiality substantially similar to those set forth
herein. If a receiving party is legally compelled to disclose any of the
disclosing party's Confidential Information, then, prior to such disclosure, the
receiving party will (i) assert the privileged and confidential nature of the
Confidential Information and (ii) cooperate fully with the disclosing party in
protecting against any such disclosure and/or obtaining a protective order
narrowing the scope of such disclosure and/or use of the Confidential
Information. In the event such protection is not obtained, the receiving party
shall disclose the Confidential Information only to the extent necessary to
comply with the applicable legal requirements.
9. Limitation of Liability. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
IN NO EVENT WILL LICENSOR OR ITS SUPPLIERS OR RESELLERS BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (OR ANY DIRECT DAMAGES
WITH RESPECT SOLELY TO ANY DATABASE
17
<PAGE>
PRODUCT PROVIDED WITH THE PRODUCT) ARISING OUT OF THE USE OF OR INABILITY TO USE
THE PRODUCT, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK
STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES, EVEN IF ADVISED OF THE POSSIBILITY THEREOF, AND REGARDLESS OF
THE LEGAL OR EQUITABLE THEORY (CONTRACT, TORT OR OTHERWISE) UPON WHICH THE CLAIM
IS BASED. IN ANY CASE, LICENSOR'S ENTIRE LIABILITY UNDER ANY PROVISION OF THIS
AGREEMENT SHALL NOT EXCEED IN THE AGGREGATE THE SUM OF THE LICENSE FEES LICENSEE
PAID FOR THE PRODUCT GIVING RISE TO SUCH DAMAGES, NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY, WITH THE EXCEPTION OF DEATH OR PERSONAL
INJURY CAUSED BY THE NEGLIGENCE OF LICENSOR TO THE EXTENT APPLICABLE LAW
PROHIBITS THE LIMITATION OF DAMAGES IN SUCH CASES. SOME JURISDICTIONS DO NOT
ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO
THIS EXCLUSION AND LIMITATION MAY NOT BE APPLICABLE. LICENSEE IS SOLELY
RESPONSIBLE FOR ANY LIABILITY ARISING OUT OF ANY CONTENT PROVIDED BY LICENSEE
AND/OR ANY MATERIAL TO WHICH USERS CAN LINK THROUGH SUCH CONTENT. ANY DATA
INCLUDED IN A PRODUCT UPON SHIPMENT FROM LICENSOR IS FOR TESTING USE ONLY AND
LICENSOR HEREBY DISCLAIMS ANY AND ALL LIABILITY ARISING THEREFROM. THE EXTENT OF
LICENSOR'S LIABILITY FOR THE LIMITED WARRANTY SECTION SHALL BE AS SET FORTH
THEREIN.
10. Encryption. If Licensee wishes to use the cryptographic features of any
Product, then Licensee may need to obtain and install a signed digital
certificate from a certificate authority or a certificate server in order to
utilize the cryptographic features. Licensee may be charged additional fees for
certification services. Licensee is responsible for maintaining the security of
the environment in which the Product is used and the integrity of the private
key file used with the Product. In addition, the use of digital certificates is
subject to the terms specified by the certificate provider, and there are
inherent limitations in the capabilities of digital certificates. If Licensee is
sending or receiving digital certificates, Licensee is responsible for
familiarizing itself with and evaluating such terms and limitations. If the
Product is a version with FORTEZZA, Licensee will need to obtain PC Card Readers
and FORTEZZA Crypto Cards from another vendor to enable the FORTEZZA features.
11. Export Control. Licensee agrees to comply with all export laws and
restrictions and regulations of the U.S. Department of State, Department of
Commerce or other United States or foreign agency or authority, and not to
export or re-export any Product or any direct product thereof in violation of
any such restrictions, laws or regulations, or without all necessary approvals.
As applicable, each party shall obtain and bear all expenses relating to any
necessary licenses and/or exemptions with respect to its own export of the
Product from the U.S. Neither the Product nor the underlying information or
technology may be downloaded or otherwise exported or re-exported (i) into Cuba,
Iran, Iraq, Libya, North Korea, Sudan, Syria or any other country subject to
U.S. trade sanctions covering the Product, to individuals or entities controlled
by such countries, or to nationals or residents of such countries other than
nationals who are lawfully admitted permanent residents of countries not subject
to such sanctions; or (ii) to anyone on the U.S. Treasury Department's list of
Specially Designated Nationals and Blocked Persons or the U.S. Commerce
Department's Table of Denial Orders. By downloading or using the Product,
Licensee agrees to the foregoing and represents and warrants that it complies
with these conditions.
If the Product(s) are identified as being not-for-export (for example, on the
box, media or in the installation process), then, unless Licensee has an
exemption from the United States government, the following applies: EXCEPT FOR
EXPORT TO CANADA FOR USE IN CANADA BY CANADIAN CITIZENS, THE PRODUCT(S) AND ANY
UNDERLYING ENCRYPTION TECHNOLOGY MAY NOT BE EXPORTED OUTSIDE THE UNITED STATES
OR TO ANY FOREIGN ENTITY OR "FOREIGN PERSON" AS DEFINED BY U.S. GOVERNMENT
REGULATIONS, INCLUDING WITHOUT LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL
OR LAWFUL PERMANENT RESIDENT OF THE UNITED STATES. BY DOWNLOADING OR USING THE
SOFTWARE, LICENSEE AGREES TO THE FOREGOING AND WARRANTS THAT IT IS NOT A
"FOREIGN PERSON" OR UNDER THE CONTROL OF A "FOREIGN PERSON."
12. High Risk Activities. The Product(s) are not fault-tolerant and are not
designed, manufactured or intended for use or resale as on-line control
equipment in hazardous environments requiring fail-safe performance, such as in
the operation of nuclear facilities, aircraft navigation or communication
systems, air traffic control, direct life support machines, or weapons systems,
in which the failure of any Product could lead directly to death, personal
injury, or severe physical or environmental damage ("High Risk Activities").
Accordingly, Licensor and its suppliers specifically disclaim any express or
implied warranty of fitness for High Risk Activities. Licensee agrees that
Licensor and its suppliers will not be liable for any claims or damages arising
from the use of any Product in such applications.
13. U.S. Government End Users. The Product is a "commercial item," as that term
is defined in 48 C.F.R. 2.101 (Oct. 1995), consisting of "commercial computer
software" and "commercial computer software documentation," as such terms are
used in 48 C.F.R. 12.212 (Sept. 1995). Consistent with 48 C.F.R. 12.212 and 48
C.F.R. 227.7202-1 through 227.7202-4 (June 1995), all U.S. Government End Users
acquire the Product with only those rights set forth herein.
14. Purchase Orders. Licensee shall place written purchase orders for
additional unit licenses. If Licensee is purchasing such licenses from Licensor,
the purchase orders shall include the following information: (i) reference to
the Agreement number on the Order Form, if applicable; (ii) description of each
Product ordered, quantity and price; (iii) shipping instructions and
destination; (iv) requested delivery date; (v) bill to address; and (vi)
restatement of the payment terms on the Product Schedule, if applicable.
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15. Notices. Any notice required or permitted hereunder shall be in English, in
writing and shall be deemed to be properly given upon the earlier of (i) actual
receipt by the addressee (including facsimile or e-mail) or (ii) 5 business days
after deposit in the mail, postage prepaid, when mailed by registered or
certified airmail, return receipt requested, or (iii) 2 business days after
being sent via private industry courier to the respective parties at the
addresses set forth in the Order Form or to such other person or address as the
parties may designate in a writing. Notices to Licensor shall be to the
attention of the Legal Department, at Netscape Communications Corporation, 501
East Middlefield Road, Mountain View, CA 94043, USA.
16. Indemnity. (a) Netscape shall defend or settle and indemnify, at its
option, any action brought against Licensee to the extent it is based on a claim
that use or reproduction by Licensee of the Netscape-owned portion of the
Product hereunder infringes any valid U.S. patent, copyright or trade secret.
Netscape will pay resulting costs, damages and legal fees finally awarded
against Licensee in such action which are attributable to such claim provided
that: (i) Licensee promptly notifies Netscape in writing of any such claim; (ii)
Netscape has sole control of the defense and all related settlement
negotiations; and (iii) Licensee cooperates with Netscape, at Netscape's
expense, in defending or settling such claim. Should a Product become, or be
likely to become in Netscape's opinion, the subject of infringement of such U.S.
patent, copyright or trade secret, Netscape may (I) procure for Licensee the
right to continue using the same or (II) replace or modify it to make it non-
infringing. Netscape shall have no obligation or liability for, and Licensee
shall defend, indemnify and hold Netscape harmless from and against, any claim
based upon: (A) use of other than the then-current, unaltered version of the
Product, unless the infringing portion is also in the then-current, unaltered
release; (B) use, operation or combination of the Product with non-Netscape
programs, data, equipment or documentation if such infringement would have been
avoided but for such use, operation or combination; (C) Licensee's or its
agent's activities after Netscape has notified Licensee that Netscape believes
such activities may result in such infringement; (D) compliance with Licensee's
designs, specifications or instructions for the Product; (E) any modifications
or marking of the Product not specifically authorized in writing by Netscape;
(F) any unauthorized use of any Netscape intellectual property; (G) any content
provided by Licensee and/or any material to which users can link through such
content; or (H) third party software. The foregoing states the entire liability
of Netscape and the exclusive remedy of Licensee with respect to infringement of
any intellectual property right, whether under theory of warranty, indemnity or
otherwise.
(b) Licensee acknowledges that it is responsible for any and all claims,
liabilities, losses, damages, expenses and costs (including reasonable
attorneys' fees and costs) relating to Licensee's use or reproduction of the
Product or Documentation, except to the extent that Netscape is responsible
under Section 16(a) above or such claims, liabilities, losses, damages,
expenses, and costs are found by a court of competent jurisdiction to be
Netscape's responsibility due to Netscape's negligence or willful misconduct.
17. Miscellaneous. (a) This Agreement constitutes the entire agreement between
the parties concerning the subject matter hereof and supersedes all prior and
contemporaneous agreements and communications, whether oral or written, between
the parties relating to the subject matter hereof, and all past courses of
dealing or industry custom. The terms and conditions hereof shall prevail
exclusively over any written instrument submitted by Licensee, including
purchase order, and Licensee hereby disclaims any terms therein, except for
terms therein relating to product description, quantity thereof, pricing
therefor, shipment and delivery. (b) This Agreement may be amended only by a
writing signed by an executive vice president of Netscape and a duly authorized
representative of Licensee. (c) This Agreement shall be governed by the laws of
the State of California, U.S.A., without reference to its conflict of law
provisions. (d) Any dispute hereunder will be negotiated between the parties
commencing upon written notice from one party to the other. Settlement
discussions and materials will be confidential and inadmissible in any
subsequent proceeding without both parties' consent. If the dispute is not
resolved by negotiation within 45 days following such notice, the parties will
refer the dispute to non-binding mediation conducted by JAMS/EndDispute. The
parties will share the costs of mediation. If the dispute is not resolved after
45 days of mediation, the parties will refer the dispute to binding arbitration
by JAMS/EndDispute in Santa Clara County, California. The results of any
arbitration will be final and non-appealable, except that either party may
petition any court of competent jurisdiction to review any decision relating to
intellectual property matters (including the scope of license rights), vacating
or modifying erroneous conclusions of law or findings of fact not supported by
substantial evidence. The arbitrator may fashion any legal or equitable remedy
except punitive or exemplary damages, which both parties waive. The arbitrator
will render a written decision, which may be entered in and enforced by any
court of competent jurisdiction, but which will have no preclusive effect in
other matters involving third parties. The losing party will pay the costs of
the arbitration and the reasonable legal fees and expenses of the prevailing
party, as determined by the arbitrator. The parties will jointly pay arbitration
costs pending a final allocation by the arbitrator. At any point in the dispute
resolution process, either party may seek injunctive relief preserving the
status quo pending the outcome of that process. Except as noted, the parties
waive any right to judicial process. The U.S. Arbitration Act and
JAMS/EndDispute rules will govern the arbitration process. Absent fraudulent
concealment, neither party may raise a claim more than 3 years after it arises
or any shorter period provided by applicable statutes of limitations.
Notwithstanding the foregoing, Licensor reserves the right to invoke the
jurisdiction of any competent court to remedy or prevent violation of any
provision in the Agreement relating to payment, Netscape Confidential
Information or Netscape intellectual property. (e) This Agreement shall not be
governed by the United Nations Convention on Contracts for the International
Sale of Goods. (f) If any provision in this Agreement should be held illegal or
unenforceable by a court having jurisdiction, such provision shall be modified
to the extent necessary to render it enforceable without losing its intent, or
severed from this Agreement if no such modification is possible, and other
provisions of this Agreement shall remain in full force and effect. (g) The
controlling language of this Agreement is English. If Licensee has received a
translation into another language, it has been provided for Licensee's
convenience only. (h) A waiver by either party of any term or condition of this
Agreement or any breach thereof, in any one instance, shall not waive such term
or condition or any subsequent breach thereof. (i) The provisions of this
Agreement which require or contemplate performance after the expiration or
termination of this Agreement shall be enforceable notwithstanding said
expiration or termination. (j) Licensee may not assign or otherwise transfer by
operation of law or otherwise this Agreement or any rights or obligations herein
without the prior express written consent of Licensor, which will not be
unreasonably withheld, except that Licensee may assign this Agreement to a party
acquiring all or substantially all of Licensee's assets without Netscape's
consent.. (k) This Agreement shall be binding upon and shall inure to the
benefit of the parties, their successors and permitted assigns. (l) If
applicable, this Agreement may be executed in counterparts or by facsimile, each
of which shall be deemed an original, and all of which together shall constitute
one and the same agreement. (m) Neither party shall be in default or be liable
for any delay, failure in performance (excepting the obligation to pay) or
interruption of service resulting directly or indirectly from any cause beyond
its reasonable
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control. (n) The relationship between Licensor and Licensee is that of
independent contractors and neither Licensee nor its agents shall have any
authority to bind Licensor in any way. (o) If any dispute arises under this
Agreement, the prevailing party shall be reimbursed by the other party for any
and all legal fees and costs associated therewith. (p) If any Netscape
professional services are being provided, then such professional services are
provided pursuant to the terms of a separate Professional Services Agreement
between Netscape and Licensee. The parties acknowledge that such services are
acquired independently of the Products licensed hereunder, and that provision of
such services is not essential to the functionality of such Products. (q) The
headings to the sections of this Agreement are used for convenience only and
shall have no substantive meaning. (r) Licensor may use Licensee's name in any
customer reference list or in any press release issued by Licensor regarding the
licensing of the Product and/or provide Licensee's name and the names of the
Products licensed by Licensee to third parties.
18. Licensee Outside the U.S. If Licensee is located outside the U.S., then the
provisions of this Section shall apply. (i) If Licensee is purchasing licenses
directly from Netscape and if Netscape and Licensee are not located in the same
country, then, if any applicable law requires Licensee to withhold amounts from
any payments to Netscape hereunder Licensee shall effect such withholding, remit
such amounts to the appropriate taxing authorities and promptly furnish Netscape
with tax receipts evidencing the payments of such amounts, and the sum payable
by Licensee upon which the deduction or withholding is based shall be increased
to the extent necessary to ensure that, after such deduction or withholding,
Netscape receives and retains, free from liability for such deduction or
withholding, a net amount equal to the amount Netscape would have received and
retained absent such required deduction or withholding. (ii) Les parties aux
presentes confirment leur volonte que cette convention de meme que tous les
documents y compris tout avis qui s'y rattache, soient rediges en langue
anglaise. (translation: "The parties confirm that this Agreement and all related
documentation is and will be in the English language.") (iii) Licensee is
responsible for complying with any local laws in its jurisdiction which might
impact its right to import, export or use the Product(s), and Licensee
represents that it has complied with any regulations or registration procedures
required by applicable law to make this license enforceable.
NETSCAPE APPLICATION PRODUCTS TERMS AND CONDITIONS
- --------------------------------------------------
These Terms apply to Netscape Application Server, Netscape Application Builder,
Netscape Extension Builder, and the Netscape Application Extensions
1. Agreement. The Agreement governing Licensee's use of the Product(s)
identified above ("Application Products") consists of these Netscape Application
Products Terms and Conditions, the General Terms, and, if provided, the (i)
Corporate End User Order Form and Product Schedule or (ii) Quotation and Offer
form, as applicable.
2. License Grant. Subject to payment of applicable license fees, Licensor
grants Licensee a non-exclusive and non-transferable (except as such licenses
are assignable as set forth in Paragraph 17j of the General Terms and
Conditions) license to use the executable code version of the Application
Product(s) and accompanying documentation in the territory of use allowed under
the license fee paid by Licensee (the "Territory"), according to the terms and
conditions of this Agreement. Licensee may:
a. Use Netscape Application Server and any Netscape Application Extensions that
it has licensed on the specific Designated System(s) identified in the
Product Schedule, or temporarily on a backup Designated System if a
specified Designated System is inoperative.
b. Allow use of Netscape Application Builder and Netscape Extension Builder by
the number of developers indicated on the Product Schedule for the purpose
of developing components to be deployed on Netscape Application Server.
c. Install the C++ OCL Client Kit on the number of computers identified in the
Product Schedule.
d. Add CPUs to the Designated System(s) or transfer Netscape Application Server
or any Netscape Application Extensions to another Designated System so long
as Licensee pays Licensor's then-current per CPU license fees for any
additional CPUs, and provides Licensor with the make, model, operating
system and number of CPUs of the new or reconfigured Designated System.
e. Copy the documentation, without change, as necessary to fully utilize the
Application Product(s), provided the copies contain all of the original
proprietary notices.
f. Use any Netscape or third party products bundled with an Application Product
only in conjunction with that Application Product, and not with other
software products or on a stand-alone basis.
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g. If an Application Product contains header files or class libraries, copy and
use the header files and class libraries solely to create and distribute
programs to interface with the Application Product's Application Program
Interfaces. Licensee may not modify the header files or class libraries.
3. Fees. For Netscape Application Server and any Netscape Application
Extensions that Licensee has licensed, license fees are required for each
CPU contained in the Designated System(s) upon which those Application
Products are installed. For Netscape Application Builder and Netscape
Extension Builder, license fees are required for each developer who is using
them. For the C++ OCL Client Kit, license fees are required for each
computer upon.
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NETSCAPE COMMERCEXPERT PRODUCT TERMS AND CONDITIONS
These Terms apply to BuyerXpert, SellerXpert, ECXpert, DeveloperXpert,
PublishingXpert and Merchant System/MerchantXpert
1. Agreement. The Agreement governing Licensee's use of the Product(s)
identified above ("Commerce Products") consists of these Netscape CommerceXpert
Product Terms and Conditions, the General Terms, and, if provided, the (i)
Corporate End User Order Form and Product Schedule or (ii) Quotation and Offer
form, as applicable.
2. License Grant. Subject to payment of applicable license fees, Licensor
grants Licensee a non-exclusive and non-transferable (except as such licenses
are assignable as set forth in Paragraph 17j of the General Terms and
Conditions) license to use the executable code version of the Commerce
Product(s) and accompanying documentation in the territory of use allowed under
the license fee paid by Licensee (the "Territory"), according to the terms and
conditions of this Agreement. The original copy of the Commerce Product(s) that
you received is your archival copy. Licensee may:
a. Use the Commerce Products on the Designated System(s) identified in the
Product Schedule for the purpose of conducting electronic transactions. No
other use, including without limitation Multi-Hosting, is allowed unless
such use is permitted elsewhere in this Agreement and the applicable license
fees for such use have been paid. The Designated System(s) will be limited
to two central processing units ("CPUs") unless fees for additional CPUs
have been paid.
b. If the Commerce Product is DeveloperXpert and Licensee has also purchased a
license for ECXpert, use DeveloperXpert to develop web-based applications
that work in conjunction with ECXpert ("Developed Applications"). Licensee
may only run the Developed Applications on the same Designated System as
ECXpert. Licensee may only use the Developed Applications for its own
business operations unless it has paid the applicable additional fees for
multi-hosting and service bureau use. Licensee may not use DeveloperXpert to
develop Developed Applications for use in conjunction with any products
other than ECXpert and may not distribute the Developed Applications outside
Licensee's company. The use of any Netscape server and client products
bundled with DeveloperXpert is governed by the License Agreements
accompanying those products, except that such Netscape products may only be
used with DeveloperXpert and only for development and testing purposes.
Licensee will need to separately purchase a license for the web server to be
deployed for use with the Developed Applications.
c. If Licensee has licensed a relational database from Licensor for use with a
Commerce Product, use the relational database only with that Commerce
Product and only upon payment of the applicable per CPU fees for use of the
relational database on the Designated System(s) identified in the Product
Schedule. If Licensee wishes to use a relational database with another
Commerce Product, it must purchase a license for use of the relational
database with that second Commerce Product. Even if Licensee has purchased a
Multi-Hosting license for a Commerce Product, the relational database may
not be used for Multi-Hosting or service bureau purposes.
d. Add CPUs to the Designated System(s) or transfer the Commerce Product(s) or
Developed Application(s) to another Designated System so long as Licensee
pays Licensor's then-current per CPU license fees for any additional CPUs,
and provides Licensor with the make, model, operating system and number of
CPUs of the new or reconfigured Designated System.
e. If the Commerce Product(s) contain a Visigenic VisiBroker development
component, use the Visigenic VisiBroker development component on no more
than one computer by no more than one developer. The single allowed
developer may use both VisiBroker for C++ and VisiBroker for Java.
f. If the Commerce Product(s) contain a Visigenic runtime component, use the
Visigenic runtime component to invoke object implementations, provided that
the invoking application (i) is one or more components of the Commerce
Product or (ii) interoperates with and runs on the same computer as the
Commerce Product.
g. If a Commerce Product contains header files or class libraries, copy and use
the header files and class libraries solely to create and distribute
programs to interface with the Commerce Product's APIs. Licensee may not
modify the header files or class libraries.
h. If Licensee has purchased a Netscape Content Management Server ("Content
Server") license, use Content Server solely for the purpose of managing
content to be published on Netscape PublishingXpert. If Licensee has
purchased a Multi-Hosting license for PublishingXpert, Licensee may purchase
Content Server licenses for use by its hosting service customers by
submitting a purchase order. Licensee may then distribute the number of
copies of Content Server it has licensed to its hosting service customers in
the Territory for their use solely in managing content to be published to
Licensee's PublishingXpert, provided Licensee is solely responsible for
providing front-line support to such customers and Licensee is responsible
for such customers complying with the terms of the license agreement
provided with Content Server. Licensee has no right to reproduce Content
Server.
i. If Licensee has purchased a Multi-Hosting license for a Commerce Product,
use that Commerce Product on the Designated System(s) identified for such
use in the Product Schedule to allow the conduct of electronic transactions
by third parties.
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j. If Licensee has purchased a Development and Testing license for a Commerce
Product, use the applicable Commerce Product on a Designated System with no
more than 2 CPUs solely for quality assurance, development and testing
purposes. This Development and Testing copy may not be used in a production
environment nor as a backup or archival copy. The Development and Testing
license is only available if a standard production license has been
purchased.
k. If Licensee is a Netscape authorized reseller and has acquired a
demonstration license for any Commerce Product, use such Commerce Product
only for the purpose of demonstration and not for any other purpose set
forth in this Agreement. Upon completion of the demonstration use, the
Commerce Product must be de-installed.
l. Use any Netscape or third party products bundled with a Commerce Product
only in conjunction with that Commerce Product, and not with other software
products or on a stand-alone basis.
3. Fees. With the exception of DeveloperXpert, license fees are required for
each CPU contained in the Designated System upon which the Commerce Product is
installed. For DeveloperXpert, license fees are required for each CPU contained
in the Designated System upon which the Developed Applications will be running.
4. Payment Processing. If Licensee wishes to use the payment processing
software for any Commerce Product, Licensee must establish a relationship with a
compatible merchant processing service and may need to establish a relationship
with a compatible payment processing service, both of which are equipped to
receive payment authorization requests, capture requests, and settlement
requests from the Commerce Product. If Licensor modifies the Commerce Product
such that it is no longer compatible with most merchant or payment processing
services in the Territory or if Licensor is notified in writing by a merchant or
payment processing service in the Territory that it will no longer be compatible
with the Commerce Product, Licensor will advise Licensee promptly of such
changes. Licensee is not a merchant processing service or payment processing
service and this Agreement does not create any such relationship. Such
relationship will be subject to the terms, conditions and approval requirements
of the relevant processing service.
5. Aspect Catalog. If Licensee wishes to enable the Aspect product catalog
feature for a Commerce Product, Licensee may need to obtain a key to enable such
feature by providing Licensor with the host ID and IP address of the applicable
Designated System.
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NETSCAPE SERVER PRODUCT TERMS AND CONDITIONS
THESE TERMS APPLY TO SUITESPOT, CALENDAR EXPRESS, CALENDAR SERVER, CERTIFICATE
- ------------------------------------------------------------------------------
SERVER, COLLABRA SERVER, COMPASS SERVER, CONTENT MANAGEMENT SERVER (PART OF
- ---------------------------------------------------------------------------
PUBLISHINGXPERT), DIRECTORY SERVER, ENTERPRISE SERVER, FASTTRACK SERVER,
- ------------------------------------------------------------------------
MESSENGER EXPRESS, MESSAGING SERVER, PROCESS MANAGER & PROXY SERVER1.
- ----------------------------------------------------------------------
AGREEMENT.
- -----------
THE AGREEMENT GOVERNING LICENSEE'S USE OF THE PRODUCT(S) IDENTIFIED ABOVE
- -------------------------------------------------------------------------
("SERVER PRODUCTS") CONSISTS OF THESE NETSCAPE SERVER PRODUCT TERMS AND
- -----------------------------------------------------------------------
CONDITIONS, THE GENERAL TERMS, AND, IF PROVIDED, THE (I) CORPORATE END USER
- ---------------------------------------------------------------------------
ORDER FORM AND PRODUCT SCHEDULE OR (II) QUOTATION AND OFFER FORM, AS APPLICABLE.
- --------------------------------------------------------------------------------
2. License Grant. Subject to payment of applicable license fees, Licensor
grants Licensee a non-exclusive and non-transferable (except as such licenses
are assignable as set forth in Paragraph 17j of the General Terms and
Conditions) license to use the executable code version of the Server
Product(s) and accompanying documentation in the territory of use allowed under
the license fee paid by Licensee (the "Territory"), according to the terms and
conditions of this Agreement. Licensee is only entitled to a refund if one is
offered by Licensee's place of purchase. "Users" is defined for each Server
Product in the User Definitions and Number of Users table found at the following
URL: http://home.netscape.com/servers/pricing/license.html (the "User Table").
License fees must be paid for all Users who have access to the Server Product's
services, not just the number who may access those services concurrently.
Additional fees are required prior to providing access to additional Users (with
the exceptions noted above). It is recommended that Licensee print out a copy of
the User Table page on the date of purchase as confirmation of the information
provided therein. Licensee may:
a. Allow access to the functionality and/or services provided by the Server
Product(s) by the number of Users for whom Licensee has paid license fees,
as identified on Licensee's Certificate of Authenticity, unless (i) Licensee
has purchased a license at special pricing exclusively for extranet Users,
in which case Licensee may permit access to the specified functionality and
services only by Users who are not employees or full-time independent
contractors, and only by the number of Users specified on the Product
Schedule, (ii) Licensee has purchased a Search and Browse only, per CPU
license for Netscape Compass Server (available only for internet and
extranet use), in which case Compass Server may not be installed on a
computer system with more CPUs than the number licensed, no use of My
Compass is allowed, and unlimited user access may be granted for searching
and browsing, (iii) Licensee has purchased an unlimited User license for a
Server Product for which such licenses are available, or (iv) Licensee is
using the PM Builder component of Netscape Process Manager, which is
licensed on a per developer basis. When licensing SuiteSpot, the number of
Users for whom license fees must be paid is the largest number of Users who
will have access to any of the included Server Products. Additional fees are
required prior to providing access to additional Users (with the exceptions
noted above). Extranet-only licenses are not available for the provision of
hosting services, such as ISP services.
b. If the Server Product is SuiteSpot, reproduce, without change, the number of
copies of the Server Products in SuiteSpot necessary to support the number
of Users on Licensee's Certificate of Authenticity. For individual Server
Product(s) that are licensed on a per-User basis, one copy may be installed
for every 50 licensed Users, except that if the User Table provides
different information, Licensee may make the number of copies indicated in
the User Table. However, if a relational database product is provided with a
Server Product, Licensee may only make one copy of such relational database,
even if additional Users have been licensed. See the Relational Database
Rights and Limitations section below for more information on database use.
c. Make, without change, the number of copies of the documentation provided
with the Server Product(s) necessary to support the Server Product(s)
copied.
d. Sublicense the right to use and reproduce the Server Product(s) and related
documentation under this Agreement to subsidiaries of Licensee provided
Licensee is responsible for each such entity complying with the terms of
this Agreement.
e. Use the "Powered By Netscape SuiteSpot" logo (the "Logo") on its website
(internal or external) provided (i) the site operates on or utilizes any
Server Product or combination of Server Products and (ii) Licensee agrees to
the applicable terms and conditions of use described in the Logo usage
guidelines found at: http://home.netscape.com/comprod/mirror/
powered_suitespot_guidelines.html. This license does not grant Licensee any
rights to use the Logo on products or services. It also does not grant
Licensee any rights to use other Netscape trademarks or logos.
f. If the Server Product(s) contain header files, copy and use the header files
solely to create and distribute programs to interface with the server APIs.
g. If the Server Product(s) contain Java classes other than classes which are
part of the Server Product's programming interface ("Sample Java Classes"),
copy and use the Sample Java Classes solely to create and distribute
programs to interface with Netscape products.
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h. If applicable, run multiple instances of the Netscape Resource Description
Server and Netscape Compass Server software for content robotting on
multiple computers.
i. If applicable, install and run multiple instances of the Netscape Mission
Control Console client on multiple computers and platforms for remote and
distributed administration of servers and applications.
j. If applicable, run the server-side JavaScript compiler on an unlimited
number of computers.
k. If the Server Product is Netscape Messenger Express ("ME"), modify ME to
meet Licensee's needs. The modified version may only be used by Licensee.
Any modified code will not be supported or warranted by Licensor. ME,
including any modified versions created by Licensee, may only be used in
conjunction with Netscape Messaging Server and may not be used with any
third party server product. Licensee may allow use of ME by the same number
of Users licensed for use of Messaging Server. If Licensee wishes to submit
modifications to ME to Netscape for possible inclusion in a future version
of ME, Licensee must go to the following URL for submission information, and
must agree to the license terms posted there. The ME submission site can be
found at http://home.netscape.com/messaging/v3.5/custmod.html.
l. If the Server Product is or includes Netscape Calendar Express, use Netscape
Calendar Express only in conjunction with Netscape Calendar Server. Netscape
Calendar Express may not be used with any other server product. Licensee may
allow use of Netscape Calendar Express by the same number of Users licensed
for use of Calendar Server.
m. If Netscape Directory Server is provided with another Server Product, with
the exception of Netscape Process Manager, allow access to the functionality
and services of Netscape Directory Server by the same Users who are licensed
to access the Server Product's functionality and services. In order to allow
access by additional Users, Licensee must pay additional license fees. In
the case of Netscape Process Manager, the only information that may be
loaded into the embedded Netscape Directory Server software is (i) the
automatically generated process definitions, (ii) user data provided by
Netscape with Netscape Process Manager for testing and evaluation purposes
and (iii) user information to be used to resolve groups and roles by Process
Manager. All other Netscape Process Manager user information must be stored
in a separate LDAP directory product. Licensee may use Netscape Directory
Server copies that are provided as the embedded directory service component
of a third party software product or application only for such embedded
directory services and not to provide directory services for other software
products or to provide standalone directory services (unless the license
provided with the third party product containing an embedded Netscape
Directory Server explicitly grants additional rights).
n. Use any Netscape Communicator software provided with a Server Product in
accordance with the Netscape Client Product Terms and Conditions.
o. Use the Informix database in Netscape Certificate Server only on a single
computer upon which Certificate Server is installed, and only as a
repository for Certificate Server's data. The Informix database may be
accessed only by tools intended for use with Certificate Server. If the
Server Product is SuiteSpot with an Informix database, Licensee may use the
Informix database for additional purposes as further described below in the
Relational Database Rights and Limitations section.
p. If the Server Product(s) contain a Visigenic VisiBroker development
component, use the Visigenic VisiBroker development component on no more
than one computer by no more than one developer. The single allowed
developer may use both VisiBroker for C++ and VisiBroker for Java.
q. If the Server Product(s) contain a Visigenic runtime component, use the
Visigenic runtime component to invoke object implementations, provided that
the invoking application (i) is one or more components of the Server Product
or (ii) interoperates with and runs on the same computer as the Server
Product.
r. If the Server Product is Netscape Process Manager, use the embedded Netscape
Enterprise Server software only in conjunction with Netscape Process
Manager, and not for any other purpose.
s. Relational Database Rights and Limitations. If the Server Product is
SuiteSpot with an included database product, then the following rights and
limitations govern Licensee's use of the included database:
1. Informix Database. If the SuiteSpot software includes an Informix
database, the Informix database may be used only (i) for the purpose of
developing Netscape web server applications ("Web Server Applications");
and (ii) to reproduce and distribute a single copy of the runtime version
of the Informix database for use solely as a component of a Web Server
Application and only on a single computer for up to 32 connections (the
"Deployment System"). A "connection" means a computer process generated
by the designated computer to service on-line users of the Web Server
Applications. A single connection may support a multitude of users, the
exact number of which depends on the particular circumstances. Multiple
Web Server Applications may reside on the Deployment System, provided
that all such applications access only the single copy of the Informix
database and all Web Server Applications together use no more than 32
connections. Licensee may use the Informix database to develop any number
of Web Server Applications, but once Licensee has distributed a single
runtime version of the Informix database in any one Web Server
Application, Licensee may not distribute the Informix database in another
copy of that Web Server Application or as part of any subsequent Web
Server Application. In order to provide a database product as part of
Licensee's Web Server Application either Licensee must purchase a
separate database product license for each recipient, or each recipient
to whom Licensee distributes a Web Server Application must license its
own copy of a database product. Licensee may not establish direct
connections with the Informix database other than through Enterprise
Server software or use the Informix database for any purpose other than
developing and executing Web Server Applications.
25
<PAGE>
2. ORACLE DATABASE. IF THE SUITESPOT SOFTWARE INCLUDES AN ORACLE DATABASE,
---------------------------------------------------------------------------
LICENSEE IS LICENSED TO RUN THE ORACLE DATABASE ONLY ON A SINGLE PROCESSOR
--------------------------------------------------------------------------
ON THE SAME COMPUTER UPON WHICH ENTERPRISE SERVER SOFTWARE IS INSTALLED FOR
---------------------------------------------------------------------------
INTERNAL BUSINESS PURPOSES, AND ONLY PERMITTING ACCESS BY UP TO TEN NAMED
-------------------------------------------------------------------------
USERS. THE ORACLE DATABASE MAY BE USED ONLY FOR THE PURPOSE OF DEVELOPING
-------------------------------------------------------------------------
WEB SERVER APPLICATIONS, AND FOR NO OTHER PURPOSE. LICENSEE MAY NOT
-------------------------------------------------------------------
DISTRIBUTE THE ORACLE DATABASE WITH WEB SERVER APPLICATIONS. IN ORDER TO
------------------------------------------------------------------------
PROVIDE A DATABASE PRODUCT AS PART OF LICENSEE'S WEB SERVER APPLICATION
-----------------------------------------------------------------------
EITHER LICENSEE MUST PURCHASE A SEPARATE DATABASE PRODUCT LICENSE FOR EACH
--------------------------------------------------------------------------
RECIPIENT, OR EACH RECIPIENT TO WHOM LICENSEE DISTRIBUTES A WEB SERVER
----------------------------------------------------------------------
APPLICATION MUST LICENSE ITS OWN COPY OF A DATABASE PRODUCT. LICENSEE MAY
-------------------------------------------------------------------------
NOT ESTABLISH DIRECT CONNECTIONS WITH THE ORACLE DATABASE OTHER THAN
--------------------------------------------------------------------
THROUGH ENTERPRISE SERVER SOFTWARE.
-----------------------------------
3. Fees. License fees for most Server Products are based on the number of
Users accessing certain functionality and/or services of the Server Product.
User-based licensing applies to these server products. Detailed information
regarding user-based and other types of licensing and license fees can be found
at the User Table page. It is recommended that Licensee print out a copy of the
User Table page on the date of purchase as confirmation of the information
therein.
NETSCAPE MAINTENANCE PLAN - SILVER/GOLD
These terms and conditions apply to the provision of Maintenance service
hereunder
26
<PAGE>
1. Agreement. These terms and conditions, together with the other terms and
conditions of the Agreement are applicable to the provision of Maintenance
services hereunder.
2. Definitions. "End User" means any user of a Netscape software or a service
hosted by Netscape ("Product") authorized by Licensee pursuant to Licensee's
license agreement for the Product. "Maintenance Plan" means the applicable
Netscape Silver or Gold Maintenance Plan. "Maintenance Release" means a Product
revision or patch that improves the functionality of a Product that does not
contain any new features or enhancements. A Maintenance Release is not an
upgrade. "Program Errors" means one or more reproducible deviations in the
standard, unmodified Product from the applicable specifications shown in the
documentation (if any). "Upgrades" means both major and minor upgrades to the
Product, if any, provided that Upgrades shall exclude any release that is
reasonably designated by Netscape as a separate product or a new component. All
references to Upgrades herein do not apply to any service hosted by Netscape.
"Major Upgrades" are designated by a change in the number to the left of the
decimal point of the number appearing after the Product name while "Minor
Upgrades" are designated by a change in such number to the right of the decimal
point. Netscape is the sole determiner of the availability and designation of a
Product release as a Major Upgrade or Minor Upgrade. "Working Hours" and
"Working Days" are defined by the Netscape office delivering the Services,
excluding Netscape holidays.
3. Technical Support. Netscape will provide back-end support to Licensee for
Program Errors not resolved by Licensee pursuant to Licensee's support policies
and in accordance herewith. Netscape will provide Licensee with a telephone
number and a URL address that Licensee may use to report Program Errors during
Working Hours. For priority 1, Licensee agrees to notify Netscape via both
telephone and URL address. Netscape will make reasonable efforts to correct
significant Program Errors that Licensee identifies, classifies and reports to
Netscape and that Netscape substantiates. Netscape may reclassify Program
Errors if it reasonably believes that Licensee's classification is incorrect.
Licensee will provide sufficient information for Netscape to enable Netscape to
duplicate the Program Error before Netscape's response obligations will
commence. Unless otherwise authorized in writing by Netscape, Netscape will not
be required to correct any Program Error caused by (a) incorporation, attachment
of a feature, program, or device to the Product, or any part thereof, by
Licensee unless such incorporation or attachment was directed by Netscape in
writing or done by Netscape professional services; (b) any nonconformance caused
by accident, transportation, neglect, misuse, alteration, modification, or
enhancement of the Product by Licensee, unless such was directed by Netscape in
writing or done by Netscape professional services; (c) Licensee's failure to
provide an installation environment recommended for the Product as set forth in
the applicable Documentation; (d) Licensee's use of the Product for other than
the specific purpose for which the Product is intended; (e) if applicable,
Licensee's use of the Product on any systems other than the specified hardware
platform for such Product as set forth in the applicable Documentation; (f) if
applicable, Licensee's use of defective media or defective duplication of the
Product; or (g) Licensee's failure to incorporate any Maintenance Releases
previously released by Netscape which corrects such Program Error. Provided
Program Error reports are received by Netscape during Working Hours, Netscape
will use reasonable commercial efforts to communicate with Licensee about the
Program Error, via telephone or e-mail within the following targeted response
times: For Silver Maintenance Plan:
<TABLE>
<CAPTION>
Priority Failure Description Initial Response Time
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1 Enterprise Critical (Product is not functioning) 4 Working Hours
- ------------------------------------------------------------------------------------------------------------------------------------
2 Severe Impact (Product inconsistency causes significantly decreased Licensee productivity, 8 Working Hours
such as periodic work stoppages or feature crashes)
- ------------------------------------------------------------------------------------------------------------------------------------
3 Degraded Operations (Product inconsistency causes slightly impaired Licensee productivity, but Next Working Day
Licensee can work around problem)
- ------------------------------------------------------------------------------------------------------------------------------------
4 Minimal Impact (Requests for minor changes in Product such as documentation updates, cosmetic 2 Working Days
defects or enhancements)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the Silver Maintenance Plan, Licensee may designate two (2) liaisons
authorized to contact Netscape for technical support. For Gold Maintenance Plan:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Priority Failure Description Initial Response Time
<C> <S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1 Enterprise Critical (Product is not functioning) 1 Working Hour
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
2 Severe Impact (Product inconsistency causes significantly decreased Licensee productivity, 4 Working Hours
such as periodic work stoppages or feature crashes)
- -----------------------------------------------------------------------------------------------------------------------------------
3 Degraded Operations (Product inconsistency causes slightly impaired Licensee productivity, but Next Working Day
Licensee can work around problem)
- -----------------------------------------------------------------------------------------------------------------------------------
4 Minimal Impact (Requests for minor changes in Product such as documentation updates, cosmetic Next Working Day
defects or enhancements)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the Gold Maintenance Plan, Licensee may designate four (4) liaisons
authorized to contact Netscape for technical support. Netscape will also provide
Licensee with a telephone number to use in order to submit Priority 1 problems
only, 24 hours a day, 7 days a week.
Netscape will use reasonable commercial efforts to identify defective source
code and to resolve each significant Program Error by providing either a
reasonable workaround, an object code patch (or equivalent) or a specific action
plan for how Netscape will address the problem and an estimate of how long it
will take to rectify the defect. Netscape agrees to support a given revision of
the Product for the shorter of (i) 12 months from the date such revision is
superseded by the next sequential Minor and/or Major Upgrade; or (ii) until such
revision is superseded by 2 sequential Minor and/or Major Upgrades. (For
example, Netscape will support version 2.1 for the shorter of 12 months from the
date version 2.2 or 3.0 (if 3.0 is the next sequential release), is released by
Netscape, or until version 2.1 is superseded by 2 sequential releases (2.2 and
2.3 or 2.2 and 3.0, as the case may be.))
4. Additional Technical Support Fees. Netscape reserves the right to charge
Licensee additional technical support fees at its then standard rates for
technical support services performed in connection with reported Program Errors
which are later determined to have been due to hardware or software not supplied
by Netscape. Notwithstanding the foregoing, Netscape has no obligation to
perform technical support services in connection with Program Errors resulting
from hardware or software not supplied by Netscape.
5. Licensee Obligations. Licensee, and not Netscape, will be responsible for,
and will bear all expenses associated with, providing front-line technical
support, Maintenance Releases, and Upgrades to its End Users. Notwithstanding
anything contained in this Agreement to the contrary, Licensee shall not be
entitled to provide Maintenance Releases and/or Upgrades to any End User or use
any back-end support received from Netscape to provide front-line technical
support to any End User prior to the payment by Licensee to Netscape of the
annual Services fee for such End User. Licensee agrees to use reasonable
commercial efforts to answer its End User's support questions. For the Silver
Maintenance Plan, Licensee will identify 1 member of its customer support staff
and 1 alternate to act as the primary technical liaisons responsible for all
communications with Netscape's technical support representatives. For the Gold
Maintenance Plan, Licensee will identify 1 member of its customer support staff
and 3 alternates to act as the primary technical liaisons responsible for all
communications with Netscape's technical support representatives. Such liaisons
will have sufficient technical expertise, training and/or experience, for
Licensee to perform its obligations hereunder. Licensee will designate, in
writing and/or e-mail to Netscape, its list of liaisons within 1 week after
Netscape's receipt of Licensee's purchase order, and may substitute contacts at
any time by providing 1 week's prior written and/or electronic notice thereof to
Netscape. Licensee, and not Netscape, will provide front-line technical support
to its End Users. Such support includes but is not limited to, call receipt,
entitlement verification, call screening, installation assistance, problem
identification and diagnosis, product defect determination, efforts to create a
repeatable demonstration of the Program Error and, if applicable, the
distribution of any replacements for defective media or Upgrades. Licensee
agrees that any information or documentation distributed by Licensee to its End
Users will clearly and conspicuously state that End Users should call Licensee
for technical support for the Product. Netscape will have no obligation to
furnish any assistance, information or documentation with respect to the
Product, directly to End Users. If Netscape customer support representatives
are being contacted by a significant number of Licensee's End Users then, upon
Netscape's request, Licensee and Netscape will cooperate to minimize such
contact.
6. Maintenance Releases and Upgrades. Provided that Licensee has paid the
applicable Services fees, Licensee will be entitled to receive any Maintenance
Releases and/or Upgrades made generally available during the Maintenance Period
for those Products licensed from Netscape by Licensee and covered under a
Maintenance Plan. Netscape client products are excluded from coverage under any
Maintenance Plan. Any Upgrades released during the Maintenance Period shall be
made available on a Netscape-designated web site for access or electronic
download by Licensee. Netscape shall provide Licensee with instructions
regarding registration for such access or electronic downloads. When a
Maintenance Release or Upgrade is available for access or download, Licensee
will receive an electronic communication from Netscape indicating such
availability. Use of each Upgrade is subject to the terms of the license
agreement for such Upgrade.
7. Insurance. If the Maintenance Plan Licensee has purchased includes
provision of onsite support by Netscape at Licensee's location, Netscape shall
be responsible, at Netscape's expense, for securing and maintaining adequate
Worker's Compensation insurance in accordance with the laws of the state or
country in which such onsite support is performed. If Netscape is permitted by
state law to be a self-insurer, Netscape may maintain the equivalent of such
insurance. Netscape further agrees to be
PSA
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<PAGE>
responsible, at Netscape's expense, for securing and maintaining adequate
Comprehensive General Liability insurance for claims for damages based on bodily
injury (including death) and property damage caused by or arising from acts or
omissions of Netscape's employees.
8. Reinstatement of Services. Reinstatement of lapsed Services is subject to
Netscape's then-current Services reinstatement fees in effect on the date the
reinstatement of Services is ordered.
9. Renewal of Services. Prior to the expiration of the current Maintenance
Period, Netscape reserves the right to send Licensee an invoice for annual
renewal of the Services pursuant to the terms, conditions, and pricing then in
effect. If Licensee does not wish to renew the Services, Licensee must contact
Netscape prior to the expiration of the current Maintenance Period in order to
decline acceptance of the renewed Services.
PSA
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<PAGE>
PROFESSIONAL SERVICES ORDER FORM
(With Terms & Conditions)
No.
------------------
drkoop.com, Inc
- --------------------------------------------------------------------------------
Full Legal Name of Entity Signing This Order Form ("Customer")
8920 Business Park Drive Austin TX 78759
- --------------------------------------------------------------------------------
Address of Principal Place of Business City State/Province Postal Code/
Country
- --------------------------------------------------------------------------------
Bill to Address (if different from above) City State/Province Postal Code/
Country
Contact Person: Lou Scalpati Phone: (512)726-5113 Fax: (512)726-5130
-------------- ------------- ---------------------
Customer is incorporated in the state/country of: Deleware
------------------------------
Sales Tax Resale/ Exemption Certificate No. (if applicable):
--------------------
(ORIGINAL CERTIFICATE
MUST BE ATTACHED)
VAT Registration No. (if Europe):
-----------------------------------------------
Payment Terms: All amounts payable to Netscape are nonrefundable and must be
paid in a single payment in advance or within 30 days of the date of Netscape's
invoice, as determined by Netscape's Credit Department. All payments shall be
made by wire transfer or remittance in accordance with Netscape's instructions
on such invoice. Past due amounts shall bear interest at the lower of 1-1/2% per
month or the maximum rate allowed by law until paid in full. Customer shall be
responsible for any costs resulting from collection by Netscape of any such past
due amounts, including without limitation, reasonable attorneys fees and court
costs.
IMPORTANT NOTICE: BY SIGNING THIS ORDER FORM ("ORDER FORM"), CUSTOMER
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<PAGE>
AGREES (I) TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS, AND STATEMENT(S) OF
WORK ("SOW") HEREUNDER (COLLECTIVELY, THE "AGREEMENT") AND (II) THAT CUSTOMER
HAS RECEIVED A COPY OF THE TERMS AND CONDITIONS. THIS AGREEMENT MAY CONSIST OF
ONE OR MORE SOWS.
- ------------------------------------ CUSTOMER
Full Legal Name of Netscape
Entity ("Netscape")
By: By:
------------------------------------- ---------------------------------
Signature Signature
Name: Name:
----------------------------------- -------------------------------
Print or Type Print or Type
Title: Title:
---------------------------------- ------------------------------
Date of Acceptance: Date:
--------------------- -------------------------------
("Effective Date")
AGREEMENT CONSISTS OF:
1. Professional Services Order
Form
Address: 2. Professional Services Terms &
-------------------------------- Conditions
- ----------------------------------------
3. SOW
Netscape Representative:
----------------
Telephone:
------------------------------
PSA
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<PAGE>
PROFESSIONAL SERVICES
TERMS & CONDITIONS
1. Definitions. "Netscape Innovation(s)" means any or all inventions,
improvements, reports, drawings and other works of authorship, and other
innovations of any kind, including, without limitation, any improvements or
modifications to the Product(s), that Netscape, or personnel working for or
through Netscape, may make, conceive, develop or reduce to practice, alone or
jointly with others, in the course of performing the Services or as a result of
such Services, whether or not they are eligible for patent, copyright,
trademark, trade secret or other legal protection. "Product(s)" means any or
all Netscape proprietary computer software programs and related documentation as
the same exist on the date hereof, and as changed or modified hereafter by
Netscape. Customer's right to use the Product(s) will be subject to the terms
and conditions of the applicable Netscape end user license agreement(s) provided
with the Product(s). "Services" means those services set forth in an SOW, which
may include installation, training, consulting and/or development services, and
any warranty services performed by Netscape pursuant to Section 8.
"Specifications" means those functional and/or technical specifications, if any,
set forth in the applicable SOW. "Statement of Work" or "SOW" means the Netscape
document(s) executed by the parties describing the Services and/or
Specifications to be performed or caused to be performed by Netscape under this
Agreement.
2. Services and Statement of Work. Netscape agrees to use commercially
reasonable (and industry standard) efforts to perform or cause to be performed
for Customer the Services described in any SOW. Services to be performed
hereunder shall be during Netscape's local business hours (8 hours/day; 5
days/week; excluding Netscape holidays). Such SOW shall be contained in the
proposals prepared by Netscape for Customer. The parties agree that the proposal
is not intended to create any obligation on the part of Netscape to provide any
particular type or amount of services. Each SOW shall, when executed by
Customer and Netscape, form a part of this Agreement and be subject to the terms
and conditions set forth herein. Customer shall advise Netscape in writing of
the individuals with whom Netscape consultants will interface for each SOW.
Customer and Netscape shall develop appropriate procedures to assure timely and
appropriate coordination of efforts. Such appropriate procedures shall include,
among other things, detailed task level project plans (including appropriate
milestones and deliverables) signed off in writing by the parties, project
management approach, staffing, escalation and change control policy and
procedure, project status tracking and reporting, and testing criteria.
Customer shall provide such information and assistance as is reasonably required
to permit Netscape to complete each SOW.
3. Fees; Taxes. (a) Unless otherwise specified in the applicable SOW, all
Services shall be provided on a time and materials basis at Netscape's then-
current fees and charges therefor. Netscape's standard hourly billing rates for
professional services are set forth in Netscape's published billing rate
schedule and are subject to change without prior notice to Customer, no more
than once every 6 months. Any change in billing rates shall not affect the
rates set forth in any SOW being performed by Netscape or executed by the
parties. In addition, Customer shall reimburse Netscape for all reasonable out-
of-pocket expenses incurred by Netscape in connection with the performance of
the Services, including, without limitation, travel, lodging, meals and other
incidental expenses estimated on the Order Form. Any such expenses shall be
consistent with the Netscape/AOL business travel policies. Netscape shall
provide copies of receipts for expenses over $75. The amount reimbursed may be
greater or less than this estimate, depending upon actual expenses incurred by
Netscape. Netscape shall invoice Customer on a monthly or bi-monthly basis as
set forth in the SOW for all Services, reimbursements and other payments due
under this Agreement and any SOW.
(b) In addition to all charges specified in this Agreement and each SOW,
Customer shall pay or reimburse Netscape for all federal, state, local, or other
taxes, including, without limitation, sales, use, value added, excise and
property taxes, or any amounts levied in lieu thereof, based on charges set
forth in this Agreement or any SOW; provided, that Customer shall have no
responsibility for taxes based on Netscape's net income from the sale of the
Services to Customer (except to the extent Customer provides Netscape herewith a
valid tax exemption certificate).
4. Termination. (a) Customer or Netscape may terminate this Agreement and/or
any SOW at any time upon 60 days advance written notice to the other party. In
the event either party shall fail to perform its obligations pursuant to this
Agreement and/or SOW and such failure shall continue for a period of 30 days (or
15 days with respect to a breach by Customer of any obligation to pay or
reimburse Netscape for amounts due hereunder and/or any SOW) following written
notice from the other party, this Agreement and/or any SOW may be terminated by
such party by its giving a notice of termination to the breaching party. Notice
of termination of any SOW shall not be considered notice of termination of this
Agreement unless specifically stated in the notice; provided, however, that any
termination of this Agreement shall automatically terminate all uncompleted
SOWs. (b) Customer shall pay Netscape for all Services performed and costs
incurred up through the termination date. Termination shall be Customer's sole
and exclusive remedy for delay or failure of Netscape to complete a SOW. The
provisions of Sections 3, 4(b), 5, 6, 9, 10, 11, 12, 14 and 15 shall survive any
termination of this Agreement and govern any completed SOW.
5. License of Netscape Innovations. In the event that any Netscape Innovations
is developed pursuant to any SOW, Customer shall have the nonexclusive, royalty-
free perpetual, irrevocable, unlimited and nontransferable (except as set forth
in Paragraph 14c below) right and license (with no right of sublicense) to use
such Netscape
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<PAGE>
Innovations solely Customer's as necessary to support Customer's
business needs. Such license includes the right for Customer to modify any
Netscape Innovation solely for the purpose of Customer's maintenance and support
thereof.
6. Ownership of Netscape Innovations. (a) Customer agrees that all Netscape
Innovations shall be the property of Netscape or its licensor. To the extent
that Customer may acquire property rights in the Netscape Innovations by
operation of law, Customer hereby assigns to Netscape, with full title
guarantee, all of its rights in the Netscape Innovations. Netscape, in its sole
discretion, shall have the right to license any Netscape Innovation, and/or
incorporate any Netscape Innovation into the Products, for use by other
licensees or customers of Netscape. At Netscape's request and expense, Customer
shall assist and cooperate with Netscape in all reasonable respects and shall
execute documents, give testimony and take further acts as reasonably requested
by Netscape to acquire, transfer, maintain and enforce any legal protection for
the Netscape Innovations. Customer hereby appoints the officers of Netscape as
in existence from time to time as its attorneys-in-fact to execute documents on
its behalf for this limited purpose.
(b) Netscape agrees that Netscape will not distribute or license any Netscape
Innovations delivered hereunder to any entities for use in the consumer
healthcare or medical fields. The foregoing limitation shall be valid for 12
months from the date each Netscape Innovation is delivered to Customer, and for
the purposes of this clause, Netscape Innovation shall not include any works
developed by Netscape independently of this Agreement. Notwithstanding the
foregoing, Netscape hereby reserves the continuing, perpetual and irrevocable
right to use the methods, techniques, algorithms, knowledge, underlying design
and architectural elements and subroutines contained or used in the Customer
Code that are of general applicability; provided, to the extent that such
methods, techniques, algorithms, knowledge, underlying design and architectural
elements or subroutines contain Customer Confidential Information, then
Netscape's use thereof shall be subject to the confidentiality obligations set
forth in paragraph 10 below
7. Maintenance and Support. Except as provided in this Section 7, Customer
agrees that Netscape shall be under no obligation to maintain or support any
Netscape Innovations. In the event that Netscape shall determine to include and
maintain any Netscape Innovation as part of the Products which it licenses and
maintains for its general licensees, Netscape agrees to provide Customer with
maintenance and support as to such Netscape Innovation on the same terms and
conditions as Netscape supports the Products for the benefit of its general
licensees. Netscape is not responsible for obsolescence of any Netscape
Innovation that may result from changes in Customer's requirements or
modifications or updates to the Products. Netscape assumes no responsibility for
the use of superseded, outdated or uncorrected versions of any Netscape
Innovation.
8. Limited Warranty. Netscape hereby represents and warrants to Customer that:
(i) the Services will be performed in a good and workmanlike manner (judged in
accordance with industry standards; and (ii) with respect to any Netscape
Innovation for which Specifications are set forth in the applicable SOW, for a
period of 90 days commencing on the date that such Netscape Innovation is
delivered by Netscape to Customer, such Netscape Innovation, when properly
installed and/or used, shall materially conform to the applicable Specifications
("Warranty Period"). Any warranty claims to be made hereunder shall be
submitted in writing to Netscape within the Warranty Period. Warranty claims
not made in writing or not received by Netscape within the Warranty Period shall
be deemed waived. Netscape's warranty is solely for the benefit of Customer,
who has no authority to extend this warranty to any other person or entity.
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, NETSCAPE MAKES NO OTHER WARRANTIES OR
CONDITIONS, EITHER EXPRESS OR IMPLIED, AS TO ANY OTHER MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE SERVICES, PRODUCTS OR ANY
NETSCAPE INNOVATIONS DEVELOPED HEREUNDER, THEIR MERCHANTABILITY, THEIR FITNESS
FOR ANY PARTICULAR PURPOSE, THEIR NON-INFRINGEMENT OF THIRD PARTY RIGHTS
(PROVIDED THAT THIS DISCLAIMER SHALL NOT BE DEEMED TO VOID NETSCAPE'S
OBLIGATIONS UNDER PARAGRAPH 15 BELOW), THAT ANY PRODUCT OR NETSCAPE INNOVATION
IS ERROR-FREE OR THAT OPERATION OF ANY PRODUCT OR NETSCAPE INNOVATION WILL BE
SECURE OR UNINTERRUPTED. Netscape shall have no obligations under the limited
warranty set forth in (ii) above to the extent that the failure of any Netscape
Innovation to materially conform to the applicable Specifications is caused by:
the incorporation, attachment or otherwise engagement of any attachment,
feature, program, or device, other than by Netscape, to such Netscape
Innovation, or any part thereof; accident; transportation; neglect or misuse;
alteration, modification, combination with materials not supplied by Netscape,
or enhancement of such Netscape Innovation other than by Netscape; failure to
provide an installation environment recommended for the Product; use of supplies
or materials not meeting specifications; use of such Netscape Innovation for
other than the specific purpose for which such Netscape Innovation is intended;
or use of such Netscape Innovation on any systems other than the specified
hardware platform for such Netscape Innovation. Netscape shall, as Customer's
sole and exclusive remedy and Netscape's sole and exclusive obligation under the
Warranty Period, use commercially reasonable efforts to correct any failure of
an Netscape Innovation to materially conform to the applicable Specifications;
provided, that Netscape's obligation to correct any such failure pursuant to
this Section 8 is subject to receipt by Netscape from Customer, within 90 days
from the date that such Netscape Innovation was first delivered by Netscape to
Customer, of written notice that sets forth such failure of the Netscape
Innovation to materially
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<PAGE>
conform to the applicable Specifications and such other information as is
reasonably necessary to permit Netscape to verify and reproduce such failure.
9. Limitation of Liability. (a) EXCEPT FOR DEATH OR PERSONAL INJURY CAUSED BY
THE NEGLIGENCE OF NETSCAPE AND TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE
LAW, NETSCAPE'S AGGREGATE LIABILITY TO CUSTOMER UNDER THIS AGREEMENT FOR DAMAGES
FROM ANY CAUSE WHATSOEVER AND REGARDLESS OF THE FORM OF ACTION, WHETHER IN
CONTRACT OR TORT OR OTHERWISE, SHALL BE LIMITED TO THE FEES RECEIVED BY NETSCAPE
FROM CUSTOMER FOR SERVICES RENDERED PURSUANT TO THE SOW GIVING RISE TO
CUSTOMER'S CLAIM FOR DAMAGES. (b) IN NO EVENT SHALL NETSCAPE BE LIABLE FOR
DAMAGES RESULTING FROM LOSS OF DATA, PROFITS OR BUSINESS, USE OF PRODUCTS OR
NETSCAPE INNOVATIONS, FAILURE OF THE PRODUCTS OR NETSCAPE INNOVATIONS TO PROVIDE
SECURITY, OR FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN
CONNECTION WITH THIS AGREEMENT, THE SERVICES OR ANY NETSCAPE INNOVATIONS
PROVIDED HEREUNDER, EVEN IF NETSCAPE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY.
10. Confidentiality. "Confidential Information" shall mean this Agreement and
all information a party discloses to the other which has been either (i)
characterized in writing as confidential at the time of its disclosure or (ii)
orally characterized as confidential at the time of disclosure, except for
information which the receiving party can demonstrate: (a) is previously
rightfully known to the receiving party without restriction on disclosure; (b)
is or becomes, from no act or failure to act on the part of the receiving party,
generally known in the relevant industry or public domain; (c) is disclosed to
the receiving party by a third party as a matter of right and without
restriction on disclosure; or (d) is independently developed by the receiving
party without access to Confidential Information of the disclosing party. Each
receiving party shall at all times, both during the term hereof and for a period
of at least 3 years after termination, keep in confidence all such Confidential
Information using a standard of care such party uses with its own information of
this nature, but in no event less than reasonable care. The receiving party
shall not use any Confidential Information other than in the course of its
duties hereunder. Without the prior written consent of the disclosing party,
the receiving party shall not disclose any Confidential Information except on a
"need to know" basis to an employee or contractor under binding obligations of
confidentiality substantially similar to those set forth herein. The terms of
confidentiality under this Agreement shall not be construed to limit either
party's right to independently develop or acquire products without use of the
other party's Confidential Information. Immediately upon the termination or
expiration of the Agreement and/or any SOW, the receiving party will return to
the disclosing party all Confidential Information of the disclosing party and
all documents or media containing any such Confidential Information and any and
all copies or extracts thereof.
If a receiving party is legally compelled to disclose any of the disclosing
party's Confidential Information, then, prior to such disclosure, the receiving
party will (x) assert the privileged and confidential nature of the Confidential
Information and (y) cooperate fully with the disclosing party in protecting
against any such disclosure and/or obtaining a protective order narrowing the
scope of such disclosure and/or use of the Confidential Information. In the
event such protection is not obtained, the receiving party shall disclose the
Confidential Information only the extent necessary to comply with the applicable
legal requirements.
Each party expressly agrees that monetary damages would be inadequate to
compensate the other for any breach of any provision of Section 10, that any
such breach or threatened breach of Section 10 will cause irreparable injury to
the other party and that, in addition to any other remedies that may be
available, at law or in equity, the other party shall be entitled to obtain
injunctive relief against the threatened breach of any provision of Section 10
or the continuation of any such breach without the necessity of proving actual
damages.
11. Notice. Any notice required or permitted hereunder shall be in English, in
writing and shall be deemed to be properly given upon the earlier of (a) actual
receipt by the addressee (including facsimile or e-mail) or (b) 5 business days
after deposit in the mail, postage prepaid, when mailed by registered or
certified airmail, return receipt requested, or (c) 2 business days after being
sent via private industry courier to the respective parties at the addresses set
forth in the Order Form or to such other person or address as the parties may
from time to time designate in a writing. Notices to Netscape shall be to the
attention of the Legal Department, at Netscape Communications Corporation, 501
East Middlefield Road, Mountain View, CA 94043.
12. Non-solicitation. Customer acknowledges that Netscape provides a valuable
service by identifying, recruiting, employing, training and providing personnel
to perform the Services. Without the prior written consent of Netscape,
Customer shall not solicit the services of any personnel provided by Netscape or
a Netscape subcontractor who are or have been assigned to perform Services
hereunder for a period commencing on the Effective Date and terminating 1 year
after the date of completion of the most recent SOW.
34
<PAGE>
13. Purchase Orders. Customer may place written purchase orders for Services
provided that each purchase order contains the following (i) reference to the
Agreement number; (ii) incorporates any SOW detailing the Services to be
rendered, fees and charges therefor, and bill to address (if different). No
terms and conditions set forth in any purchase order or instrument issued by
Customer in connection with the Services shall be binding upon Netscape.
14. Miscellaneous. (a) Neither this Agreement nor any SOW may be amended
except by a written notice signed by an authorized representative of Netscape
and Customer. (b) The waiver by either party of any of its rights hereunder or
under any SOW shall not be construed as a waiver of any subsequent breach. (c)
All terms and conditions of this Agreement and each SOW shall be binding upon
and inure to the benefit of the parties hereto, and to their successors and
assigns, except that Customer may not assign or otherwise transfer any of its
rights or obligations under this Agreement or any SOW without Netscape's prior
written consent, except that Customer may assign this Agreement to a party
acquiring all or substantially all of Licensee's assets without Netscape's
consent. (d) This Agreement and each SOW will be governed by and construed in
accordance with the laws of the State of California, without reference to
conflicts of law principles. (e) Any dispute regarding this Agreement shall be
subject to the exclusive jurisdiction of the applicable court in the County of
Santa Clara in the State of California, and each party submits to the
jurisdiction thereof. Notwithstanding the foregoing, Netscape reserves the
right to invoke the jurisdiction of any competent court to remedy or prevent
violation of any provision in the Agreement relating to payment, Netscape
Confidential Information or Netscape intellectual property. (f) This Agreement
shall not be governed by the United Nations Convention of Contracts for the
International Sale of Goods. (g) This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior and contemporaneous agreements and communications, whether
oral or written, between the parties relating to the subject matter hereof, and
all past courses of dealing or industry custom. The terms and conditions hereof
shall prevail over any conflicting purchase order or other written instrument
submitted by Customer. (h) This Agreement may be executed in counterparts or
facsimile, each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement. (i) If there is any
inconsistency between a provision in an SOW of this Agreement and a provision in
either the Professional Services Order Form or Professional Services Terms &
Conditions ("Other Portion"), the provision in the Other Portions shall prevail.
(j) If a court finds any provision of this Agreement invalid or unenforceable as
applied to any circumstance, that provision shall be enforced to the maximum
extent permitted by law, and the other provisions, and that provision as applied
to other circumstances, will remain in full force and effect. (k) Both parties
shall be excused from performance under this Agreement and any related SOW for
any period to the extent that a party is prevented from performing any
obligation, in whole or in part, as a result of causes beyond its reasonable
control and without its negligent or willful misconduct. In the event that such
nonperformance continues for a period of 60 days or more, either party may
terminate either this Agreement or a related SOW by giving 10 days written
notice to the other. If either party exercises its option to terminate,
Customer shall pay for any Services rendered and/or expenses incurred by
Netscape prior to the termination date. (l) Each party is an independent
contractor and is not an employee, agent or legal representative of the other
party. Neither party is authorized to bind the other party, act as an agent for
the other party or otherwise act in the name of or on behalf of the other party.
(m) The Netscape Innovations, if any are provided to the U.S. Government, are a
"commercial item," as that term is defined in 48 C.F.R. 2.101 (Oct. 1995),
consisting of "commercial computer software" and "commercial computer software
documentation," as such terms are used in 48 C.F.R. 12.212 (Sept. 1995).
Consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4
(June 1995), all U.S. Government End Users acquire the Netscape Innovations with
only those rights set forth herein. Contractor/manufacturer is Netscape
Communications Corporation, 501 East Middlefield Road, Mountain View, California
94043. (n) Netscape may use Customer's name in any customer reference list or in
any press release issued by Netscape regarding the subject matter hereof. (o) If
any dispute arises under this Agreement, the prevailing party shall be
reimbursed by the other party for any and all legal fees and costs associated
therewith. (p). In the event that Netscape uses any subcontractors in its
performance hereunder, Netscape is responsible for such subcontractor's
adherence with the terms and conditions of this Agreement.
15. Indemnity. (a) Netscape shall defend or settle and indemnify, at its
option, any action brought against Licensee to the extent it is based on a claim
that use or reproduction by Licensee of the Netscape-owned portion of the
Netscape Innovation hereunder infringes any valid U.S. patent, copyright or
trade secret. Netscape will pay resulting costs, damages and legal fees finally
awarded against Licensee in such action which are attributable to such claim
provided that: (i) Licensee promptly notifies Netscape in writing of any such
claim; (ii) Netscape has sole control of the defense and all related settlement
negotiations; and (iii) Licensee cooperates with Netscape, at Netscape's
expense, in defending or settling such claim. Should a Netscape Innovation
become, or be likely to become in Netscape's opinion, the subject of
infringement of such copyright or trade secret, Netscape may (I) procure for
Licensee the right to continue using the same or (II) replace or modify it to
make it non-infringing. Netscape shall have no obligation or liability for, and
Licensee shall defend, indemnify and hold Netscape harmless from and against,
any claim based upon: (A) use of other than the unaltered version of the
Netscape Innovation, unless the infringing portion is also in the unaltered
version; (B) use, operation or combination of the Netscape Innovation with non-
Netscape programs, data, equipment or documentation if such infringement would
have
PSA
CONFIDENTIAL
35
<PAGE>
been avoided but for such use, operation or combination; (C) Licensee's or its
agent's activities after Netscape has notified Licensee that Netscape believes
such activities may result in such infringement; (D) compliance with Licensee's
designs, specifications or instructions for the Netscape Innovation; (E) any
modifications or marking of the Netscape Innovation not specifically authorized
in writing by Netscape; (F) any unauthorized use of any Netscape intellectual
property; (G) any content provided by Licensee and/or any material to which
users can link through such content; or (H) third party software. The foregoing
states the entire liability of Netscape and the exclusive remedy of Licensee
with respect to infringement of any intellectual property right, whether under
theory of warranty, indemnity or otherwise.
(b) Licensee acknowledges that it is responsible for any and all claims,
liabilities, losses, damages, expenses and costs (including reasonable
attorneys' fees and costs) relating to Licensee's use or reproduction of the
Netscape Innovation or Documentation, except to the extent that Netscape is
responsible under Section 15(a) above or such claims, liabilities, losses,
damages, expenses, and costs are found by a court of competent jurisdiction to
be Netscape's responsibility due to Netscape's negligence or willful misconduct.
16. Outside of the U.S. If Customer is located outside of the United States,
this section shall apply. (a) If Customer is required by law to make any
deduction or to withhold from any sum payable to Netscape by Customer hereunder,
(i) Customer shall effect such deduction or withholding, remit such amounts to
the appropriate taxing authorities and promptly furnish Netscape with tax
receipts evidencing the payments of such amounts, and (ii) the sum payable by
Customer upon which the deduction or withholding is based shall be increased to
the extent necessary to ensure that, after such deduction or withholding,
Netscape receives and retains, free from liability for such deduction or
withholding, a net amount equal to the amount Netscape would have received and
retained in the absence of such required deduction or withholding. (b) Les
parties aux presentes confirment leur volonte que cette convention de meme que
tous les documents y compris tout avis qui s'y rattache, soient rediges en
langue anglaise (translation: "The parties confirm that this Agreement and all
related documentation is and will be in the English language"). (c) If any
applicable law requires Customer to obtain technology import rights and complete
certain registration requirements in order for this Agreement to be enforceable
under such law, Customer hereby represents that Customer has duly obtained and
maintains valid technology import rights, and that Customer has duly completed
or will duly complete the registration formalities required by such law.
PSA
CONFIDENTIAL
36
<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DRKOOP.COM,
INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001073794
<NAME> DRKOOP.COM, INC.
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> JUN-30-1998 JUN-30-1999
<CASH> 2,696 85,953
<SECURITIES> 0 0
<RECEIVABLES> 0 965
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<CURRENT-ASSETS> 2,752 92,770
<PP&E> 139 827
<DEPRECIATION> (20) (170)
<TOTAL-ASSETS> 2,889 101,882
<CURRENT-LIABILITIES> 402 9,618
<BONDS> 0 0
0 0
0 0
<COMMON> 10 30
<OTHER-SE> 2,477 92,234
<TOTAL-LIABILITY-AND-EQUITY> 2,889 101,882
<SALES> 0 1,423
<TOTAL-REVENUES> 0 0
<CGS> 347 10,058
<TOTAL-COSTS> 1,773 7,063
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 13 36
<INTEREST-EXPENSE> (2,107) (15,662)
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