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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
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 September 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)
7000 North Mopac, Suite 400
Austin, Texas 78731
(Address of principal executive offices)
________________
(512) 583-5667 (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 X No
----- -----
(2) Yes X No
----- -----
As of October 31, 1999 there were 30,304,317 shares of the Registrant's
common stock outstanding.
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drkoop.com, Inc.
FORM 10-Q
For the Quarter Ended September 30, 1999
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Balance Sheets at September 30, 1999 (Unaudited) and
December 31, 1998....................................................3
Condensed Statements of Operations for the three and nine month
periods ended September 30, 1999 and 1998 (Unaudited)................4
Condensed Statements of Cash Flows for the nine months ended
September 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.................................11
Item 3. Quantitative and Qualitative Disclosures about Market
Risk................................................................18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................31
Item 2. Changes in Securities and Use of Proceeds...........................31
Item 3. Defaults Upon Senior Securities.....................................32
Item 4. Submission of Matters to a Vote of Security Holders.................32
Item 5. Other Information...................................................32
Item 6. Exhibits and Reports on Form 8-K....................................32
SIGNATURES....................................................................33
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>
September 30, December 31,
Assets 1999 1998
------------- ------------
Current assets: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 49,077 $ --
Trade accounts receivable, net 2,718 41
Prepaids and other 23,214 22
--------- ---------
Total current assets 75,009 63
--------- ---------
Equipment, furniture and fixtures, net 6,121 306
Investment in affiliate, at cost 5,000 --
Intangible assets, net 3,111 --
Other assets 7,252 11
========= =========
Total assets $ 96,493 $ 380
========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Trade accounts payable $ 4,432 $ 804
Accrued liabilities 5,591 520
Related party payables 202 1,193
Deferred revenue 5,562 --
Convertible note payable to stockholder, net of discount of $49
at December 31, 1998 -- 451
--------- ---------
Total current liabilities 15,787 2,968
--------- ---------
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 September 30, 1999
and December 31, 1998 -- 1
Common stock, par value of $.001; 75,000,000 shares authorized
at September 30, 1999 and 15,000,000 shares authorized at 30 8
December 31, 1998; 30,304,317 and 8,550,360 shares issued
and outstanding at September 30, 1999 and December 31, 1998
Additional paid-in capital 140,843 --
Deferred stock compensation (3,020) (1,425)
Accumulated deficit (57,147) (19,578)
--------- ---------
Total stockholders' equity (deficit) 80,706 (20,994)
--------- ---------
Total liabilities and stockholders' equity (deficit) $ 96,493 $ 380
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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drkoop.com, Inc.
Condensed Statements of Operations
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenue:
Content subscription and software license $ 459 $ -- $ 913 $ --
Advertising and sponsorship 2,402 -- 3,364 --
Other 49 -- 56 --
-------------------------------- -------------------------------
2,910 -- 4,333 --
-------------------------------- -------------------------------
Operating expenses:
Production, content and product development 2,390 1,847 5,535 2,802
Sales and marketing 18,585 649 28,643 996
General and administrative 2,246 867 5,091 1,687
Amortization of deferred stock compensation 839 -- 1,912 --
-------------------------------- -------------------------------
Total operating expenses 24,060 3,363 41,181 5,485
-------------------------------- -------------------------------
Loss from operations (21,150) (3,363) (36,848) (5,485)
Interest income 550 13 587 25
-------------------------------- -------------------------------
Net loss (20,600) (3,350) (36,261) (5,460)
Accretion of redeemable securitites to fair value -- -- (17,255) --
Dividend to preferred stockholders -- -- (9,147) --
-------------------------------- -------------------------------
Loss attributable to common stockholders $(20,600) $ (3,350) $ (62,663) $ (5,460)
================================ ===============================
Basic and diluted net loss per share attributable
to common stockholders $ (0.68) $ (0.39) $ (3.56) $ (0.68)
================================ ===============================
Weighted average shares used in computing basic
and diluted net loss per share attributable to
common stockholders 30,137 8,550 17,581 8,049
================================ ===============================
</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>
Nine Months Ended September 30,
-------------------------------
OPERATING ACTIVITIES: 1999 1998
---------- ----------
<S> <C> <C>
Net loss $ (36,261) $ (5,460)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,357 34
Amortization of deferred stock compensation 1,912 --
Provision for doubtful accounts 100 --
Interest accretion on convertible notes payable 94 --
Changes in assets and liabilities:
Accounts receivable (2,778) --
Prepaids and other assets (21,180) (181)
Accounts payable 3,628 418
Accrued liabilities 5,071 381
Related party payables (991) (80)
Deferred revenue 5,562 --
---------- ----------
Cash used in operating activities (42,486) (4,888)
========== ==========
Investing Activities:
Purchase of furniture, fixtures and equipment (6,483) (229)
---------- ----------
Cash used in investing activities (6,483) (229)
---------- ----------
Financing Activities:
Proceeds from issuance of preferred stock 3,500 5,454
Proceeds from issuance of convertible notes payable 5,775 --
Proceeds from exercise of stock options 323 --
Proceeds from issuance of common stock, net 88,448 --
---------- ----------
Cash provided by financing activities 98,046 5,454
---------- ----------
Increase / (decrease) in cash and cash equivalents 49,077 337
Cash and cash equivalents at beginning of period -- 8
---------- ----------
Cash and cash equivalents at end of period $ 49,077 $ 345
========== ==========
</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
SEPTEMBER 30, 1999
NOTE 1 - ORGANIZATION
drkoop.com, Inc. (the "Company"), a Delaware corporation, 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 Web sites, 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. Upon closing of
the initial public offering, each outstanding share of the Company's convertible
Series A and C preferred stock and mandatorily redeemable convertible (Series B)
preferred stock were automatically converted into shares 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
916,908 shares of common stock was 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 on Form S-1 filed with the
Securities and Exchange Commission (File No. 333-73459). The results of
operations for the three month periods ended September 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 nine
months ended September 30, 1999 and 1998, respectively, assumes the conversion
of all outstanding 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 deemed necessary as the Company's
historical capital structure is not indicative of the 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 September 30, Nine months ended September 30,
---------------------------------- -------------------------------
(in thousands, except per share data) 1999 1998 1999 1998
--------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Loss $ (20,600) $ (3,350) $ (62,663) $ (5,460)
============== ============= ============ ============
Basic and diluted:
Shares used in computing basic and diluted
net loss 30,137 8,550 17,581 8,049
============== ============= ============ ============
Basic and diluted net loss per share $ (0.68) $ (0.39) $ (3.56) $ (0.68)
============== ============= ============ ============
Pro forma:
Shares used above 30,137 8,550 17,581 8,049
Pro forma adjustment to reflect weighted
effect of assumed conversion of convertible
notes payable and preferred stock 10 5,845 5,557 2,748
-------------- ------------- ------------ ------------
Shares used in computing pro forma basic and
diluted net loss per share 30,147 14,395 23,138 10,797
============== ============= ============ ============
Pro forma basic and diluted net loss per $ (0.68) $ (0.23) $ (2.71) $ (0.51)
share
============== ============= ============ ============
</TABLE>
NOTE 4 - COMMITMENTS & CONTINGENCIES
Portal Agreements
Infoseek and Buena Vista
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 Web sites 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 be also 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 Web site 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
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term. The cash portion of this obligation is payable as approximately $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.
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 the agreements.
America Online.
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 carriage payments aggregating $89.0
million in cash. In addition, the Company provided AOL immediately vested
warrants (the "time warrants") to purchase drkoop.com, Inc. common stock and the
right to earn additional warrants based on performance (the "performance
warrants").
The immediately vested time warrants allow AOL to purchase 1,570,932 shares of
the Company's common stock for a purchase price of $15.94 per share (the opening
price on July 1, 1999). The immediately vested warrants 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. The immediately vested
warrants have been recorded at a fair value of $4.97 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; 0.75
volatility; risk-free interest rate of 5.5% and an expected life of 1 year. The
Company will recognize the costs associated with the Agreement and the
immediately vested time warrants ratably over the term of Agreement.
As noted above, the Company provided AOL the ability to earn additional
performance warrants, as follows:
. 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 an additional 2,749,131 shares of the Company's
common stock are not exercisable, and will not become exercisable unless the
AOL relationship delivers specified usage of a new interactive 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 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.
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The Company has currently not recorded any costs associated with the performance
based warrants. Should it become probable that AOL will meet the criteria to
earn the performance warrants the Company will record a charge in the period in
which it became probable that AOL would earn the warrants.
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.
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 claims are without merit and intends to defend this
lawsuit vigorously.
9
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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 underwriters 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 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.
NOTE 6 - RELATED PARTY TRANSACTION
Name and Likeness Agreement
The terms of the Company's historical agreements with Dr. C. Everett Koop
pursuant to which the Company obtained the ability to use his name and likeness
and provided to Dr. C. Everett Koop the right to receive a percentage of the
revenue received by the Company from certain activities. To date, these royalty
payments have been immaterial, aggregating $41,000 for the nine months ended
September 30, 1999. Effective August 30, 1999, the Company amended and restated
its agreement with Dr. C. Everett Koop. This amendment made the following
principal changes to the agreement:
. The term was extended for an additional five years;
. The obligation to make any payments to Dr. C. Everett Koop based on the
revenues of the Company was completely eliminated; and
. As the sole compensation to him for the modifications made in the
agreement and the services to be provided over its full term, Dr. C.
Everett Koop was granted options to acquire 214,400 shares of our common
stock at an exercise price of $17.88 per share (the public trading price
at the time of grant). The options vest at the rate of approximately
8,900 shares per month.
10
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NOTE 7 - SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Nine Months Ended
September 30,
- --------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <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 $ 1,912 $ -
- --------------------------------------------------------------------------------------------------------
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 $ 6,290 $ -
- --------------------------------------------------------------------------------------------------------
Conversion of preferred stock to common stock at IPO $ 35,660 $ -
- --------------------------------------------------------------------------------------------------------
Issuance of warrants $ 10,052 $ -
- --------------------------------------------------------------------------------------------------------
</TABLE>
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 condensed 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 do not intend 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 Web site that provides
users with comprehensive healthcare information and services, as well as
affiliate relationships with portals, other Web sites, healthcare organizations
and traditional media outlets. Our Web site, www.drkoop.com, is a healthcare
--------------
portal which integrates dynamic healthcare content on a wide
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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 nine months ended September 30, 1999
were primarily revenues from content subscription and software licensing fees,
and advertising and sponsorship fees.
Content 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 Web site 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
is 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 Web site 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 nine months ended
September 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 Web
site. Advertising rates, measured on a cost per thousand impressions basis, are
dependent on whether the impressions are for general rotation throughout the
drkoop.com Web site or for target audiences and properties within specific areas
of the Web site.
Sponsorship revenues are derived from contracts ranging from one to fifty 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 Web site that enhance the
promotional objective of the sponsor. Costs associated with the development of
the web pages are minimal and are expensed when incurred. 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.
Dependent upon the complexity of an advertising or sponsorship revenue
arrangement, we may provide initial site design consulting and engineering
services which require the development and implementation of specific Web site
enhancements prior to launching a co-branded site. Revenues and related costs
for initial site design and engineering services are recognized under contract
accounting.
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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 Web site, www.drkoop.com, was launched July 1998. Revenues
--------------
increased to $2.9 million and $4.3 million for the three and nine months ended
September 30, 1999, respectively, as compared to $0 revenues for the comparable
periods of 1998. Revenue from content subscription and software licenses for
the quarter ended September 30, 1999 totaled $459,000 or 16% of total revenues,
and $913,000 or 21% of total revenue for the nine months then ended. All
content subscription and software license revenue is considered recurring
revenue. The increase in content subscription and software license revenue is
attributable to the continued expansion of the Community Partner Program,
resulting in the addition of 15 new contracts during the three months ended
September 30, 1999, bringing the total number of new contracts to 30 for the
nine months ended September 30, 1999.
Advertising and sponsorship revenues totaled $2.4 million, or 83% of total
revenues for the quarter ended September 30, 1999, and $3.4 million, or 78% of
total revenues, for the nine months ended September 30, 1999. Advertising and
sponsorship revenues include related services revenues of $229,000, or 8% of
total revenue for the quarter ended September 30, 1999, and $432,000, or 10% of
total revenue for the nine months then ended. Additionally, included in
advertising and sponsorship revenues were recurring revenues from sponsorship
agreements of $864,000, or 30% of total revenues, and $1.2 million, or 27% of
total revenues, for the quarter and nine months ended September 30, 1999,
respectively. The remaining advertising revenues of $1.3 million, or 45% of
total revenues, and $1.8 million, or 42% of total revenues, for the quarter and
nine months ended September 30, 1999, respectively, 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
Web site resulting in a higher number of impressions delivered.
Other revenues totaled $49,000 or 2%, of total revenues, for the quarter ended
September 30, 1999, and $56,000, or 1% of total revenues, for the nine months
ended September 30, 1999. Other revenues consist primarily of fees paid for
successful screenings of potential clinical trials participants.
Included in content subscription and software licensing revenues are barter
transactions that accounted for $30,000 and $80,000 for the three and nine
months ended September 30, 1999, respectively. Barter revenues accounted for
$160,000 and $276,000 of the advertising and sponsorship revenues for the three
and nine months ended September 30, 1999, respectively. In total, barter
revenues represented $190,000, or 7%, and $356,000, or 8%, of total revenues for
the quarter and nine months ended September 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 Web site operations expense.
Production, content and product development expense increased by $543,000, or
29%, from $1.8 million for the quarter ended September 30, 1998 to $2.4 million
for the quarter ended September 30, 1999, and by $2.7 million, or 98%, from $2.8
million for the nine months ended September 30, 1998 to $5.5 million for the
nine months ended September 30 1999. 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
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increase in content licensing required as our Web site 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 expense 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 $17.9 million, from $649,000 to $18.6 million for the quarters
ended September 30, 1998 and 1999, respectively, and by $27.6 million, from
$996,000 to $28.6 million for the nine months ended September 30, 1998 and 1999,
respectively. The primary reasons for the increases were costs associated with
the distribution agreements with major portals totaling $10.1 million and $12.9
million for the three and nine months ended September 30, 1999, respectively, as
compared to $0 for the same periods in 1998. Advertising and promotion
expenses for the drkoop.com Web site totaled $5.7 million and $10.6 million for
the three and nine months ended September 30, 1999, respectively, as compared to
$390,000 and $621,000 for the three and nine months ended September 30, 1998,
respectively. Additionally, we experienced significant growth in the numbers of
sales and marketing personnel, resulting in salary and related expenses of
approximately $2.8 million and $5.1 million for the three and nine months ended
September 30, 1999, respectively, as compared to $259,000 and $375,000 for the
three and nine months ended September 30, 1998, respectively. 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 $1.4 million, or 159%, from $867,000 to $2.2 million for
the quarters ended September 30, 1998 and 1999, respectively, and by $3.4
million, or 202% from $1.7 million to $5.1 million for the nine months periods
ended September 30, 1998 and 1999, respectively. The primary reasons for the
increases were the addition of personnel, increased professional fees and the
amortization of the intangible assets. 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.
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, $839,000 and $1.9 million
were amortized in the three and nine months ended September 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 and interest expenses related to our financing obligations,
particularly on the convertible notes payable prior to conversion and capital
leases on computer equipment. Net interest income was $550,000 and $13,000 for
the three months ended September 30, 1999 and 1998, respectively, and $587,000
and $25,000 for the nine months ended September 30, 1999 and 1998, respectively.
The increase was due to higher average net cash and cash equivalents balances
resulting from the investment of the proceeds from our IPO completed in June
1999.
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Income tax. We have incurred net losses to date. As of September 30, 1999, we
had net operating loss carryforwards of $43.5 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
Until our initial public offering in June 1999, which raised net proceeds of
$88.4 million, we have financed our operations primarily through equity sales
and convertible notes payable debt financing. At September 30, 1999 we had
$49.1 million in cash and cash equivalents and working capital of $59.2 million.
We currently have a backlog of $25.1 million in contracts for which the services
have not yet been delivered.
Cash used in operating activities for the nine months ended September 30, 1999
of $42.5 million was due primarily to a net operating loss of $36.3 million and
increases in accounts receivable of $2.8 million, prepaid expenses of $21.2
million and a decrease in related party payables of $1.0 million. These amounts
were offset by non cash charges for amortization of deferred stock compensation
of $1.9 million and depreciation and amortization of $2.4 million and increases
in accounts payable of $3.6 million, accrued liabilities of $5.1 million and
deferred revenue of $5.6 million, respectively. The increases in accounts
payable and accrued liabilities are attributable to the increased expenses
associated with the continued development and promotion of our Web site. The
increase in prepaid expenses is primarily the result of prepayments required
under the terms of various portal and content contracts. The increases in
accounts receivable and deferred revenue are the results of the increases in our
client base. Cash used in operating activities for the nine months ended
September 30, 1998 of $4.9 million was due primarily to a net operating loss of
$5.5 million and an increase in prepaid assets of $181,000, offset by increases
in accounts payable of $418,000 and accrued liabilities of $381,000.
Cash used in investing activities was $6.5 million and $229,000 for the nine
months ended September 30, 1999 and 1998, respectively. Net cash used for
investing activities for these periods consisted primarily of capital
expenditures for computer equipment and software.
Net cash provided by financing activities was $98.0 million for the nine months
ended September 30, 1999, compared to $5.5 million during the same period of
1998. Net cash provided by financing activities resulted primarily from proceeds
from our initial public offering for which we received approximately $88.4
million in net proceeds and, to a lesser extent, proceeds from the issuance of
Series C Convertible Preferred Stock for $3.5 million, issuance of convertible
notes payable resulting in $5.8 million of proceeds, and the exercise of stock
options resulting in $323,000 of proceeds. The $5.5 million in proceeds
received during the first nine months of 1998 was from the issuance of preferred
stock.
The terms of our historical agreements with Dr. C. Everett Koop pursuant to
which we obtained the ability to use his name and likeness and provided Dr.
C. Everett Koop the right to receive a percentage of the revenue received by our
company from certain activities. To date, these royalty payments have been
immaterial, aggregating $41,000 for the nine months ended September 30, 1999.
Effective August 30, 1999, we amended and restated our agreement with Dr. C.
Everett Koop. This amendment made the following principal changes to the
agreement:
. The term was extended for an additional five years;
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. The obligation to make any payments to Dr. C. Everett Koop based on the
revenues of our company was completely eliminated; and
. As the sole compensation to him for the modifications made in the
agreement and the services to be provided over its full term, Dr. C.
Everett Koop was granted options to acquire 214,400 shares of our common
stock at an exercise price of $17.88 per share (the public trading price
at the time of grant). The options vest at the rate of approximately
8,900 shares per month.
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.
State of Readiness
In our analysis of the state of readiness for Y2K, we have focussed on two
areas: corporate information technology and Internet information delivery
systems.
Corporate information technology: We have tested and verified the Y2K readiness
of our standard software installation, which is loaded on each employee's
computer system. The evaluation included the operating system as well as mission
critical applications required to function on a daily basis, such as e-mail,
contact management, word processing, spreadsheet, database and presentation
software. In addition, all of our mission critical centralized applications have
been updated to the latest versions, which are stated to be Y2K compliant by the
vendor, and/or verified compliant by vendor provided Y2K test tools.
The remaining tests relate to hardware and support equipment issues, networks
and infrastructure (including elevators, heating and air conditioning systems,
and security systems), and special purpose software applications. We will
perform a complete inventory of hardware and software in use by various
departments throughout the company, and work with vendors to verify compliance.
The inventory process will be followed by a build-up of our test environment,
which will include a snapshot of our mission-critical servers and a number of
workstations loaded with software in use throughout the company. Tests will be
conducted in an environment that is
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identical to, but isolated from, our existing corporate network. Issues that
arise during these tests will be addressed and software updates applied to all
workstations as needed. Any information technology components that are found to
be non-compliant will be upgraded or replaced with compliant components.
In parallel with the testing activity we will develop a contingency plan, with
alternative methods to existing processes, and preparations for unexpected
complications or failures in environments that are out of our control, such as
supply chain, environmental and communication dependencies. We will continue to
work with business partners and current suppliers of services and products, and
identify areas that need attention.
Internet information delivery systems: We are in the process of relocating our
site to a new facility. As part of this move, all information technology
components are being replaced. One purchase requirement for these components
was a statement of Y2K readiness from the vendor. As the new site is being
assembled, the team will conduct a Y2K readiness assessment. This assessment
will encompass all areas including product delivery, reporting, and support
systems.
First, a comprehensive audit of all hardware, software and web site dependencies
will be carried out to collect Y2K compliance information. Computers, network
devices, and dedicated appliances will be classified as (a) compliant, (b)
update needed, or (c) non-compliant after research is performed with appropriate
vendors and manufacturers. Commercial software products will be reviewed and
classified similarly. Additionally, statements of Y2K compliance will be
obtained from critical service providers.
Second, third-party tools will be used to verify Y2K compliance where possible.
These utilities will confirm proper BIOS date-handling and software maintenance
patch levels. They will also report on violations against a database of known
Y2K problems.
Next, a series of Y2K simulations will be run against the site as a whole.
These simulations will test for the proper operation of all hardware and
software components as several Y2K-related date transitions occur.
Finally, any corrective actions found to be required will be taken to bring any
components determined to be non-compliant to an acceptable state of compliance.
Risks. We are unable to assess the Y2K readiness of the Internet as a whole.
Since our business depends on visitors reaching our site, if a significant
number of Internet Service Providers have Y2K related problems, our traffic may
suffer.
Uninterruptible power supplies (UPS) and backup generators protect our Internet
information delivery site, our Internet Service Provider, and our corporate
infrastructure systems. While we are prepared for significant power outages, we
may not be able to continue to operate if electric service is unavailable for
extended periods. Similarly, extended outages elsewhere may affect the ability
of our visitors to reach us.
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
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our business, results of operations and financial condition. Further, as noted
above we are heavily dependent on the accuracy of certifications provided by
third party vendors and the effectiveness of our testing tools and methods.
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.
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 December 1, 1999.
New Accounting Pronouncements
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
We are not subject to any meaningful market risks related to currency, commodity
prices or similar matters. We are sensitive to short-term interest rates
fluctuations to the extent that such fluctuations impact the interest income we
receive on the investment of the proceeds from our initial public offering.
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;
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. 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.
Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors, not all of which are in 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
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. technical difficulties or system downtime affecting the operation of our
Web site.
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 September 30, 1999, had an accumulated deficit of approximately $57.1
million, which included $17.3 million for accretion to fair value of the
mandatory redeemable Series B convertible preferred 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 healthcare network
that 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 Web site
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.
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We are a party to an amended and restated agreement, dated August 30, 1999, 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 amendment and extension of the Koop agreement, we
granted Dr. C. Everett Koop options to purchase 214,400 shares of common stock
for an exercise price of $17.88 per share.
The Koop agreement is exclusive and for a term of five years, subject to
automatic renewal for additional five-year terms unless it is terminated by
either party within 120 days of the end of each term.
If the Koop Agreement is terminated other than due to 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 lose all rights to use Dr. C. Everett Koop's name and likeness on
the 90th day after such termination. 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 Web site 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 Web site.
The potential also exists that if Dr. C. Everett Koop ends his affiliation 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
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health and related content on three Web sites 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 Web site. 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 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.
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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 generate advertising and other revenues.
Outside parties on which we depend include unrelated Web site operators that
provide links to drkoop.com, providers of healthcare content and portals which
provide us with carriage and ad serving. 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,
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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 Web site 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. 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 in our company. 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 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, we could have difficulty in integrating the acquired 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.
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 Web site. We must
continue to expand and adapt our network infrastructure to accommodate
additional users, increase transaction volumes and 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 Web site 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.
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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 Web site or which is
accessed from our Web site.
Because users of our Web site 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 Web
site through links to other Web sites 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.
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 Web site
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 are assessing 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,
25
<PAGE>
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."
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 section or elsewhere in
this report, 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.
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 Web site, and that local healthcare organizations and other
participants in the healthcare industry will affiliate with us. Our business
model also assumes that the services provided by our network will be supported
in part by advertising, sponsorship and similar activities purchased by
companies with commercial interests in the healthcare industry and that this
practice will be accepted by consumers. Our 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 Web sites offering users healthcare content, products and
services is vast and increasing at a rapid rate. These companies compete with us
for users, advertisers, e-
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<PAGE>
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 Web sites 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 Web
site;
. 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:
. 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. We must also meet or exceed evolving consumer
expectations and competitive standards regarding medical ethics, Internet ethics
and privacy concerns. 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.
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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.
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 Web site 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
Web site 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
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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 Web site to their Web site. 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 Web site 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 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
Web site, 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;
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. 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 Web site 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 Web site. 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 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.
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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. We believe that the claims are without merit and intends to
defend this lawsuit vigorously.
Item 2. Changes in Securities and Use of Proceeds
During the quarter ended September 30, 1999, we issued the following equity
securities in transactions exempt from registration under the Securities Act of
1933:
. On July 1, 1999, we issued warrants to purchase up to 5,890,995 shares
of common stock to America Online, Inc. in connection with the
establishment of a business relationship. The terms of the relationship
and the warrants (including the consideration and terms of exercise) are
more fully described in the notes to the condensed financial statements
provided with this report and in our Current Report on Form 8-K dated
July 6, 1999. This issuance was exempt from registration by operation of
Section 4(2) of the Securities Act and Regulation D promulgated
thereunder.
. During the quarter we issued an aggregate of 703,396 shares of common
stock upon the issue of compensatory stock options granted prior to our
initial public offering at various exercise prices. Total cash
consideration received by us aggregated $76,095. These issuances were
exempt from registration by operation of Rule 701 promulgated under the
Securities Act.
In June 1999, we completed our initial public offering through an
underwritten public offering pursuant to a Registration Statement on Form S-1
(File No. 333-73459). These funds have been the principal source of liquidity
for us during the quarter ended September 30, 1999
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and were used to fund operating losses and make capital expenditures as
described in the financial statements included with this report.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
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 September 30, 1999.
Report on Form 8-K filed on July 7, 1999: The text of a joint press release
between our company, drkoop.com, Inc and America Online, Inc. dated July 6,
1999, announcing a four-year strategic alliance between the two companies.
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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: November 10, 1999 /s/ Susan Georgen Saad
-------------------------------
Name Susan Georgen Saad
Title: Chief Financial Officer
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EXHIBIT INDEX
Exhibit Number Exhibit Title
10.49 Amended Name & Likeness Agreement by and between
Company and C. Everett Koop, M.D.
10.50+ Interactive Services Agreement by and between
Company and America Online, Inc.
10.51+ Development and Services Agreement by and between
Company and America Online, Inc.
10.52 Registration Rights Agreement by and between
Company and America Online, Inc.
10.53 Warrant to Purchase 1,570,932 shares of Common
Stock Issued to America Online dated July 1, 1999.
10.54+ Performance Warrant to Purchase 1,570,932 shares
of Common Stock Issued to America Online dated
July 1, 1999.
10.55+ Performance Warrant to Purchase 2,749,131 shares
of Common Stock Issued to America Online dated
July 1, 1999.
10.56 Lease Agreement by and between Company and Plaza 7000, Ltd.
27.1 Financial Data Schedule
+ Confidential Treatment Requested
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EXHIBIT 10.49
AMENDED AND RESTATED NAME AND LIKENESS AGREEMENT
This AMENDED AND RESTATED NAME AND LIKENESS AGREEMENT (the "Agreement") is
---------
made and entered as of August 30, 1999 by and among C. Everett Koop, M.D.
("Koop") and drkoop.com, Inc., a Delaware corporation ("DKC" or the "Company"),
---- --- -------
formerly Empower Health Corporation.
RECITALS:
A. On January 5, 1999, Koop and DKC entered into a predecessor to this
Agreement for the purpose of conveying to DKC certain rights to use the name,
likeness and other attributes of Koop (the "January Agreement").
-----------------
B. The parties, by entering into this Agreement, intend to supersede the
January Agreement in all respects and, from and after the date hereof, to have
this Agreement replace such January Agreement.
AGREEMENT:
NOW THEREFORE for and in consideration of the premises, and the mutual
covenants and promises herein set forth, the parties hereto hereby agree as
follows:
1. Term and Termination: The term of this Agreement (the "Term") will
-------------------- ----
begin effective on the date hereof and will extend for an initial term of five
years. Unless otherwise terminated as provided for below, the Agreement will
automatically renew for consecutive five-year terms. The Agreement may be
terminated by either party upon written notice given not more than 270 and not
less than 180 days before the expiration of any such five year period. This
Agreement may also be terminated by either party in the event of a material
breach or termination is not the result of a material breach or default by DKC
that is not cured after written notice as provided in the immediately preceding
sentence, DKC shall have the right for three years following termination to use
the Koop Name (the "Rebranding Period"). During the Rebranding Period, the
-----------------
Company's right to use the Koop Name shall be non-exclusive except that (i) such
usage shall be exclusive with respect to any products or services involving or
related to Internet-based health information, healthcare related software
services and products, or electronic commerce and (ii) the Koop Name may not be
licensed or otherwise conveyed to any Direct Competitor of DKC as identified on
Attachment B. In the event that termination occurs as a result of a material
- ------------
breach or default by DKC that is not cured after written notice as provided
herein, all rights to use the Koop Name (as defined below) shall cease on the
90th day after such termination.
2. Right To Use Services: During the Term and subject to all other
---------------------
provisions of this Agreement, Koop agrees that DKC shall have the right to use
the Koop name, image or likeness (hereinafter the "Koop Name") in connection
---------
with the Company's Internet-based health information network, healthcare related
software services and products or electronic commerce (collectively the
"Products") in accordance with Section 5 below.
--------
<PAGE>
3. Fees and Payment: For all rights and privileges and services rendered
----------------
or provided for hereunder by Koop, DKC shall grant to Koop, pursuant to the
general terms of its current stock option plan, options to purchase 214,400
shares of the common stock of DKC for an exercise price of $17.88 per share.
These options will vest (i.e., become exercisable) at a rate of 8,933.33 options
per month (subject to adjust for stock splits and similar matters) provided that
at the end of each such month this Agreement shall remain in full force and
effect; provided, however, that all such options shall vest and become
exercisable at such time as this Agreement shall be terminated due to the
material breach of this Agreement by DKC in accordance with the default
provisions contained in Sections 1 and 6. The foregoing options have been or
will be approved by a compensation committee consisting solely of non-employee
directors, or by the full board of directors of DKC (with Koop abstaining), for
purposes of Rule 16b-3 under the Securities Exchange Act. The parties
acknowledge that the January Agreement provided for a continuing royalty on DKC
revenue and expressly acknowledge that the obligation of DKC to pay, and the
right of Koop to receive, any such royalty is terminated effective July 1, 1999.
4. Competitive Protection: Effective as of the date of this Agreement and
----------------------
continuing throughout the Term, Koop agrees that Koop will not render services
in the form of advertising and/or publicizing of any items, products or services
which are directly competitive with DKC's Products including, without
limitation, products or services involving or related to any Internet-based
health information network, healthcare-related software services and products or
electronic commerce (hereinafter collectively the "Competitive Products") nor
--------------------
will Koop permit or authorize the use of the Koop name and/or likeness
(photograph and/or drawing), voice, signature and/or endorsement directly or
indirectly, in connection with any such Competitive Products or by any Direct
Competitor as identified on Attachment B, except as may be used for the non-
------------
profit, non-commercial activities of the Koop Institute provided such activities
are not related in any way to the promotion of any Competitive Products or any
Director Competitor.
Without limiting the generality of the foregoing, Dr. Koop shall not
directly or indirectly participate in the development, production or promotion
of any Competitive Products or the products or services of any Direct Competitor
during the Term of this Agreement or any renewal term or during the Rebranding
Period, if any.
5. Right of Review: The following elements of each Product shall be
---------------
subject to Koop's prior review and written approval, which approval shall not be
unreasonably withheld and shall be rendered within ten working days of receipt
of the element of the Product. Koop shall have the right to delegate his
approval rights hereunder to a Representative (as defined in Section 10 below)
with the approval of DKC, such approval not to be unreasonably withheld .
(i) Content and format, including manuscripts and other written
materials included with the Products, including drafts, and the final version.
(ii) Extent and content of all medical and technical information.
(iii) Professional medical consultants and advisors.
(iv) Title.
(v) Credit.
<PAGE>
(vi) Means of advertising, promoting and selling the product,
including the Koop Name.
(vii) All advertising and promotional materials created, developed or
used in connection with the Products.
(viii) Any use of the Koop Name.
(ix) Any use not expressly contemplated by this Agreement.
DKC and Koop shall work together to establish systems and procedures for
updating the Products based on advances in the field of medicine.
6. Default Provisions:
------------------
(a) In the event that either party ("Defaulting Party")
----------------
(i) Materially defaults in the performance of any of its duties
or obligations set forth in this Agreement and such default is not substantially
cured within thirty (30) days after written notice is given by the other party
specifying the default; or
(ii) Defaults in the payment of any amount due to the other
party under this Agreement and does not cure the default within thirty (30) days
after written notice is given by the other party specifying the default; and
(iii) Provided, that upon a default under Section 6(i) and/or
(ii) by one party under this Agreement, the cure period for the next default by
such party shall be reduced (but not below ten days) by ten (10) days.
Then the other party may, by giving written notice to such effect to the
Defaulting Party, terminate this Agreement as of the date specified in such
notice of termination.
(b) Notwithstanding anything to the contrary herein contained, the
termination of the Agreement shall not relieve the parties of their obligations
existing at or prior to termination.
7. Obligations Limited to Payments: The obligations to Koop hereunder
-------------------------------
shall be fully performed and discharged as stipulated in Section 3, except for
those obligations that arise pursuant to the provisions for indemnifications
contained in Section 9. It is understood that Koop is not an employee of DKC and
shall not be entitled to any rights or benefits granted to employees of DKC by
reason of the rendering hereunder of services by Koop.
8. Covenants Regarding Public Image: DKC and Koop each covenants and
--------------------------------
agrees that it will not knowingly permit, do or commit any act or thing that
would degrade, tarnish or deprecate or disparage the other party or the public
image of the other party in society or standing in the community, or prejudice
the other party, and that it will terminate such activities promptly upon
notice, it being understood that this Section 8 shall not apply to any dispute
involving this Agreement between Koop and DKC.
<PAGE>
9. Indemnity: DKC agrees to indemnify and hold harmless Koop, his
---------
employees, assignees, and heirs against any and all claims, damages, liabilities
(including, but not limited to, liability for personal injury and liability for
breach of confidentiality), costs and expenses, including without limitation,
reasonable legal fees and costs arising out of the use of any material furnished
by DKC in connection with the services performed, or resulting from any patient
or third party action of any kind, or resulting in any way from the sale of
Products pursuant to this Agreement, or incurred for or by reason of the breach
of DKC of any of the obligations, warranties, agreements, covenants or
representations herein contained. Koop shall provide prompt written notice of
any claim hereunder and DKC shall have the right to defend same.
10. Incapacity or Death of Dr. Koop. The rights granted to DKC herein are
-------------------------------
intended to survive the incapacity or death of Dr. Koop. Upon the occurrence of
any such event, all actions with respect to Koop hereunder, including without
limitation the approval rights provided in Section 5, shall be exercisable on
behalf of Koop by another person (the "Representative"), who, at the execution
--------------
date of this agreement, is hereby designated by Koop to be his son: Alan Koop,
and, in the event of Alan Koop's death, to be Koop's granddaughter: Dr.
Jennifer Koop.
If prior to the death of Dr. Koop, he is pronounced to be incapacitated
(i.e., as being incapable of managing or conducting his own business affairs due
to physical or mental infirmity) by his Representative and Koop's son-in-law:
Gordon Thompson (such determination to be made only in association with a
physician chosen by and mutually acceptable to DKC and the Representative), then
said Representative shall thereafter and for so long as Koop is incapacitated
have full right to take any and all acts on behalf of Koop hereunder.
Any Representative appointed in accordance with this Section 10 shall have
full right to take any and all acts on behalf of Koop hereunder and DKC may rely
on such acts as the lawful and duly authorized acts of Koop.
11. Notices: Any notice or other communication (including payment
-------
hereunder) required or permitted to be given hereunder shall be in writing and
shall be hand delivered or sent next-day delivery by a company where a receipt
is given to the address as follows:
To DKC: drkoop.com, Inc.
Attention: President
8920 Business Park Drive
Suite 200
Austin, TX 78759
To Koop: C. Everett Koop, M.D.
Koop Institute at Dartmouth
College Street
Hanover, NH 03755
and
<PAGE>
C. Everett Koop, M.D.
3 Ivy Pointe Way
Hanover, NH 03755
Any such notice, direction or other instrument aforesaid, if delivered,
shall be deemed to have been given or made on the date on which it was delivered
or if sent next-day delivery shall be deemed to have been given or made on the
day following the day on which it was sent provided that any one of the parties
hereto may change its address by written notice to the other according to the
terms hereof and in such event this paragraph shall be deemed to be amended
accordingly.
12. Informed Consent, Confidentiality and Security: DKC represents and
----------------------------------------------
warrants that when and if it introduces a program identified here as "Personal
Medical Records" that it will obtain appropriate and fully informed patient
consent to the receipt, retention, use and transfer of that patient's personal
or medical data and that such informed consent complies with all applicable
federal, state and local laws and regulations. DKC further represents and
warrants that it shall take reasonable precautions to assure accuracy of and to
protect against negligent disclosure of and unauthorized access to all patients'
personal and medical data.
13. Other Representations and Warranties:
------------------------------------
By DKC: DKC represents and warrants that:
1. It has the right to enter into this Agreement and that it is free
to grant the rights granted herein.
2. The Products will not infringe the patent, copyright, trade
secret, or property rights of any third party.
3. All aspects of the product, distribution and promotion of the
Products shall comply in all material respects with all
applicable laws and regulations.
4. It is not a party to any agreement that will be breached by or
that prohibits it entering into or performing this Agreement.
By Koop: Koop represents and warrants that:
1. He has the right to enter into this Agreement and that it is free
to grant the rights granted herein.
2. He is not a party to any agreement that will be breached by or
that prohibits it entering into or performing this Agreement.
3. DKC may apply for trademarks which incorporate the Dr. Koop name.
4. Koop has the right to enter into this Agreement and that he is
free to grant the rights granted herein.
<PAGE>
14. Trademark Assignment and License: DKC represents and warrants that it
--------------------------------
has filed applications based on actual use with the United States Trademark
Office to register various marks, the status of which are as follows:
(i) DR. KOOP'S COMMUNITY: application filed with no pending number
assigned as of the execution of this Agreement; and
(ii) drkoop.com: application filed with no pending number assigned as
of the execution of this Agreement.
All of the above, hereinafter the "Trademarks," are referenced for the good
and services described herein. Upon termination of the Agreement and Rebranding
Period (if any), DKC shall assign its right, title and interest in the
Trademarks including the goodwill contained therein to Koop and any other marks
registered by DKC pursuant to this Agreement which include the word Koop.
Except as set forth herein, DKC acknowledges that it has no rights in the
Trademarks and that nothing contained in this Agreement or in any other document
shall vest any ownership rights in the Koop name.
15. Miscellaneous:
-------------
(a) Ownership and Publicity: Except as granted herein, DKC does not
and may not claim any right, title or interest in or to Koop's name or likeness,
and acknowledges that all rights therein are and remain the property of Koop.
(b) Insurance: Prior to sale, promotion or distribution of any
---------
Product other than reasonable, limited test marketing, DKC shall secure all
necessary and customary insurance, including a standard comprehensive general
liability insurance policy providing standard product liability protection,
directors and officers insurance and errors and omissions insurance listing Koop
as a named insured. Such insurance shall be in a form reasonably acceptable to
counsel for Koop and shall require the insurer to give Koop at least thirty (30)
days' prior written notice of any material modifications or cancellations.
(c) Entire Agreement: This Agreement constitutes the complete and
----------------
exclusive statement of the agreement between Koop and DKC with respect to the
subject matter herein set forth and supersedes all prior agreements by and
between the parties including, specifically, the January Agreement.
(d) Amendments: This Agreement may not be amended, altered or
----------
terminated except in writing executed by or on behalf of each party.
(e) Inurement: This Agreement shall be binding upon the parties
---------
hereto and their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns.
(f) Language: The language used in this agreement shall be deemed to
--------
be language chosen by the parties thereto to express their mutual intent and no
rule of strict construction against any party shall apply to any term or
condition thereof
<PAGE>
(g) Governing Law: THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(h) Termination: Upon any termination and except as provided for
-----------
herein, all rights to use Dr. Koop's name and likeness shall terminate.
(i) Arbitration: Any controversy or claim arising out of or relating
-----------
to this Agreement, or the breach thereof, shall be settled by binding
arbitration in accordance with the Commercial Rules of the American Arbitration
Association by a single arbitrator in a location to be agreed to by the parties,
and judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof and shall not be appealable.
(j) Gender: Wherever herein the singular number is used, the same
------
shall include the plural, and the masculine gender shall include the feminine
and neuter genders and vice versa, as the context may require.
(k) Specific Performance. The rights and obligations granted herein,
--------------------
including without limitation the use of the name, likeness, personality and
other public attributes of Dr. C. Everett Koop, are extremely unique and
therefore the parties acknowledge that money damages will generally not be a
suitable remedy and therefore each agree that the rights and obligations granted
herein may be specifically enforced.
(l) Counterparts: This Agreement may be executed in counterparts,
------------
each of which shall constitute an original but all of which taken together shall
constitute but one agreement.
16. Assignment and Change of Control: Neither party may assign its rights
--------------------------------
and obligations under this Agreement without the prior written consent of the
other. In the event of a change of control of DKC as hereinafter defined, this
Agreement shall terminate and all rights in the Koop Name granted hereunder
immediately revert to Koop. A Change of Control shall be defined as set forth in
Attachment A.
- ------------
(Signature Page Follows)
<PAGE>
IN WITNESS WHEREOF THIS AGREEMENT IS EXECUTED AS OF THE DATE FIRST
WRITTEN ABOVE.
drkoop.com, Inc.
- ------------------------------------ ----------------------------------
C. Everett Koop, M.D. Donald W. Hackett, President
<PAGE>
ATTACHMENT A
------------
For purposes of this Agreement "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial
ownership within the meaning of rule 13d-3 promulgated under the Exchange Act,
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
-------- -------
constitute a Change in Control: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of a conversion or
exchange privilege in respect to outstanding convertible or exchangeable
securities), (B) any acquisition by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, (D) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation involving the
Company, if, immediately after such reorganization, merger or consolidation,
each of the conditions described in clauses (i), (ii) and (iii) of section (3)
of this definition shall be satisfied; and provided further that, for purposes
-------- -------
of clause (B), if any Person (other than the Company or any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the beneficial owner of 20%
or more of the Outstanding Company Common Stock or 20% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the Company
and such Person shall, after such acquisition by the Company, become the
beneficial owner of more than an additional 5% of the Outstanding Company Common
Stock and such beneficial ownership is publicly announced, such additional
beneficial ownership shall constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least 66-2/3% of such
Board; provided, however, that any individual who becomes a director of the
-----------------
Company subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by the vote of at least 66-2/3% of
the directors when comprising the Incumbent Board shall be deemed to have been a
member of the Incumbent Board; and provided further, that no individual who was
----------------
initially elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall be deemed to have been a member of the Incumbent Board;
(3) approval by the stockholders of the Company of a reorganization, merger
or consolidation unless, in any such case, immediately after such
reorganization, merger or consolidation, (i) more than 60% of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined voting
power of the then outstanding securities of such corporation entitled to vote
<PAGE>
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation an in substantially the same proportions
relative to each other as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may be, (ii) no
Person (other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation resulting from such
reorganization, merger or consolidation (or any corporation controlled by the
Company) and any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of such corporation or
20% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors and
(iii) at least 66-2/3% of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such reorganization, merger or
consolidation; or
(4) approval by the stockholders of the Company of (i) a plan of complete
liquidation or dissolution of the Company or (ii) the sale or the disposition of
all or substantially all of the assets of the Company other than to a
corporation with respect to which, immediately after such sale or other
disposition, (A) more than 60% of the then outstanding shares of common stock
thereof and more than 60% of the combined voting power of the then outstanding
securities thereof entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such sale or other disposition and in
substantially the same proportions relative to each other as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(B) no Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or such corporation (or any
corporation controlled by the Company) and any Person which beneficially owned,
immediately prior to such sale or other disposition, directly or indirectly, 20%
or more of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of common stock thereof
or 20% or more of the combined voting power of the then outstanding securities
thereof entitled to vote generally in the election of directors and (C) at least
66-2/3% of the members of the board of directors thereof were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition.
<PAGE>
ATTACHMENT B
------------
Direct Competitors shall include the following, which list shall be updated
from time to time upon delivery by DKC to Koop of parties that should be added
because they have become material competitors in the marketplace or deleted.
Any disagreement to such an update shall be resolved by arbitration in
accordance with Section 14(i).
1. Accesshealth.com
2. Ahn.com
3. Betterhealth.com
4. Healthcentral.com
5. Healtheon/WebMD
6. Healthgate.com
7. Intelihealth.com
8. Mayohealth.org
9. Mediconsult.com
10. Onhealth.com
11. Thriveonline.com
12. American Online
13. Microsoft
14. Yahoo!
15. Excite@home
16. Lycos Corporation
17. Infoseek/The Walt Disney Company
18. PlantRx
19. Drugstore.com
<PAGE>
20. IMS Health, Inc.
21. McKesson/HBOC
22. Synoptics
<PAGE>
EXHIBIT 10.50
Final Execution
CONFIDENTIAL
INTERACTIVE SERVICES AGREEMENT
------------------------------
This Interactive Services Agreement (this "Agreement"), effective as of
July 1, 1999 (the "Effective Date"), is made and entered into by and between
America Online, Inc. ("AOL"), a Delaware corporation, with its principal offices
at 22000 AOL Way, Dulles, Virginia 20166, and drkoop.com, Inc. ("Interactive
Content Provider" or "ICP"), a Delaware corporation, with its principal offices
at 8920 Business Park Drive, Suite 200, Austin, Texas 78759 (each a "Party" and
collectively the "Parties").
INTRODUCTION
------------
AOL and ICP each desires that AOL provide access to the ICP Internet Site
and ICP Programming through the AOL Network, subject to the terms and conditions
set forth in this Agreement. Defined terms used but not otherwise defined in
this Agreement shall be as defined on Exhibit B attached hereto.
TERMS
-----
1. DISTRIBUTION; PROGRAMMING
-------------------------
1.1 Programming and Distribution. Beginning on a mutually agreed upon date
----------------------------
after the Effective Date, AOL shall provide ICP with the promotions
set forth on Exhibit A-1. The promotions described on Exhibit A-1 and
any other promotions provided by AOL to ICP shall be referred to as
the "Promotions." Subject to ICP's reasonable approval, AOL will have
the right to fulfill its promotional commitments with respect to any
of the foregoing by providing ICP comparable (in terms of the mix of
quality and quantity) promotional placements in appropriate
alternative areas of the AOL Network. In addition, if AOL is unable to
deliver any particular Promotion, AOL will work with ICP to provide
ICP, as its sole remedy, a comparable (in terms of the mix of quality
and quantity) promotional placement. Except to the extent expressly
described herein, the exact form, placement and nature of the
Promotions shall be determined by AOL in its reasonable editorial
discretion. ICP shall comply with the customization and co-branding
requirements and provide the Content set forth on Exhibit A-3 and
AOL's provision of Promotions in connection with any particular AOL
Property shall be conditioned upon ICP's compliance with the
customization and co-branding requirements and provision of the
Content set forth on Exhibit A-3 for such AOL Property.
1.2 Content. The ICP Programming (a) shall consist of the Content
-------
described on the programming plan attached as Exhibit A-2 (the
"Programming Plan"), (b) shall not contain any pointers or links to
any other area on or outside the AOL Network, other than as expressly
described on Exhibit A-2 with respect to such ICP Programming without
AOL's prior written consent, and (c) shall not contain any direct
pointers or links to any products or services which ICP sells in
accordance with Section 4.4 below, without AOL's prior written
consent. Notwithstanding the foregoing but subject to Section 5.3, ICP
may include a Link to * * * for * * * purposes so long as (a) such
Links only link to the specific contextually relevant page(s) of such
third party Interactive Site, which such page(s) appear in a "second"
browser window that is smaller than the original ICP browser window,
(b) ICP includes navigational ability within such page(s) for AOL
Members to return to the ICP Internet Site or the applicable AOL
Property, and (c) ICP shall use commercially reasonable efforts to
ensure that such page(s) do not include Links to areas outside of the
ICP Internet Site or to the applicable AOL Property. The ICP Internet
Site shall consist of the Content described on the Programming Plan.
ICP shall inform AOL of relevant search terms and terminology
associated with popular areas and functionality within the ICP
Internet Site and ICP
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
____________________
*** Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designed at * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
<PAGE>
Programming for AOL's promotional and Content integration purposes.
The inclusion of any additional Content for distribution through the
AOL Network (including, without limitation, any features,
functionality or technology) not expressly described on Exhibit A
shall be subject to AOL's prior written approval. AOL acknowledges
that during the Term of this Agreement, ICP has preexisting
contractual commitments (i.e., existing as of the Effective Date)
which preclude it from (1) providing more than * * * of the content on
the Dr. Koop Site (as determined by ICP in accordance with such
contractual limitation) to AOL, and (2) redistributing certain content
on affiliated or co-branded versions of the Dr. Koop Site (including
on the ICP Internet Site) (collectively, the "Preexisting
Commitments"); provided that if ICP is precluded from providing
certain Content as provided in the Programming Plan under subsection
(2) of this sentence, ICP shall use commercially reasonable efforts to
provide AOL with comparable replacement Content for distribution in
accordance with the Programming Plan. ICP hereby agrees to use
commercially reasonable efforts to limit such Preexisting Commitments
by either entering into an amendment with the respective third party
to eliminate such Preexisting Commitment, or if ICP is unsuccessful,
not renewing each such Preexisting Commitment. Notwithstanding
anything in this Agreement to the contrary, to the extent any
provision of this Agreement conflicts with the Preexisting
Commitments, the Preexisting Commitments shall take precedence and the
conflicting provision of this Agreement shall be deemed modified, as
minimally as possible, to avoid such conflict; provided that to the
extent any such modification materially adversely effects the ability
of ICP to deliver Content contemplated by Exhibit A and thereby
precludes or restricts AOL from providing ICP with Impressions as
contemplated by Exhibit A (a "Cutback"), AOL's obligations hereunder
(including without limitation meeting the Impressions Target (as
defined below) and providing ICP with the Premier Status (as defined
below)) shall be appropriately reduced. The occurrence of a Cutback
which remains uncured for ten (10) business days or the occurrence of
two or more Cutbacks within any one hundred twenty day period (120)
shall constitute a material breach of this Agreement for which AOL
shall have the right to terminate this Agreement immediately by
providing ICP with written notice within thirty (30) days of AOL's
first knowledge of a Cutback (or the second Cutback in the event of
two or more Cutbacks), subject to AOL's paying ICP the Payback Amount
in accordance with Section 7.2. In addition, AOL hereby agrees to use
reasonable efforts not to display Content of a third party on the AOL
Network in a manner that suggests that ICP endorses Content not
provided by ICP; provided that in such event ICP's sole remedy shall
be to notify AOL of such event, and upon receipt of such notice, AOL
and ICP shall work together in good faith to resolve such matter.
1.3 License. ICP hereby grants AOL a worldwide license to use, market,
-------
license, store, distribute, reproduce, display, adapt, communicate,
perform, translate, transmit, and promote the ICP Internet Site, the
ICP Programming and the Licensed Content (or any portion thereof)
through the AOL Network as AOL may determine in its sole discretion,
including without limitation the right to integrate Content from the
ICP Internet Site by linking to pages within the ICP Internet Site
and/or ICP Programming by linking to specific areas thereon, provided
that the link to any such Content on the AOL Network shall conform to
the specifications of an ICP Presence. Any Linked ICP Interactive
Sites shall be subject to the foregoing license.
1.4 Management. ICP shall design, create, edit, manage, review, update (on
----------
a daily basis or as otherwise specified herein), and maintain the ICP
Internet Site, ICP Programming and the Licensed Content in a timely,
well-organized and professional manner and in accordance with the
terms of this Agreement. ICP shall ensure that the Licensed Content
within the ICP Internet Site and ICP Programming is equal to or better
than the Content distributed by ICP through any other ICP Interactive
Site in all material respects, including without limitation, quality,
breadth, timeliness, functionality, features, prices of products and
services and terms and conditions, except to the extent inclusion of
such Content would otherwise violate this Agreement and except as
otherwise expressly stated on Exhibit A. Except as specifically
provided for herein, AOL shall
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
2
<PAGE>
have no obligations of any kind with respect to the ICP Internet Site
or ICP Programming. ICP shall be responsible for any hosting or
communication costs associated with the ICP Internet Site and ICP
Programming (including any Linked Interactive Sites), including,
without limitation, the costs associated with (i) any agreed-upon
direct connections between the AOL Network and the ICP Internet Site
or ICP Programming or (ii) a mirrored version of the ICP Internet
Site. AOL Members shall not be required to go through a registration
process (or any similar process) in order to access and use the ICP
Internet Site, ICP Programming (including any Linked ICP Interactive
Site) or the Licensed Content; provided that with respect to the use
of any ICP Tools, in AOL's sole discretion, an AOL Member may be
required to go through a registration or similar process tied to the
AOL name space technology (e.g., AOL screennames). During the Term and
for the two (2) year period after the expiration or termination
thereof, ICP shall allow AOL Members to access and use any ICP
Interactive Site on terms and conditions no less favorable than the
terms and conditions (e.g., AOL Members shall not be required (1) to
pay subscription fees for Content that is offered to other users for
free, (2) to pay a higher subscription fee than other users, or (3) to
go through a more burdensome registration process than other users)
available to other users of such ICP Interactive Site. In the event
ICP fails to comply with any material term of this Agreement,
including without limitation ICP's obligations under this Section 1.4,
AOL will have the right (in addition to any other remedies available
to AOL hereunder) upon providing ICP notice of such non-compliance
(which notice shall describe such non-compliance in reasonable detail)
to decrease the promotion it provides to ICP hereunder and/or to
decrease or cease any other contractual obligation of AOL hereunder
until such time as ICP corrects its non-compliance, in which event AOL
will be relieved of the proportionate amount of any promotional
commitment made to ICP by AOL hereunder corresponding to such decrease
in promotion. Promptly after ICP corrects its non-compliance, subject
to the preceding sentence, AOL's obligations hereunder shall continue
in full force and effect through the remainder of the Term.
1.5 Impressions Target. AOL shall provide ICP with at least Impressions
------------------
from ICP's presence on the AOL Network (the "Impressions Target"). On
or about each anniversary of the Effective Date, AOL and ICP shall
discuss (a) whether AOL is on track to meet the Impressions Target
(taking into account variations in Impressions delivery (e.g., account
ramp-up, seasonality, promotional events, new Content acquired) of ICP
promotion on the AOL Network) and (b) future plans to ensure that the
Impressions Target is met. AOL shall use reasonable efforts to
implement any such mutually agreed plan in accordance therewith. For
the purposes of this Agreement, ICP's presence on an AOL screen shall
conform to the specifications of an ICP Presence, provided that only
screens that contain a Link to the ICP Internet Site or ICP
Programming will count against the Impressions Target. Any shortfall
in Impressions from a particular AOL Property or area within an AOL
Property may be made up by overdelivery of Impressions in another AOL
Property or area. In the event that the Impressions Target is not met
(or will not, in AOL's reasonable judgment, be met) during the Term,
then as ICP's sole remedy, at AOL's option (i) the Term shall be
extended for up to six (6) months without additional carriage fees
payable by ICP, and during such extension period, AOL shall provide
ICP with the remaining Impressions in the form of advertising space
within the AOL Network of comparable value to the undelivered
Impressions (as reasonably determined by AOL), (ii) AOL shall, from
time to time during the Term, provide ICP with the remaining
Impressions in the form of advertising space within the AOL Network of
comparable value to the undelivered Impressions (as reasonably
determined by AOL), or (iii) some combination thereof. In the event
ICP has a pre-existing contractual arrangement with any third party
Interactive Service, then any impressions guaranteed and actually
provided to such third party Interactive Service in accordance with
such contractual arrangement shall not count towards the Impressions
Target hereunder.
1.6 Premier Status. AOL shall provide to ICP the sole premier rights as
set forth in Exhibit A and in Section 1.6.1(a) below, subject to the
terms of this Section 1.6 (collectively, the "Premier Status"):
3
<PAGE>
1.6.1 Premier Rights.
----- --------------
(a) Description. During each contract year of the Term, AOL
-----------
shall not provide any ICP Competitor * * * within the
Restricted Screens ("Health Impressions") (viewed as a
whole across all of the AOL Properties set forth in the
definition of "Restricted Screens" in Exhibit B) * * *.
Nothing contained herein shall be deemed (a) to limit
AOL's rights to sell anchor tenant placement to any ICP
Competitor within the AOL Network (except with respect
to compliance with this Section 1.6.1(a)), (b) to grant
ICP any approval rights with respect to any portion of
any AOL Property or (c) to grant ICP most favored
customer status, any right of first refusal or any
right of first negotiation.
(b) Explicitly Permissible Activities. Notwithstanding
---------------------------------
anything to the contrary in Section 1.6.1(a) (and
without limiting any actions which may be taken by AOL
without violation of ICP's rights hereunder), the
following Links to ICP Competitor Content (including
Links on Interactive Sites of an ICP Competitor) from
the Restricted Screens shall not be deemed to count as
Health Impressions for purposes of Section 1.6.1(a):
(i) any Links specifically promoting Content which is
not provided by ICP or promoting a particular sub-
category within the comprehensive general purpose
consumer-oriented health Content category (e.g.,
illnesses, treatments, weightloss, alternative
medicine, public health, etc.); (ii) any Links which
AOL is required to provide pursuant to existing
arrangements with third parties (or pursuant to any
agreements to which AOL becomes a party subsequent to
the Effective Date as a result of Change of Control,
merger, acquisition or other similar transaction);
(iii) any Links to or within any health-related
information database or directory on any Restricted
Screen (e.g., the Conditions & Treatments database
within the Health Channel on the AOL Service); (iv) any
Links for advertising (e.g., banners, buttons, links,
sponsorships), including standard placements in any
shopping area or channel, to any ICP Competitor; (v)
any Links in connection with an arrangement with any
third party for the primary purpose of acquiring AOL
Members whereby such party is allowed to promote or
market products or services to AOL Members that are
acquired as a result of such agreement; or (vi) any
Links for contextual, editorial and/or member
experience reasons so long as AOL does not receive cash
consideration for such Links .
(c) Remedy. In the event that in any contract year during
------
the Term, * * * then as ICP's sole remedy, at AOL's
option either, (a) for a shortfall in any such contract
year except the final contract year, AOL shall, in the
subsequent contract year, provide ICP with additional
Impressions to make up the previous year's shortfall in
the form of advertising space within the AOL Network,
or (b) for a shortfall in the final contract year of
the Term, the Term shall be extended for up to six (6)
months without additional carriage fees payable by ICP,
and, during such extension period, AOL shall provide
ICP with additional Impressions to make up the previous
year's shortfall in the form of advertising space
within the AOL Network. Within thirty (30) days after
each anniversary of the Effective Date, AOL shall
provide ICP with a written certification of AOL's
compliance with Section 1.6.1(a). In addition, in the
event that AOL reasonably determines during any
contract year that * * * then AOL shall promptly notify
ICP and work with ICP to develop a plan to make up any
shortfall in Impressions. In addition to the remedies
set forth in this Section 1.6.1(a), * * * ICP shall
have the right to escalate such event to the Management
Committee.
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
4
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1.6.2 Conditions to and Restrictions on Premier Status. AOL's
------------------------------------------------
provision of the Premier Status is subject to the following
conditions and restrictions:
(a) AOL's provision of the Premier Status to ICP is
contingent upon ICP's performance of all material
obligations and compliance with all material conditions
set forth in this Agreement, including without
limitation, ICP's payment of all fees, and AOL shall
have the right, upon providing ICP notice of such any
breach of any such obligation or condition (which such
notice shall describe such breach in reasonable detail),
to terminate, in whole or in part, ICP's Premier Status,
AOL's promotional obligations hereunder and the
programming rights granted to ICP hereunder until such
time as ICP corrects such breach, in which event AOL
will be relieved of the proportionate amount of any
promotional commitment made to ICP by AOL hereunder
corresponding to such decrease in promotion. Promptly
after ICP cures such breach, subject to the preceding
sentence, AOL's obligations hereunder shall continue in
full force and effect through the remainder of the Term.
(b) AOL shall have the right to terminate, in whole or in
part, the Premier Status, AOL's promotional obligations
hereunder and the programming rights granted to ICP
hereunder if :
(i) * * *
(ii) At any time the Dr. Koop Site is not one of the
top * * * ranked health Content and tools
Interactive Sites for at least * * * consecutive
months in terms of both traffic (as measured by
page views) and audience reach (as measured by
share or percentage of Internet online users)
based on statistics as reported by Media Metrix
or similar organization reasonably determined by
the Parties;
(iii) At any time the Dr. Koop Site is not one of the
top * * * health Content and tools Interactive
Sites for at least * * * consecutive months, in
terms of quality (x) based on a cross-section of
independent third-party reviewers who are
recognized authorities in the healthcare
industry, and (y) with respect to all material
quality averages or standards in such industry,
including without limitation, quality, breadth,
depth, timeliness, accuracy, reliability of the
Content; privacy and security; functionality,
features, ease of use and user interface of the
site; and prices and terms and conditions of
Products offered on the site;
(iv) A Preexisting Commitment materially adversely
effects the ability of ICP to deliver Content
contemplated by Exhibit A and thereby precludes
or restricts AOL from providing ICP with
Impressions as contemplated by Exhibit A; or
(v) A Change of Control of ICP.
(c) Any partial or whole termination by AOL under this
Section 1.6.2 shall be done within thirty (30) days of
the date on which AOL becomes aware of the event giving
rise to the termination right; provided that if AOL
fails to exercise its termination right within such
thirty period (30) day period, AOL shall be deemed to
have waived its termination rate only with respect to
such event but not to any subsequent event which
triggers a termination right under this Section 1.6.2.
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
5
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1.6.3 Keywords. During the Term and subject to ICP's compliance with
--------
the other terms and conditions of this Agreement, ICP shall
have the right to use the following Keyword Search Term (and
mutually agreed variations thereof) to link to the ICP Internet
Site: "Dr. Koop."
2. CROSS-PROMOTION
---------------
2.1 Cooperation. Each Party shall cooperate with and reasonably assist
-----------
the other Party in supplying material for marketing and promotional
activities.
2.2 Interactive Site. Within each ICP Interactive Site, ICP shall include
----------------
the following (collectively, the "AOL Promos"): (i) a prominent
promotional button * * * , with placement of the button at ICP's
reasonable discretion, on the first screen of the ICP Interactive
Site, to promote such AOL products or services as AOL may designate
(for example, the America Online brand service, the CompuServe brand
service, the AOL.com site, the Digital City services or the AOL
Instant Messenger service); provided that AOL shall not require ICP to
promote an AOL Property that directly competes with ICP's core
business (i.e., the provision of health related content and services);
and (ii) a prominent "Try AOL" feature * * * , with placement at ICP's
reasonable discretion, through which users can obtain promotional
information about AOL products or services designated by AOL and, at
AOL's option, download or order the then-current version of client
software for such AOL products or services. AOL will provide the
creative content to be used in the AOL Promos. ICP shall post (or
update, as the case may be) the creative content supplied by AOL
within the spaces for the AOL Promos within five business days of its
receipt of such content from AOL. In the event that AOL elects to
serve the AOL Promos to the ICP Interactive Site from an ad server
controlled by AOL or its agent, ICP shall take all reasonable
operational steps, at AOL's expense, necessary to facilitate such ad
serving arrangement, including, without limitation, inserting HTML
code designated by AOL on the pages of the ICP Interactive Site on
which the AOL Promos will appear. In addition, within each ICP
Interactive Site, ICP shall provide prominent promotion for relevant
AOL Keyword Search Terms associated with the ICP Internet Site and
links from the ICP Interactive Site to the relevant topic areas on
AOL's AOL.com site. In the event ICP determines that there is a
specific instance in which the AOL promotion or integration set forth
in this Section 2.2 shall not be possible nor commercially reasonable,
then ICP shall provide AOL with prior notice of such instance and
obtain AOL's prior written consent (which consent will not be
unreasonably withheld) before running any such promotion or not
integrating such AOL product.
2.3 Component Products. ICP hereby agrees that to the extent ICP wishes to
-------------------
integrate, use and/or promote the tools and functionality in the
categories set forth in Exhibit D-1 hereto (the "Integrated Tools and
Functionality Categories") into the Dr. Koop Site, ICP Internet Site,
ICP Interactive Site and ICP Tools (a) ICP shall integrate, use and
promote AOL's tools and functionality in such categories into the Dr.
Koop Site, ICP Internet Site, ICP Interactive Site and ICP Tools (as
appropriate) and (b) that ICP shall not integrate, use or promote its
own or any other third party's tools and/or functionality in such
categories into the Dr. Koop Site, ICP Internet Site, ICP Interactive
Site and ICP Tools; provided, however, that with respect to Web-hosted
calendaring and real time instant online messaging (as such are
described in Exhibit D-1), ICP shall only be obligated to integrate
such AOL tools and functionality to the extent they are * * *. Within
sixty (60) days of the Effective Date, the Parties shall agree upon
the terms of such integration, use and promotion of such AOL tools and
functionality. Notwithstanding the foregoing, in the event that ICP
wishes to include any specific tool and/or functionality within a
subcategory of those categories set forth in Exhibit D-1 which AOL
does not then-currently offer, ICP shall have the right to develop, or
have a third party develop, such specific tool and/or functionality to
be integrated within the Dr. Koop Site, ICP Internet Site, ICP
Interactive Site and
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
6
<PAGE>
ICP Tools (as appropriate); provided that ICP first provides AOL with
the opportunity to do such development work on commercially reasonable
terms and conditions. In the event ICP wishes to integrate, use or
promote any tools and functionality in the categories set forth in
Exhibit D-2 hereto (the "Additional Tools and Functionality
Categories") into the Dr. Koop Site, the ICP Internet Site, ICP
Interactive Site and/or the ICP Tools, ICP shall either use its own
tools and functionality or the tools and functionality in such
categories which are offered by AOL to the extent such AOL tool and
functionality are competitive in the marketplace; provided that ICP
shall not integrate, use and/or promote the tools and functionality of
any third party without the prior written consent of AOL, which AOL
may withhold in its sole discretion.
2.4 Other Media. In all of ICP's television, radio, print and "out of
-----------
home" (e.g., buses and billboards, point of purchase and other "place-
based" promotions) advertisements and in any publications, programs,
features or other forms of media over which ICP exercises at least
partial editorial control, ICP will include specific references or
mentions (orally where possible) of the availability of the ICP
Internet Site through the America Online brand service (or other AOL
Property as mutually agreed to by the Parties). All such references or
mentions of AOL, and the use of AOL's trademarks, trade names and
service marks in connection therewith, shall be in accordance with
Section II of Exhibit C. In the event ICP determines that there is a
specific instance in which such AOL promotional reference shall not be
possible nor commercially reasonable, then ICP shall provide AOL with
prior notice of such instance and obtain AOL's prior written consent
(which consent will not be unreasonably withheld) before running any
such promotion.
2.5 Availability of Dr. Koop. ICP will make available Dr. C. Everett Koop
------------------------
(the former U.S. Surgeon General) from time to time, subject to Dr.
Koop's schedule and reasonable approval by Dr. Koop personally and
ICP, for joint AOL-Dr. Koop or AOL-only health-related public
relations campaigns, announcements and marketing events.
2.6 Preferred Access Provider. When promoting AOL, ICP shall promote AOL
-------------------------
(or, in AOL's discretion, an AOL Affiliate) as the preferred narrow-
band access provider through which a user can access the ICP Internet
Site (and ICP shall not implement or authorize any other promotions on
behalf of any third parties which are inconsistent with the
foregoing).
2.7 Inadvertent Breaches. AOL acknowledges and agrees that occasional
--------------------
inadvertent breaches of this Section 2 by ICP occurring from time to
time shall not be deemed a material breach of this Agreement so long
as ICP uses commercially reasonable efforts to cure any such
inadvertent breach promptly after receiving notice of such breach from
AOL; provided further however that if such inadvertent breaches occur
on more than an occasional basis and/or are not inadvertent (as
determined by AOL in its reasonable discretion), such multiple
breaches shall constitute a material breach of this Agreement.
3. REPORTING; PAYMENT; REVENUE SHARING; INVESTMENT.
-------------------------------------------------
3.1 AOL Usage and ICP Advertisement Sales Reporting. AOL shall make
-----------------------------------------------
available to (or otherwise provide) ICP a monthly report or reports
specifying (a) for the prior month aggregate usage and Impressions
with respect to ICP's presence on the AOL Network, which are similar
in substance and form to the reports provided by AOL to other content
partners similar to ICP, and (b) sales of ICP Advertisements for the
prior month.
3.2 ICP Internet Site Reporting. ICP will supply AOL with monthly reports
---------------------------
which reflect total impressions by AOL Members to the ICP Internet
Site during the prior month, the number of and dollar value associated
with the transactions involving AOL Members and any registration
information obtained from AOL Members at the ICP Internet Site during
the period in question. ICP represents that all URLs related to the
ICP Internet Site are listed on Exhibit A-2 and ICP shall provide AOL
with an update of such list promptly upon any change thereto.
7
<PAGE>
3.3 Cross-Promotional Commitments. ICP shall provide to AOL a quarterly
-----------------------------
report documenting its compliance with any promotional commitments it
has undertaken pursuant to this Agreement in the form attached as
Exhibit E hereto, and ICP shall provide AOL with "click-through" data
and the number of impressions to the pages containing the AOL Promos
with respect to the promotions specified in Section 2 for the prior
quarter.
3.4 Carriage and Promotional Fee. ICP shall pay AOL * * * (collectively,
----------------------------
the "Guaranteed Payment").
3.5 Qualified New Members. AOL shall pay ICP a fee of * * * for each
---------------------
Qualified New Member acquired through ICP's compliance with * * *. A
"Qualified New Member" shall mean any person or entity who registers
for the AOL Service during the Term (defined below) using ICP's
special promotion identifier and who pays the then-standard fees
required for membership to the AOL Service through at least two (2)
consecutive billing cycles (excluding any free trial period).
3.6 Advertising. To the extent AOL expressly permits ICP or its agents
-----------
to sell Advertisements, ICP shall provide detailed information to AOL
regarding (i) such Advertisements sold by ICP or its agents and (ii)
any advertising or promotional activity on the ICP Internet Site and
any Linked ICP Interactive Sites. In reporting any advertising
arrangement, ICP shall indicate the name of the advertiser, the terms
of the advertising arrangement and the amount paid (or to be paid) to
ICP or its agents.
3.7 Payments Terms. AOL shall pay all amounts owed to ICP hereunder on a
--------------
quarterly basis, within thirty (30) days of the end of each calendar
quarter. All payments by ICP hereunder shall be paid in immediately
available, non-refundable U.S. funds wired to the "America Online"
account, * * * or such other account of which AOL shall give ICP
written notice.
3.8 Alternative Revenue Streams. In the event ICP or any of its affiliates
---------------------------
creates or desires to create, as a direct result of any Promotions,
any new revenue stream as a result of such Promotions other than
Advertising Revenues and Transaction Revenues (an "Alternative Revenue
Stream"), ICP will promptly inform AOL in writing of ICP's desire to
market Products and/or services through the AOL Service, AOL.com,
Netscape Netcenter, the CompuServe Service, CompuServe.com, and/or
Digital City, which would produce an Alternative Revenue Stream, and
the Parties will negotiate in good faith regarding whether ICP will be
allowed to market such new Products and/or services through the
Promotions, and if so, the equitable portion of revenues from such
Alternative Revenue Stream (if applicable) that will be shared with
AOL pursuant to this Agreement.
3.9 Warrants. ICP shall grant to AOL three (3) separate warrants to
--------
purchase shares of common stock of ICP, forms of which are attached
hereto as Exhibits H, I and J. In accordance with the terms and
conditions contained therein, the three warrants which shall be
executed and delivered contemporaneously herewith shall provide as
follows:
3.9.1 in partial consideration for AOL's execution and delivery of
this Agreement, ICP shall grant to AOL a fully-vested
warrant (the "Time Warrant") to purchase up to 1,570,932
shares of common stock of ICP ("Common Stock") at an
exercise price of $15.94 per share;
3.9.2 in partial consideration for the accomplishment of certain
Page View thresholds, ICP shall grant to AOL a warrant (the
"Page View Warrant") to purchase up to 1,570,932 shares of
Common Stock at an exercise price of $20.00 per share, which
Page View Warrant shall vest in accordance with its terms;
and
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
8
<PAGE>
3.9.3 in partial consideration for the accomplishment of certain
PMR Acquisitions, ICP shall grant to AOL a warrant (the
"PMRA Warrant") to purchase up to 2,749,131 shares of Common
Stock at variable exercise prices, which PMRA Warrant shall
vest in accordance with its terms.
4. ADVERTISING AND MERCHANDISING
------------------------------
4.1 Advertising Sales on AOL Network. AOL owns all right, title and
--------------------------------
interest in and to the advertising and promotional spaces within the
AOL Network (including, without limitation, advertising and
promotional spaces on any AOL forms or pages preceding or framing the
ICP Internet Site or ICP Programming and any AOL pages on which ICP
Programming resides). The specific advertising inventory within any
such AOL forms or pages shall be as reasonably determined by AOL.
4.2 Advertising Sales on the ICP Internet Site and the Dr. Koop Site.
----------------------------------------------------------------
During the Term, except to the extent provided below, AOL shall have
the exclusive right to license or sell all promotions, advertisements,
Links, pointers, sponsorships or similar services or rights (including
without limitation commerce and anchor-tenancy deals)
("Advertisements") on or through the ICP Internet Site and the
generally publicly available Dr. Koop Site currently located at
URL:http://drkoop.com and all related URLs (excluding any third party
affiliated versions of such site (e.g., customized, mirrored, private
labeled sites)) (together with those Advertisements for which AOL has
exclusive rights pursuant to the next sentence, the "ICP
Advertisements"). With respect to each third party affiliated version
of the Dr. Koop Site (e.g., customized, mirrored, private labeled
sites), if the respective third party does not wish to sell
Advertisements on or through such site, then ICP shall promptly notify
AOL of such fact and AOL shall have the exclusive right to license or
sell all Advertisements on or through such site in accordance with
this Section 4.2. AOL shall use its ad serving technology for the ICP
Advertisements and ICP shall take all reasonable operational steps
necessary to facilitate such ad serving arrangement, including,
without limitation, inserting HTML code designated by AOL on the pages
of the Dr. Koop Site and ICP Internet Site on which the ICP
Advertisements will appear. With respect to each license or sale of an
ICP Advertisement for cash consideration, AOL shall be entitled to
retain * * * of the Advertising Revenues generated therefrom and shall
pay the remaining * * * to ICP. During the Term from time to time, ICP
shall have the right to license and sell a mutually agreed percentage
of total inventory available for ICP Advertisements on the ICP
Internet Site and the Dr. Koop Site which such inventory shall be used
in a mutually agreeable manner (e.g., house ads). In the event AOL
notifies ICP that it no longer desires to license and sell ICP
Advertisements, the Parties shall mutually agree on an appropriate
revenue share of Advertising Revenues; provided that if the Parties
are unable to agree on such revenue share, either Party shall have the
right to escalate such matter to the Management Committee for
resolution. The revenue share (as mutually agreed or determined by the
Management Committee) shall apply to the remainder of the Term. For so
long as AOL maintains the exclusive right to license and sell the
inventory available for ICP Advertisements on the ICP Internet Site
and the Dr. Koop Site as set forth above, AOL shall include such
inventory in AOL's overall available inventory across the AOL
Properties.
4.3 Advertising Policies. AOL shall use commercially reasonable efforts to
--------------------
abide by ICP's standard advertising policies in performing its rights
under this Section 4.2 to the extent such advertising policies do not
conflict with AOL's advertising policies; provided that in the event
of any conflict, the Parties shall meet to discuss how to reconcile
such conflict; provided further that in no event will AOL license or
sell ICP Advertisements which promote * * *. To the extent AOL
expressly permits ICP or its agents to sell an Advertisement, such
Advertisement sold by ICP or its agents shall be subject to AOL's
then-standard advertising policies, and ICP shall not sell an AOL
Advertisement to any entity reasonably construed to be in competition
with AOL or in a category
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
9
<PAGE>
in which AOL or the applicable AOL Property has an exclusive or other
preferential relationship. Further ICP shall ensure that any ICP
Advertisement sold by ICP complies with all applicable federal, state
and local laws and regulations .
4.4 Interactive Commerce. To the extent ICP directly sells any
--------------------
merchandising through the ICP Internet Site and/or ICP Programming,
such merchandising shall be subject to (i) the then-current
requirements of AOL's merchant certification program, and (ii) AOL's
standard terms and conditions applicable to its interactive marketing
partners In the event AOL objects to any products, goods or services
offered thought the ICP Internet Site and/or the ICP Programming, AOL
shall notify ICP of those products, goods or services to which AOL
objects, and ICP hereby agrees to discontinue offering such products,
goods or services through the ICP Internet Site and/or the ICP
Programming upon receipt of such notice. ICP will take all reasonable
steps necessary to conform its promotion and sale of Products through
the ICP Internet Site and ICP Programming (if any) to the then-
existing technologies identified by AOL which are optimized for the
applicable AOL Property including, without limitation, any "quick
checkout" tool which AOL may implement to facilitate purchase of
Products by AOL Members through the ICP Internet Site. ICP shall not
conduct any merchandising through the ICP Internet Site or ICP
Programming through auctions, clubs or any method other than a direct
sales format without AOL's prior written consent. ICP will provide AOL
with a monthly report in a mutually agreed upon format to be delivered
to AOL in an automated manner, detailing the sales activity during
such period. These sales reports shall contain information
substantially similar to the following (and any other information
reasonably required for measuring revenue activity by ICP through the
ICP Internet Site(s) or reasonably requested by AOL): (i) summary
sales information by day (date, number of Products, number of orders,
total Transaction Revenues); and (ii) detailed sales information
(order date/timestamp (if technically feasible), purchaser name and
screen-name, SKU or Product description). Further, ICP will generally
promote through the ICP Internet Site any special or promotional
offers made available by or on behalf of ICP through any ICP
Interactive Site or any other distribution channel. In addition, ICP
shall promote through the ICP Internet Site on a regular and
consistent basis special offers exclusively available to AOL Members
("AOL Exclusive Offers"). ICP shall, at all times, feature at least
one AOL Exclusive Offer for AOL Members (except as otherwise mutually
agreed upon by the Parties). The AOL Exclusive Offer made available by
ICP shall provide a substantial member benefit to AOL Members, either
by virtue of a meaningful price discount, product enhancement, unique
service benefit or other special feature. ICP will provide AOL with
reasonable prior notice of AOL Exclusive Offers and other special
offers so that AOL can, in its editorial discretion, market the
availability of such offers.
5. CUSTOMIZED ICP PROGRAMMING AND ICP INTERNET SITE
------------------------------------------------
5.1 Performance. ICP shall optimize all ICP Programming and the ICP
-----------
Internet Site for distribution hereunder according to AOL
specifications and guidelines (including, without limitation, any HTML
publishing guidelines) and the Operating Standards set forth on
Exhibit F attached hereto.
5.2 Customization. ICP shall customize all ICP Programming and the ICP
-------------
Internet Site for AOL Members as follows:
5.2.1 ICP shall customize and co-brand the ICP Internet Site for
distribution over certain AOL Properties as more particularly
described on Exhibit A-3. The customization and co-branding
described in Exhibit A-3 represents the manner in which AOL
currently contemplates that such customization and co-branding
will appear. ICP shall make any reasonable changes to the
customization and/or co-branding requirements of any AOL
Property that may occur during the Term.
5.2.2 ICP shall ensure that AOL Members accessing the ICP Programming
or linking to the ICP Internet Site do not receive
advertisements, promotions or links for the benefit of any
Interactive Service (excluding an Interactive Service whose
primary business is the
10
<PAGE>
provision of health and/or medical related Content to the
public and/or private sector), or otherwise in violation of the
applicable AOL Property's then-standard advertising policies.
In addition, ICP shall use commercially reasonable efforts to
not promote products, goods or services within the ICP
Programming or on the ICP Internet Site in a category in which
AOL or the applicable AOL Property has an exclusive or other
preferential relationship.
5.2.3 ICP shall provide continuous navigational ability for AOL
Members to return to an agreed-upon point on the applicable AOL
Property (for which AOL shall supply the proper address) from
ICP Internet Site or ICP Programming (e.g., the point on the
applicable AOL Property from which such site is linked), which,
at AOL's option, may be satisfied through the use of a hybrid
browser format. ICP shall ensure that navigation back to the
AOL Network from the ICP Internet Site, whether through a
particular pointer or link, the "back" button on an Internet
browser, the closing of an active window, or any other return
mechanism, shall not be interrupted by ICP through the use of
any intermediate screen or other device not specifically
requested by the user, including without limitation through the
use of any html pop-up window or any other similar device.
Rather, such AOL traffic shall be pointed directly back to the
AOL Network as designated by AOL.
5.3 Links on ICP Internet Site. The Parties will work together on mutually
--------------------------
acceptable links (including links back to AOL) within the ICP Internet
Site in order to create a robust and engaging AOL Member experience.
ICP shall ensure that AOL traffic is either kept within the ICP
Internet Site or ICP Programming or channeled back into the AOL
Network. To the extent that AOL notifies ICP in writing that, in AOL's
reasonable judgment, links from the ICP Internet Site or ICP
Programming cause AOL traffic to be diverted outside of such site and
the AOL Network in a manner that has a detrimental effect on the
traffic flow of the AOL audience, then ICP shall immediately remove
the links out of such site(s). In the event that ICP cannot or does
not so limit diverted traffic from such site, AOL reserves the right
to terminate such links from the AOL Network to such site.
5.4 Review. Subject to ICP's standard written privacy and security
------
policies, ICP shall allow appropriate AOL personnel to have access to
ICP Programming and the ICP Internet Site to the extent necessary to
determine ICP's compliance with the provisions of this Section 5.
6. PARTNER MARKETING
-----------------
During the 90 day period following the Effective Date, ICP shall use
commercially reasonable efforts to provide AOL with information and data
reasonably requested by AOL for determining the feasibility and likely
success of a marketing test for AOL and CompuServe CD-ROM distribution. In
the event that, at any time during the Term, ICP proposes to market, or
proposes to enter into an agreement with, or solicit, a third party with
respect to the marketing of, an Interactive Service (e.g., through a CD ROM
distribution or otherwise) other than the AOL Service and the CompuServe
Service, then ICP shall notify AOL and offer AOL the right of first
negotiation for ICP to market the AOL Service and CompuServe, upon terms to
be mutually agreed to by the Parties after good faith negotiations. In the
event that AOL fails to accept the offer to exercise such right of first
negotiation within thirty (30) days after ICP makes such offer to AOL, then
ICP and AOL shall reduce to writing the latest terms on which ICP was
willing to offer AOL the right to market exclusively the AOL Service and/or
CompuServe Service, after good faith negotiations between AOL and ICP. * *
*. AOL shall have thirty (30) days from the date it receives such revised
offer to accept or reject such revised offer. Failure by AOL to notify ICP
of its acceptance or rejection of such revised offer within the thirty (30)
day period shall be deemed a rejection of such revised offer. The rights
granted to AOL in this Section 6 shall be irrevocable during the Term of
this Agreement.
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
11
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7. TERM, TERMINATION, SITE AND CONTENT PREPARATION, PRESS RELEASES.
-----------------------------------------------------------------
7.1 Term. Unless earlier terminated as set forth herein, the initial term
----
of this Agreement shall commence on the Effective Date and expire four
(4) years from the Effective Date (the "Initial Term"). AOL shall have
the right to extend this Agreement for three (3) additional two (2)
year periods (each, an "Extension Term"). During each Extension Term:
(i) ICP will not be required to pay the Guaranteed Payments set forth
in Section 5.4; (ii) AOL will not be required to undertake any
promotional/placement obligations hereunder (including without
limitation any obligations with respect to ICP's Premier Status);
(iii) within thirty (30) days of the end of each quarter during the
Extension Term, ICP shall pay AOL * * * of all Transaction Revenues
generated during such quarter; and (iv) all other terms and conditions
of this Agreement shall remain in full force and effect during such
Extension Term. Upon the expiration or earlier termination of this
Agreement, AOL may, at its discretion, continue to promote one or more
"pointers" or links from the AOL Network to an ICP Interactive Site
and continue to use ICP's trade names, trade marks and service marks
in connection therewith (collectively, a "Continued Link"). So long as
AOL maintains a Continued Link, within thirty (30) days of the end of
each quarter in which AOL maintains a Continued Link, ICP shall pay
AOL * * * of Net Revenues generated during such quarter;"".
7.2 Termination for Breach. Either Party may terminate this Agreement at
----------------------
any time in the event of a material breach by the other Party which
remains uncured after thirty (30) days written notice thereof. * * * .
7.3 Buy-Out Right. At any time during the forty-five day period beginning
-------------
thirty (30) months after the Effective Date (the "Buy-Out Period"),
AOL shall have the right to terminate this Agreement by providing ICP
written notice (the "Buy-Out Right"). In the event AOL elects to
exercise its Buy-Out Right, AOL shall pay ICP * * * within thirty (30)
days of the date of such exercise.
7.4 Solvency Termination Rights. AOL shall have the right to terminate
---------------------------
this Agreement in the event of one of the triggering events as set
forth below (each a "Solvency Trigger Event"):
7.4.1 ICP has unpaid obligations to AOL or any third party which ICP
is not disputing in good faith in excess of * * * (in the
aggregate); or
7.4.2 The sum of ICP's "cash," "marketable securities" and available
credit, credit lines and capital commitments falls below * * *
in any quarter as such are reported in ICP's Form 10-Q.
Prior to terminating under this Section 7.4, AOL shall provide ICP
with written notice to ICP, and ICP shall have fifteen (15) business
days to cure and provide AOL with written certification of such cure
to AOL; provided that with respect to Section 7.4.2, ICP shall be able
to cure by obtaining binding commitments from investors (reasonably
satisfactory to AOL) to make up any such shortfall from the * * *
threshold. In addition, whether or not AOL exercises its termination
right under this Section 7.4, upon the occurrence of a Solvency
Trigger Event which has not been cured by ICP as provided above, by
providing written notice of default to ICP, (a) the remaining unpaid
portion of the Guaranteed Payment shall accelerate and become
immediately due and payable, and (b) AOL shall have the ongoing right
to retain ICP's portion of Advertising Revenues to the extent ICP is
delinquent in any such accelerated Guaranteed Payment.
7.5 Special Termination by AOL. AOL shall have the right to terminate this
--------------------------
Agreement immediately by providing ICP written notice (a) in the event
any claim or proceeding is brought against ICP for professional
negligence or wrongdoing, including without limitation, regarding
malpractice or practicing medicine without the appropriate license(s),
which claim appears on its face to be potentially meritorious or
appears to have the potential for significantly damaging
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
12
<PAGE>
or tarnishing the reputation of the ICP or AOL; (b) in the event of
any act, omission, event or other cause that would allow AOL to
terminate the Development and Services Agreement; provided that all
proper notice and cure periods (if applicable) are given, and provided
that AOL terminates the Development and Services Agreement, or (c)
upon any event giving rise to a material claim for indemnification by
ICP hereunder based upon ICP's content or ICP Programming, provided
that any such termination right is exercised within ninety (90) days
after the circumstance giving rise to such right of termination.
7.6 Termination for Bankruptcy/Insolvency or Changes in Business. Either
------------------------------------------------------------
Party may terminate this Agreement immediately following written
notice to the other Party if the other Party (i) ceases to do business
in the normal course, (ii) becomes or is declared insolvent or
bankrupt, (iii) is the subject of any proceeding related to its
liquidation or insolvency (whether voluntary or involuntary) which is
not dismissed within ninety (90) calendar days or (iv) makes an
assignment for the benefit of creditors.
7.7 Termination on Change of Control.
--------------------------------
7.7.1 In the event of a Change of Control of ICP to a Named Entity
(identified as such on the date that the related definitive
agreement was entered into) during the Initial Term or any
Extension Term, AOL shall have the right to terminate the
Agreement by providing thirty (30) days prior written notice.
7.7.2 In the event of a Change of Control of ICP to any third party
other than a Named Entity during the Initial Term or any
Extension Term, AOL shall not have the right to terminate the
Agreement; provided however that upon the effective date of
such Change of Control, (i) the * * * , and (ii) ICP's Premier
Status as set forth in Section 1.6.1 shall terminate.
7.7.3 In the event of a Change of Control of AOL during the Initial
Term or any Extension Term, AOL shall have the right to
terminate the Agreement by providing thirty (30) days prior
written notice; provided that within thirty (30) days of such
notice, AOL shall * * *.
7.7.4 Any termination right arising under this Section 7.7. must be
exercised within sixty (60) days of the effective date of such
Change of Control.
7.8 Site and Content Preparation. ICP shall achieve Site and Content
----------------------------
Preparation within seventy-five (75) days after the Effective Date.
"Site and Content Preparation" shall mean that ICP shall have
completed all necessary production work (including completion of all
necessary training for AOL's proprietary "Rainman" publishing tool)
for the ICP Internet Site, all ICP Programming and any other related
areas or screens (including programming all Content thereon);
customized and configured the ICP Internet Site, and all ICP
Programming in accordance with this Agreement; and completed all other
necessary work (including, without limitation, undergone all AOL site
testing set forth on Exhibit F) to prepare the ICP Internet Site, all
ICP Programming and any other related areas or screens to launch on
the AOL Network as contemplated hereunder. In the event ICP has not
achieved Site and Content Preparation within seventy-five (75) days
after the Effective Date, then in addition to any other remedies
available, the Impressions Target set forth in Section 1.5 and the
Page View thresholds set forth in the Page View Warrant shall be
reduced on a pro rata basis by multiplying the Impressions Target or
the Page View thresholds, as the case may be, by a fraction (A) the
numerator of which shall be the number of days after such seventy-five
(75) day period (as adjusted by any step-back as provided in the last
sentence of this paragraph) after which the Company accomplishes Site
and Content Preparation and (B) the denominator of which shall be 365.
In the event ICP has not achieved Site and Content Preparation within
ninety (90) days after the Effective Date, then in addition to any
other remedies available, AOL shall have the right to terminate, in
whole or in part, ICP's Premier Status, AOL's promotional obligations
hereunder
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
13
<PAGE>
and the programming rights granted to ICP hereunder. If ICP
is delayed in achieving Site and Content Preparation due to a failure
by AOL to perform its obligations under this Agreement and ICP
notifies AOL in writing of such failure and the resulting delay, then
the seventy-five (75) day and ninety (90) day periods referenced in
this Section shall each be extended by the amount of time of ICP's
delay solely attributable to such failure by AOL.
7.9 Press Releases. Each Party will submit to the other Party, for its
--------------
prior written approval, which will not be unreasonably withheld or
delayed, any press release or any other public statement ("Press
Release") regarding the transactions contemplated hereunder.
Notwithstanding the foregoing, either Party may issue Press Releases
and other disclosures as required by law or as reasonably advised by
legal counsel without the consent of the other Party and in such
event, the disclosing Party will provide at least five (5) business
days prior written notice of such disclosure (unless a shorter period
is required by an applicable legal requirement). The failure to obtain
the prior written approval of the other Party shall be deemed a
material breach of this Agreement, whereby the non-breaching Party may
terminate, in whole or in part, ICP's Premier Status, AOL's
promotional obligations hereunder and the programming rights granted
to ICP hereunder or terminate this Agreement immediately following
written notice to the other Party, and the cure provision of Section
6.2 of this Agreement shall not apply.
8. FUTURE DISCUSSIONS
------------------
So long as ICP is entitled to Premier Status under this Agreement: if (a)
AOL wishes to present an opportunity to a third party with respect to (i)
any subsequently acquired, created or developed AOL brands or platforms
(e.g., any AOL broadband initiatives) or (ii) any AOL brands or platforms
not included in the carriage plan attached hereto as Exhibit A-1 (e.g.,
ICQ, AOL International, or MovieFone) and (b) AOL wishes to offer such
opportunity to an ICP Competitor (an "Additional Opportunity"), then AOL
shall also give ICP notice of such opportunity and the general terms and
conditions of such opportunity. For forty-five (45)days after AOL provides
such notice to ICP, (A) ICP shall have the non-exclusive right to negotiate
with AOL regarding such opportunity and (B) AOL will not enter into an
definitive written agreement with an ICP Competitor regarding such
opportunity. If the Parties have not executed a definitive written
agreement incorporating the terms and conditions of such opportunity within
such forty-five (45) day period, AOL shall have the right to enter into an
agreement regarding the opportunity with any other third party, including
an ICP Competitor. An Additional Opportunity shall not include
opportunities or any programming or commerce that ICP is not, in AOL's
reasonable judgment, able to provide at a level commensurate with the
programming or commerce which can be provided by the ICP Competitor to
which AOL wishes to offer such opportunity. In addition, an Additional
Opportunity shall not include arrangements entered into by any Affiliate.
With respect to any Additional Opportunity granted to ICP pursuant to this
Agreement, once AOL has provided ICP with an Additional Opportunity related
to a particular AOL brand, platform or AOL Property in accordance with
foregoing procedure, AOL shall have no further obligation to ICP with
respect thereto for such agreement. In addition, during the forty-five
(45) day period following the Effective Date, ICP and AOL shall enter into
good faith discussions regarding the possible co-location of ICP servers at
AOL's facilities.
9. TERMS AND CONDITIONS. The terms and conditions set forth on the Exhibits
--------------------
attached hereto are hereby made a part of this Agreement.
14
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the Effective Date.
AMERICA ONLINE, INC. drkoop.com, Inc.
By: By:
----------------------- -----------------------
Print Name: Print Name:
--------------- ---------------
Title: Title:
-------------------- ---------------------
Date: Date:
-------------------- ---------------------
Tax ID/EIN#:
---------------
15
<PAGE>
EXHIBIT A
---------
Exhibit A-1: Carriage Plan
Four Year Term
<TABLE>
<CAPTION>
Channel Area Type Impressions
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Level One: Content * * *
Integration
- ------------------------------------------------------------------------------------------------------------------------
AOL, AOL.com, CompuServe, Health As detailed in attached Permanent placements and
Netcenter, Digital City programming plans integrated content
(Exhibit A-2)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Level Two: Contextual All placements listed * * *
Integration below are rotations, not
permanent links
- ------------------------------------------------------------------------------------------------------------------------
AOL Lifestyles Womens, Self-improvement, Contextual links
Ages & Stages
- ------------------------------------------------------------------------------------------------------------------------
Families Relevant area TBD Contextual links
- ------------------------------------------------------------------------------------------------------------------------
Interests Food - Healthy Eating Contextual links
- ------------------------------------------------------------------------------------------------------------------------
Shop@AOL Health & Beauty Rotational contextual link
- ------------------------------------------------------------------------------------------------------------------------
Travel Relevant area TBD Contextual link
- ------------------------------------------------------------------------------------------------------------------------
Workplace Health & medical Integrated feature text
community group
- ------------------------------------------------------------------------------------------------------------------------
Sports Injury screen Contextual integration
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
AOL.com Womens Health, Fitness Contextual link
- ------------------------------------------------------------------------------------------------------------------------
International; Overseas health Integrated content
precautions
- ------------------------------------------------------------------------------------------------------------------------
Travel Overseas health Integrated content
precautions
- ------------------------------------------------------------------------------------------------------------------------
Research & Learn Health & Medical Contextual link
Community Group
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
CompuServe Business Executive health Contextual integration and
content links
- ------------------------------------------------------------------------------------------------------------------------
Travel Health basics Contextual integration and
content links
- ------------------------------------------------------------------------------------------------------------------------
Home & Interests Family health and other Contextual integration and
content links
- ------------------------------------------------------------------------------------------------------------------------
Lifestyles Women's Health and other Contextual integration and
content links
- ------------------------------------------------------------------------------------------------------------------------
Sports & Recreation Sports medicine Contextual integration and
content links
- ------------------------------------------------------------------------------------------------------------------------
Weather Seasonal health Contextual integration and
content links
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
16
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
Channel Area Type Impressions
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
Level Two: Contextual
Integration (con't)
- ------------------------------------------------------------------------------------------------------------------------
Netscape Lifestyles Womens, Mens and other Contextual link
- ------------------------------------------------------------------------------------------------------------------------
Families Teens, Senior Contextual link
- ------------------------------------------------------------------------------------------------------------------------
Sports Sports Medicine Contextual link
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Digital City Travel Health news, weather Contextual link
- ------------------------------------------------------------------------------------------------------------------------
Dining Guide Healthy eating Contextual link
- ------------------------------------------------------------------------------------------------------------------------
Sports Sports injuries Contextual link
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Level Three: Broad Reach * * *
- ------------------------------------------------------------------------------------------------------------------------
AOL Run of Service Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
E-mail Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
People Connection Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Member Directory Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AOL.com Home Page Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Run of Hometown Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Run of Service Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Instant Messenger Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
CompuServe Run of Service Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
CompuServe.com Run of Banner rotation
Service
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Netcenter Netcenter Run of Service Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Digital City City Main Page Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
Run of Service Banner rotation
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
17
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
Channel Area Type Impressions
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other comparable As mutually agreed by the
promotions parties.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
* * * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
18
<PAGE>
Exhibit A-2: Programming Plan
AOL HEALTH CHANNEL
- ------------------
Partner provides: Daily columns, daily tips, expert advice, and personalization
- ----------------
tools for the AOL Health Channel.
Partner receives: Permanent branded presence and minimum of two lines of text
- -----------------
links on the AOL Health main screen; permanent branded presence on Today in
Health and all applicable Conditions and Treatments screens; co-branding on new
"My Health"(or other name TBD) area to be developed jointly; co-branding on new
public health area to be developed jointly; contextually appropriate content
integration and promotion throughout the Health Channel as determined by AOL;
chats integrated in to AOL chat area (provided AOL technology is used).
Section 1 - General Content Requirements
1. List the Programming which Partner is Required to Provide
. AOL Health Main Screen:
. Daily tip/editorial branded from Dr. Koop (links directly to co-branded
affiliated site, same area each day). Should change daily Monday-Friday
at a minimum.
. Daily Health with Nancy Snyderman (links directly to co-branded
affiliated site, same area each day) Should change daily Monday-Friday
at a minimum.
. Target audience: General appeal, as a way to bring new members into AOL
Health.
. ICP shall present AOL with other ideas for main screen promotion for
ICP in this space from time to time.
. Today in Health
. Today's Tip (feature on Today in Health which links to AOL Health's
Today's Tip screen, can have up to three drkoop links that from there
go directly to co-branded affiliated site)
. Exclusive news story in the "Top Stories" section -at least one daily
(link to full article will go directly to co-branded affiliated site)
. Programming features on "My" Health screen, to include at launch:
. Four health newsletters (weekly): Families, Women, Men, Seniors (AOL
to fulfill mailing)
. Alerts/Special Reports on news of broad interest to consumers
. "Staying Healthy with Dr. Koop" feature
. Drug Checker
. Two additional tools, which can either be co-developed or developed
separately by DrKoop.com, which fit the programming approach of this
screen, e.g., Medication Tracker
. Health Risk Appraisal "Preventionnaire"
19
<PAGE>
("My Health" screen will be hosted and programmed by AOL and will be a co-
branded screen featured as a new department on the AOL Health main screen.
Drkoop will provide content for up to * * * of the programming features on
such screen. Drkoop.com links from My Health area will go directly to co-
branded site.)
. After "My Health" launches:
. DrKoop.com should build and add new Health Risk Appraisals (HRA) and
other ICP tools. AOL will select at its discretion from new tools
available such that up to * * * of core tools on "My Health" screen will
come from drkoop.com. AOL will have the ability to integrate in HRAs and
tools from other partners.
. DrKoop.com and AOL shall work together to develop additional elements for
"My Health".
. Due to the rapidly changing environment, AOL staff and DrKoop.com staff
should meet at least quarterly to review the programming elements of "My
Health" and then brainstorm, develop and implement new concepts.
. Target audience: Members interested in proactively managing their health.
Programming will be broad enough to reach those interested in wellness,
general health issues particular to that individual, disease prevention
and disease management.
. "Managing My `Condition'"
. Information, tools and other resources (e.g., newsletters) to help
members manage a specific condition.. It should complement, not duplicate
the content provided by Mayo Clinic. All programming on the screen should
relate to the specific condition to enable members to manage their
condition wisely.
. Target audiences: Members with a specific condition.
. Each "Managing My `Condition'" will be integrated within the Health
Channel's specific topic screen, as appropriate, e.g., "Managing My
Diabetes" will be featured along with other contextually appropriate
links on the Health Channel's Diabetes screen.
. Drkoop.com will provide and program an individual "Managing my Condition"
screen for the top 25 conditions at initial launch, with others to be
developed as mutually agreed upon, under a defined timeframe.
. Expert Features
. Dr. Koop and Dr. Snyderman features, as well as any new medical experts
with whom Drkoop.com many form a relationship, will reside on Message
Boards, Chats and Experts and will be promoted on key AOL Health channel
screens from time to time as deemed appropriate by AOL.
. Dr. Koop Speaks About...
. Programming focusing on broad public health issues.. Program would center
around an opinion written by drkoop.com experts, including Dr. Koop
himself, but should also include links to various related information,
e.g., statistics, additional background on the topic.
. Target audience: Members who recognize Dr. Koop's name and who are
interested in learning more about his opinion on various topics.
. This programming will be integrated within the relevant topic screens and
will be promoted on various channel screens, as appropriate.
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
20
<PAGE>
. If Dr. Koop is unavailable for any reason to provide this feature, then
another nationally known expert may be substituted subject to AOL's
approval.
2. What programming is Partner required to provide on an exclusive basis?
The Dr. Koop Special Report/daily feature that will be a permanent feature
of the AOL Health Main Screen.
Will the Partner provide live events? Yes, frequency TBD as opportunities are
identified.
3. Required frequency of updates.
As dictated by the various elements, e.g., newsletters on a weekly
basis; Dr Koop and Dr. Snyderman features on the AOL Health main screen
updated on a daily basis; alerts/special reports updated as needed.
4. What publishing format(s)?: HTML
Section 2 - Community Requirements
1. Will the Partner host message boards?
Yes (already existing), residing within their area. Partner agrees to
provide monitoring consistent with AOL's best practices.
2. Will the Partner host Chat?
Yes, will be integrated into the AOL Health Channel chat screens, and
will be promoted on a regular basis within the Message Boards, Chats,
and Experts area. Partner agrees to provide monitoring consistent with
AOL's best practices.
3. Will the Partner provide or promote Newsletters? Yes, at launch, four
(Families, Women, Men and Seniors' Health) will be featured on "My Health".
Based on the success of these newsletters, additional, topic-specific
newsletters may be added, e.g., depression, arthritis, which would be
featured on the appropriate topic screens subject to the agreement of both
parties.
4. What are the Member Registration requirements or restrictions? Subject to
terms of agreement.
5. Ownership of the community areas/content in the Partner's area?
The Partner will own all of the community areas provided within the
Partner's co-branded area.
6. What are the co-branding requirements in the community areas? Subject to
the co-branding terms of the agreement.
7. What are navigation requirements from the AOL Community/Message Board's?
Chats and experts will be integrated within the Health Channel's Message
Boards, Chats & Experts screen. Chats must be regularly scheduled and will
be integrated topically. Experts will be integrated by topic. Partner will
provide return navigation links to the relevant AOL community areas from
within the co-branded area .
8. Performance and Quality standards Partner must meet in community areas.
Subject to terms of agreement.
9. Must the Partner use AOL provided community tools? Yes, subject to terms of
agreement.
21
<PAGE>
AOL.COM
- -------
DrKoop.com will provide health-related content, tools and personalization for
the average consumer on a co-branded mirrored site with the domain
drkoop.aol.com.
- --------------
The content will consist of a news feed of original medical and health-related
stories written by DrKoop.com reporters; sports-injury reports (as they become
available); advice from medical professionals; weekly general-interest health
features promoting articles covering a variety of topics; reference materials;
and consumer health care information that provides an introduction to the
industry and terms used.
Drkoop.com tools and personalization will be intimately linked to the core areas
of the AOL.com Health Webcenter. In addition drkoop.com will provide fun tools
as they become available, such as a tool showing the relationship between
calories eaten and the exercise needed to work it off, and a daily poll.
Section 1 - General Content Requirements
1. List the Programming which Partner is Required to Provide (News, Features,
Statistics, etc.):
DrKoop.com will provide the following co-branded content:
. Weekly features for demographically targeted Health Web Center
departments
. Daily (Monday-Friday minimum) original health news on topics related to
health and health-care, including government policy
. A feed of DrKoop.com health stories for the AOL My News product
. Expert advice columns from Nancy Snyderman
. HTML code for widgets such as the Drug Checker, medication tracker and
immunization tracker (as they become available)
. Up-to-date sports injury reports (as they become available)
. Health tips, updated weekly, that provide a very brief teaser that links
to a full description.
. Consumer information on the health-insurance industry: articles,
calculators, lexicon and any other materials needed to provide users with
a general understanding of how health care plans work (as they become
available)
2. Will the Partner provide live events?
Not at first. When AOL.COM supports Web auditorium events, live events
will be discussed.
3. Required frequency of updates.
Broad features should be updated at least weekly, while news-oriented
features (daily heath news, daily sports injury news) should be updated
at least on a daily basis. The poll should be updated as needed to retain
timeliness. Other content will be static.
The partner will provide up-to-date editorial calendars of content that
will appear in co-branded areas. The partner will also meet weekly via
conference call with AOL.COM editorial staff to discuss upcoming content,
review previous editorial content, coordinate promotion of the Health Web
Center (such as providing graphics for use on the AOL.COM home page), and
suggest other possible content for the Health Web Center and other
applicable AOL.COM content areas.
4. What publishing format(s)?: HTML only.
22
<PAGE>
Section 2 - Community Requirements
1. Will the Partner host message boards? NO
2. Will the Partner host Chat?
Partner's chat that will be integrated into AOL.com chat, provided that
AOL technology and tools are used. Partner agrees to provide monitoring
consistent with AOL's best practices. Partner will provide return na
vigation links to the relevant AOL community areas from within the co-
branded area.
23
<PAGE>
<TABLE>
<CAPTION>
Placement Branded Content
AOL Product Channel/Area Screen Type Y/N Frequency Linked To
-----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1 AOL.com Health Index Feature Y Weekly Feature article
-----------------------------------------------------------------------------------------------------------------------------------
2 AOL.com Health Index Headlines N Daily Relevant news story
-----------------------------------------------------------------------------------------------------------------------------------
3 AOL.com Health Index Expert advice N Weekly Expert advice
-----------------------------------------------------------------------------------------------------------------------------------
4 AOL.com Health Index Poll N Weekly Results page
- ------------------------------------------------------------------------------------------------------------------------------------
5 AOL.com Health Index Widget Y Static Drug checker
- ------------------------------------------------------------------------------------------------------------------------------------
6 AOL.com Health Womens Health Feature Y Weekly Feature article
- ------------------------------------------------------------------------------------------------------------------------------------
7 AOL.com Health Womens Health Expert advice N Weekly Expert advice aggregate
area
- ------------------------------------------------------------------------------------------------------------------------------------
8 AOL.com Health Womens Health Widget Y Static Medication tracker (once
available)
- ------------------------------------------------------------------------------------------------------------------------------------
9 AOL.com Health Womens Health Widget Y Static Drug checker
- ------------------------------------------------------------------------------------------------------------------------------------
10 AOL.com Health Mens Health Feature Y Weekly Feature article
- ------------------------------------------------------------------------------------------------------------------------------------
11 AOL.com Health Mens Health Expert advice N Weekly Expert advice aggregate
area
- ------------------------------------------------------------------------------------------------------------------------------------
12 AOL.com Health Mens Health Widget Y Static Medication tracker
- ------------------------------------------------------------------------------------------------------------------------------------
13 AOL.com Health Mens Health Widget Y Static Drug checker
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AOL Product Channel/Area Screen Placement Type Branded Frequency Linked To
Y/N
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
14 AOL.com Health Childrens Health Feature Y Weekly Feature article
- ------------------------------------------------------------------------------------------------------------------------------------
15 AOL.com Health Childrens Health Expert advice N Weekly Expert advice aggregate
area
- ------------------------------------------------------------------------------------------------------------------------------------
16 AOL.com Health Childrens Health Widget Y Static Medication tracker (once
available)
- ------------------------------------------------------------------------------------------------------------------------------------
17 AOL.com Health Childrens Health Widget Y Static Immunization Tracker (once
available)
- ------------------------------------------------------------------------------------------------------------------------------------
18 AOL.com Health Childrens Health Widget Y Static Drug checker
- ------------------------------------------------------------------------------------------------------------------------------------
19 AOL.com Health Seniors Health Feature Y Weekly Feature article
- ------------------------------------------------------------------------------------------------------------------------------------
20 AOL.com Health Seniors Health Expert advice N Weekly Expert advice aggregate
area
- ------------------------------------------------------------------------------------------------------------------------------------
21 AOL.com Health Seniors Health Widget Y Static Medication tracker (once
available)
- ------------------------------------------------------------------------------------------------------------------------------------
22 AOL.com Health Seniors Health Widget Y Static Drug checker
- ------------------------------------------------------------------------------------------------------------------------------------
23 AOL.com Health Fitness & Feature Y Daily Sports injury news
Sports Medicine
- ------------------------------------------------------------------------------------------------------------------------------------
24 AOL.com Health Alternative Widget Y Static Drug checker
Medicine
- ------------------------------------------------------------------------------------------------------------------------------------
25 AOL.com Health Diet & Nutrition Tip or Factoid N Weekly Full description of tip
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
Placement Branded
AOL Product Channel/Area Screen Type Y/N Frequency Linked to
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
26 AOL.com Health Doctors, TBD TBD TBD Health insurance consumer
Insurance, HMOs info resources
and More
- ------------------------------------------------------------------------------------------------------------------------------------
27 AOL.com Health Health & Beauty Tip or Factoid N Weekly Full description of tip
- ------------------------------------------------------------------------------------------------------------------------------------
28 AOL.com Sports Index Link Y Daily Sports injury news (once
available)
- -----------------------------------------------------------------------------------------------------------------------------------
29 AOL.com Sports Fantasy Sports Link Y Daily Sports injury news (once
available)
- -----------------------------------------------------------------------------------------------------------------------------------
30 AOL.com My News N/a Headlines Y Daily Health-related news
stories
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
COMPUSERVE
- ----------
Section 1 - General Content Requirements
. drkoop.com will be the Anchor Tenant for CompuServe Health & Fitness Channel,
which includes prominent Channel wide branding (e.g.: CompuServe Health &
Fitness with drkoop.com).
. CompuServe will link to drkoop.com tools, databases, articles, and features,
co-branded for CompuServe Health, throughout the Health Channel, as shown below
or as mutually agreed upon.
. drkoop will be a special featured partner in the Fitness and Nutrition
Departments as shown
. drkoop.com will supply the top feature article for the Health Channel, plus
additional articles for designated Departments, and for the Family, Over 50, and
Women's Channels.
. Partner will provide weekly teaser text for additional content links to co-
branded site: Nutrition Department: The Daily Special; Ask the Expert; Fitness
Dept: Ask the Expert; 4 Get Fit
. Content will be provided in HTML coded format, preferably by automatic feed.
Should automatic feed be impractical, Partner will update content using
CompuServe's Content Submission Manager tool (CSM)
. drkoop.com to provide fully co-branded site. drkoop.com will link to
CompuServe Forums from Co-branded pages and will not link to drkoop.com
Communities from these pages.
. As other tools and utilities are added to the drkoop co-branded area,
placements will be added on the CompuServe Health & Fitness Channel
Section 2 - Community Requirements
. To the extent technically feasible, drkoop.com community chats will be
integrated with the CompuServe Forum chat applet to allow participation by
CompuServe members in already scheduled chats.
. Should this prove to be impossible, drkoop and AOL will mutually identify
opportunities for live chat events per month within CompuServe Forums.
Section 2 (Continued) - Other Requirements
. GO DRKOOP will take CompuServe members to the Co-Branded site top page.
. CompuServe will add drkoop.com to its CompuServe Search and Internet "try
this first".
. Drkoop.com will be the anchor tenant for CompuServe's Health & Fitness
Channel with prominent branding throughout the Channel in the top Channel
banner.
. Additional branding will be included on special features throughout the
Channel, as mutually agreed.
. The co-branded site will include the CompuServe Health & Fitness Channel
banner and top bar site navigation across the top; navigation links across the
bottom, and a portion of the left navigation reserved for links to Forums.
Most links to the Co-branded site will be one or two clicks from the top of the
Channel, except for articles supplied to each Department which are three clicks
(see attached chart). Note on programming plan: subject to change based on new
content available from drkoop.com in each of the identified subject areas.
26
<PAGE>
<TABLE>
<CAPTION>
Page/Department Item Source/ Brand Notes
Destination
<S> <C> <C> <C> <C>
Health Channel Top Channel Banner N/a Logo integrated drkoop.com Anchor Tenancy: Channel to be
with Channel billed as "Compuserve Health & Fitness, with
banner throughout drkoop.com" or other equivalent language to
Channel be agreed upon.
- ------------------------------------------------------------------------------------------------------------------------------------
Health Channel Top Top Feature Story; teaser Provided by drkoop.com Top story, above the scroll
and link to second page. drkoop.com branded story
- ------------------------------------------------------------------------------------------------------------------------------------
Health Channel Top Links to Databases drkoop.com Csv. None Search boxes for Drugs; Encyclopedia; Web
CoBrand pages Site Reviews
- ------------------------------------------------------------------------------------------------------------------------------------
Health Channel Top Dr. Nancy Provided by Daily Health with Title links to Ailments Dept.
drkoop.com Dr. Nancy
- ------------------------------------------------------------------------------------------------------------------------------------
Health Channel Top Dr. Koop's Corner Department page Name can change See below for destination content
- ------------------------------------------------------------------------------------------------------------------------------------
Dr. Koop's Corner Monthly topical feature Provided by Branded Feature links to co-branded site throughout.
(seasonal; health month) drkoop.com Right navigation will have Compuserve related
links.
- ------------------------------------------------------------------------------------------------------------------------------------
Ask the Experts Descriptions of Experts drkoop experts Branded Links to cobranded for biographies, archives
and links for more as well as any and to ask a question
CompuServe Forum
experts
- ------------------------------------------------------------------------------------------------------------------------------------
Fitness Fitness files teaser and Provided by If desired Top story, above the scroll,
link to second page drkoop.com pertaining to fitness.
- ------------------------------------------------------------------------------------------------------------------------------------
Fitness Ask the Expert Questions Provided by If desired Links to full Q&A on cobranded site;
of the week drkoop.com links to ask your questions and FAQ
on co-branded site.
- ------------------------------------------------------------------------------------------------------------------------------------
Fitness Fitness Facts link (right drkoop.com Csv. Links to co-branded page
Nav) CoBrand pages
- ------------------------------------------------------------------------------------------------------------------------------------
Fitness Links to drkoop Fitness drkoop.com Csv. Branded Links to Fitness Files, Four Get
Center sections CoBrand pages Fit; Ask the Expert; Weekly Fitness;
Fitness Facts
- ------------------------------------------------------------------------------------------------------------------------------------
Fitness Four Get Fit drkoop.com Csv. If desired Links to co-branded pages
CoBrand pages
- ------------------------------------------------------------------------------------------------------------------------------------
Fitness & Nutrition Links to drkoop centers drkoop.com Csv. Branded Right Nav: Links to Fitness Center;
Departments CoBrand pages Nutrition Center; Tackling Tobacco;
Preventionaire; Prevention Center
- ------------------------------------------------------------------------------------------------------------------------------------
Nutrition Nutrition for Healthy Provided by Branded Links to full article on second page.
Living feature drkoop.com Links from that article to co-branded site.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Page/Department Item Source/Destination Brand Notes
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Nutrition Daily special Provided by Branded Teaser links to recipe on co-branded
drkoop.com site.
- ------------------------------------------------------------------------------------------------------------------------------------
Nutrition Ask the Expert Provided by Branded Links to full Q&A on cobranded site;
drkoop.com links to ask your questions and FAQ
on co-branded site.
- ------------------------------------------------------------------------------------------------------------------------------------
Nutrition Links to drkoop centers drkoop.com Csv. Branded Links to Nutrition for your
CoBrand pages condition; Vitamins and Minerals;
Healthy Recipes; Nutrition for
Healthy Living (right and left nav)
on co-branded site
- ------------------------------------------------------------------------------------------------------------------------------------
Ailments & Conditions Top Feature Dr. Nancy Q&A Provided by drkoop.com branded Content relating to ailments and
drkoop.com conditions. Links to full story on
CompuServe site. Links to archives
and ask a question go to co-branded
site.
- ------------------------------------------------------------------------------------------------------------------------------------
Ailments & Conditions Links to Databases drkoop.com Csv. Links to Drug DB, Medical
page and each CoBrand pages Encyclopedia, and other tools as
Specialty Center available.
- ------------------------------------------------------------------------------------------------------------------------------------
Ailments & Conditions Links to Specialty Centers CompuServe pages Specialty Centers for each condition
- ------------------------------------------------------------------------------------------------------------------------------------
Diabetes; Heart; Pain; Top Feature Story; teaser Provided by drkoop.com Top story, above the scroll,
and Cancer Specialty and link to second page drkoop.com branded story pertaining to subject area
Centers
- ------------------------------------------------------------------------------------------------------------------------------------
Research Links to relevant drkoop.com Csv. drkoop.com Branded ICP is contractually permitted to
Databases and tools CoBrand pages such databases and tools
- ------------------------------------------------------------------------------------------------------------------------------------
Women's Health Top Feature Story; teaser Provided by Top story, above the scroll,
and link to second page drkoop.com pertaining to Women's Health.
- ------------------------------------------------------------------------------------------------------------------------------------
Women's Health Dr. Nancy Question Provided by Links to co-branded pages
drkoop.com
- ------------------------------------------------------------------------------------------------------------------------------------
Men's Health Top Feature Story; teaser Provided by Top story, above the scroll,
and link to second page drkoop.com pertaining to Men's Health.
- ------------------------------------------------------------------------------------------------------------------------------------
Womens, Mens and Mental drkoop centers drkoop.com Csv. Branded Links to Various Centers on co-
Health CoBrand pages branded site(may change as
appropriate for subject area):
Managing Stress; Fitness; Nutrition;
Tobacco; Prevention; Safety; etc.)
- ------------------------------------------------------------------------------------------------------------------------------------
Children's Health Top Feature Story; teaser Provided by Top story, above the scroll,
and link to second page drkoop.com pertaining to pediatric Health.
- ------------------------------------------------------------------------------------------------------------------------------------
Mental Health Top Feature Story; teaser Provided by Top story, above the scroll,
and link to second page drkoop.com pertaining to Mental Health
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Family Channel Feature Story; teaser & Provided by Branded Story Top story, above the scroll,
link to second page drkoop.com pertaining to Pediatric Health.
Different from that in Children's
Health
- ------------------------------------------------------------------------------------------------------------------------------------
The Family Channel Link to drkoop.com drkoop.com Csv. Links to the drkoop.com/Health
Co-branded Site CoBrand pages Channel Co-branded pages Top. Adds
additional incremental traffic.
- ------------------------------------------------------------------------------------------------------------------------------------
The Women's Channel: Feature Story; teaser & Provided by Branded Story Top story, above the scroll,
Health & Beauty link to second page drkoop.com pertaining to Women's Health.
Different article than that in Health
Channel Women's Health
- ------------------------------------------------------------------------------------------------------------------------------------
The Women's Link to drkoop.com drkoop.com Csv. Links to the drkoop.com/Health
Channel: Health & Co-branded Site CoBrand pages Channel Co-branded pages Top. Adds
Beauty additional incremental traffic.
- ------------------------------------------------------------------------------------------------------------------------------------
Over 50 Feature Story; teaser & Provided by Branded Story Top story, above the scroll,
link to second page drkoop.com pertaining to Aging.
- ------------------------------------------------------------------------------------------------------------------------------------
Over 50 Link to drkoop.com drkoop.com Csv. Links to the drkoop.com/Health
Co-branded Site CoBrand pages Channel Co-branded pages Top. Adds
additional incremental traffic.
- ------------------------------------------------------------------------------------------------------------------------------------
Research Channel Links drkoop.com Csv. Branded Links to co-branded site for medical
CoBrand research
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
NETSCAPE NETCENTER
- ------------------
Drkoop.com will be the premier provider of branded, general health & wellness
information and utilities.
Drkoop.com will provide comprehensive, trusted consumer healthcare information
and services to empower users to better manage their personal health. The focus
of drkoop.com's content will be based heavily around consumer trends in health.
Drkoop.com brands and quality content will help to build a trusted relationship
with users which will be the foundation for the later phases of empowering the
consumer in disease & wellness management.
Phase 1: Provide comprehensive, consumer-focused healthcare information &
utilities:
. generalized health & wellness info (most frequently requested health info)
. deeper disease-specific, medical diagnostic, & medical reference info
. interactive, time-saving tools to help the consumer manage their health
online
Phase 2: Deeper integration of ICP Tools as mutually agreed.
Section 1 - General Content Requirements
1. List the Programming which Partner is Required to Provide:
. News & Features - note: Daily = Mon.-Fri. at a minimum
. Health News (updated: daily)
. Health Breakthroughs / Health Tech (updated: daily) - as available
. Daily Health with Dr. Nancy Syderman (updated: daily)
. Announcements & Recalls (updated: as appropriate)
. Health Tip (updated: daily)
. Tools & Utilities
. Polls (updated: same frequency as on drkoop.com.com)
. Drug Checker (updated: N/A)
. Conditions & Concerns (updated: N/A)
. Additional Tools (in development) TBD - commitment that new tools will
be made available in same timeframe.
. News, Features, Tools & Utilities will be threaded throughout the Health
Index page and appropriate Health Department pages:
. Diseases & Conditions
. Diet & Nutrition
. Exercise & Fitness
. Health & Beauty
. Alternative Health
. Emotional Health
. Sexual health
. Doctors, Insurance, HMOs
. Women's Health
. Men's Health
. Children's Health
30
<PAGE>
. Senior's Health
. Disease Centers
. Cancer Center
. HIV/AIDS
. Diabetes
. Anorexia/Bulemia
. Health Breakthroughs area: New area to be created and hosted by
drkoop.com that is threaded throughout the relevant Netcenter Health
Departments. Content of Health Breakthroughs area will include new
medical products and how they are beneficial or harmful; product recalls;
feature news items, `watchdogs' and special reports.
. MyHealth: My Health will be a customizable Health index page, leveraging
Netscape's personalization technology, at AOL's option. This page will be
hosted by Netscape, but will have direct links to drkoop.com's co-branded
affiliated site. Appropriate tools from drkoop.com will be integrated
into the product offering as mutually agreed.
. MyNetscape - Partner will provide as a "widget" their most popular
tool/utility/feature(s) to be included on the MyNetscape page, at AOL's
option.
2. Will the Partner provide live events?
Partner will provide live events focused on featured speakers / specific
topics with the same frequency as offered on drkoop.com.
3. Required frequency of updates. See above.
4. What publishing format(s): HTML & XML feeds (for any daily changing
content).
Section 2 - Community Requirements
1. Will the Partner host message boards? TBD.
2. Will the Partner host Chat?
Yes, drkoop.com's chat will be integrated in to Netcenter Health chats,
provided the AOL technology is used.
3. Will the Partner provide or promote Newsletters? Yes, as appropriate.
4. Links: Contextual content links within the message board headers and
footers shall refer to AOL-native products where it is feasible.
31
<PAGE>
DIGITAL CITY:
- -------------
Dr. Koop will be the Premier Health Partner for DCI. This means that Dr. Koop
will have a top-level banner sponsorship, permanent placement of badges and
branded content integration. We will feature other providers' content in a
complementary way so that we offer a well-rounded product to our users.
Drkoop.com chats will be integrated into DCI Support Online, provided that AOL
technology is used. Daily shall mean Monday through Friday, at a minimum.
Overview of placements on DCI-hosted pages
<TABLE>
<CAPTION>
Center Page Item Source/ Brand Frequency Notes
Destination
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Health City Main Top Level Sponsor Banner Drkoop.com Logo/ Daily This is the center bar above the
banner health navigation and dail story
promotion.
- ------------------------------------------------------------------------------------------------------------------------------------
Health Support Online Sponsorship of the main page Drkoop.com Logo/ Daily This is an area dedicated to
(Community Page) badge member interactionn for people to
discuss specific health-related
issues. Drkoop.com could sponsor
this area.
- ------------------------------------------------------------------------------------------------------------------------------------
Health City Main Health articles Drkoop.com Logo Daily 2-3 topical articles that point to
an interim page that contains the
main article and summaries that
point to the Drkoop.com site.
- ------------------------------------------------------------------------------------------------------------------------------------
Health Health Sponsorship of condition main Drkoop.com Text/ Monthly We give the consumer the
Condition main page badge opportunity to get basic
information and current news
related to that condition.
- ------------------------------------------------------------------------------------------------------------------------------------
Health Health Category Category Main page Drkoop.com Logo As Integrate co-branded text
needed articles into the category box.
after This textbox resides on the main
first city pages and all of the
phase secondary pages.
- ------------------------------------------------------------------------------------------------------------------------------------
Health Local Health Interactive content, Information Drkoop.com Badge monthly Local content integration (non-
Resources Databases exclusive)
- ------------------------------------------------------------------------------------------------------------------------------------
DCI 1-of-24 Ticker City Sponsorship of a top 10 list Drkoop.com Logo Daily We plan to have an informational
Main Page ticker that will reside on the
front page of each city. 24
locally-relevant topics will
rotate through the ticker.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
A-3: Customization and Co-branding Requirements
- -----------------------------------------------
ICP Internet Sites. ICP shall create, at its sole expense, a fully customized
- ------------------
site for each of the AOL Properties and warrants that it also shall implement,
at its sole expense, any appropriate infrastructure additions to the ICP
Internet Site to support the projected traffic growth on such ICP Internet
Sites. Such customization shall include, without limitation:
(a) Standard Customization
- --- ----------------------
(i) the inclusion of a toolbar (the parameters, specifications and format
of which are listed below) at the top and bottom of each page of the
ICP Internet Site, which, among other things, will provide navigation
back to the AOL Network;
(ii) various additional co-branding elements as specified below;
(iii) the creation of links in connection with communication services on
the ICP Internet Sites to the corresponding or equivalent
communication services or areas of the ICP Internet Site of the
appropriate AOL Property (e.g., chat from the ICP Internet Site of
the AOL Service will link to the chat area on the AOL Service); and
(iv) the linking of each ICP Internet Site to an URL which contains the
location code for the appropriate AOL brand (e.g.,
www.drkoop.aol.com) or any such other URL as determined by AOL in its
sole discretion).
(b) AOL Service. Please see attached co branding mockup.
- ----------------
33
<PAGE>
AOL Brands Cobranding
Usage Guidelines [AOL Confidential]
10 June 99
AOL interim hat
585w 30h
position at (0,0)
logo art, main & help buttons provided to
size
X = height of capital A AOL Presents
9.1 aol cobrand eyebrow
1. typographic art
provided to size--extend
baseline rule to full
width of partner brand;
2. positioning
set eyebrow at minimum
2 pixels above partner
brand, left- aligned with
the brand;
3. clear space
provide clear space
(see x) above the
eyebrow equal to the
height of the letter A.
4. type specs
AOL brand set in Thesis
Sans Extra Bold Plain
all caps. Presents set
in Thesis Sans Semi Bold
Plain. Type should be no
smaller than 14 pt.
aol interim footer
585w 30h
position at (0,0)
logo art, main & help buttons provided to size
34
<PAGE>
(c) AOL.com
-------
ICP shall create a version of the ICP Internet Site customized for distribution
through AOL.com (the "ICP-AOL.com Site") by (w) developing the ICP-AOL.com Site
as a "cul de sac" site containing no links outside of the ICP-AOL.com Site other
than to AOL.com, other AOL or third party Content determined by AOL, or
advertisements permitted under this Agreement, (x) displaying on each page of
the ICP-AOL.com Site headers and footers of size and type determined by AOL and
which contain both AOL.com and ICP branding, links to AOL.com, a Netfind search
box and two (2) promotional spaces to be programmed by AOL, (y) programming each
page of the ICP-AOL.com Site with a co-branded domain name (e.g.,
drkoop.aol.com) and (z) matching the look and feel of AOL.com on the ICP-AOL.com
Site. ICP will, in accordance with the Programming Plan, and subject to the
terms of this Agreement, (1) provide AOL with Content for the areas and screens
of AOL.com described in the Programming Plan, and (2) program and manage the
Content on the ICP-AOL.com Site for distribution through AOL.com. All terms and
conditions of this Agreement applicable to the ICP Internet Site shall apply to
the ICP-AOL.com Site except as expressly otherwise stated.
(d) CompuServe Service and CompuServe.com
ICP/CompuServe co-branded as follows: (a) the ICP-CompuServe Site will be
framed on each page across the top and along the left side using the then-
current navigation of the CompuServe Health Channel and the left side navigation
will comprise the Health Channel navigation bar; (b) ICP shall eliminate the use
of "pop-up" windows, screens and similar types of functionality in connection
with the display of advertising, promotions or sponsorships on the ICP-
CompuServe Site; (c) ICP shall program each page of the ICP-CompuServe Site with
a co-branded domain name (e.g., drkoop.compuserve.com) and (e) ICP shall match
the look and feel of CompuServe Service Health Channel on the ICP-CompuServe
Site.
(e) Digital City. ICP/Digital City co-branded as follows: (x) displaying on
------------
each page of the ICP-Digital City Site headers and footers of size and type
determined by AOL and which contain both Digital City and ICP branding, and
links to Digital City; (y) programming each page of the ICP-Netcenter Site with
a co-branded domain name (e.g., drkoop.digitalcity.com) and (z) matching the
look and feel of Digital City on the ICP-Digital City Site.
(f) Netscape Netcenter. ICP/Netscape Netcenter co-branded as follows: (x)
------------------
displaying on each page of the ICP-Netcenter Site headers, footers and
navigation sidebar of size and type determined by AOL and which contain both
Netscape and ICP branding, links to Netscape Netcenter, a search box ,two (2)
promotional spaces to be programmed by AOL, and advertising space as desired by
partner ; (y) programming each page of the ICP-Netcenter Site with a co-branded
domain name (e.g., drkoop.netscape.com) and (z) matching the look and feel of
Netscape Netcenter on the ICP-Netcenter Site. Within navigation sidebar, where
subdepartments exist under Netcenter Department headings, these will be broken
out for navigational purposes.
35
<PAGE>
EXHIBIT B -- DEFINITIONS
-------------------------
DEFINITIONS. The following definitions shall apply to this Agreement:
- -----------
Advertising Revenues. Aggregate amounts collected plus the fair market value of
- --------------------
any other compensation received (such as barter advertising) by ICP or ICP's
agents, as the case may be, arising from the license or sale of AOL
Advertisements, less applicable Advertising Sales Commissions.
Advertising Sales Commission. In the case of an AOL Advertisement, actual
- ----------------------------
amounts paid as commission to third party agencies in connection with sale of
the AOL Advertisement.
Affiliate. Any agent, distributor or franchisee of AOL, or an entity in which
- ---------
AOL holds at least a * * * equity interest.
* * * Certain information on this page has been omitted and filed separately
- ------------------------------------------------------------------------------
with the Securities and Exchange Commission. Confidential treatment has been
- -----------------------------------------------------------------------------
requested with respect to the omitted portions.
- -----------------------------------------------
AOL.com. AOL's primary Internet-based Interactive Site marketed under the
- -------
"AOL.COM(TM)" brand, specifically excluding (a) the AOL Service, (b) any
international versions of such site, (c) CompuServe.com, Netscape Netcenter, any
other CompuServe or Netscape products or services or interactive sites, (d)
"ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "NetMail(TM)" or any
similar independent product or service offered by or through such site or any
other AOL Interactive Site, (e) any programming or Content area offered by or
through such site over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (f) any programming or Content area offered by or
through the U.S. version of the America Online brand service which was operated,
maintained or controlled by the former AOL Studios division, (g) any yellow
pages, white pages, classifieds or other search, directory or review services or
Content offered by or through such site or any other AOL Interactive Site, (h)
any property, feature, product or service which AOL or its affiliates may
acquire subsequent to the Effective Date and (i) any other version of an America
Online Interactive Site which is materially different from AOL's primary
Internet-based Interactive Site marketed under the "AOL.COM(TM)" brand, by
virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded versions and any version
distributed through any broadband distribution platform or through any platform
or device other than a desktop personal computer.
AOL Look and Feel. The distinctive and particular elements of graphics, design,
- -----------------
organization, presentation, layout, user interface, navigation, trade dress and
stylistic convention (including the digital implementations thereof) within the
AOL Network and the total appearance and impression substantially formed by the
combination, coordination and interaction of these elements.
AOL Member(s). Authorized users (including any sub-accounts under an authorized
- -------------
master account) of the AOL Network.
AOL Network. (i) The AOL Service, (ii) AOL.com, (iii) CompuServe Service, (iv)
- ------------
CompuServe.com, (v) Digital City, (vi) Netscape Netcenter and (vii) any other
product or service owned, operated, distributed or authorized to be distributed
by or through AOL or its Affiliates worldwide through which such party elects to
offer the ICP Internet Site, ICP Programming and/or Licensed Content (which may
include, without limitation, AOL-related Internet sites, "offline" information
browsing products, international versions of the AOL brand service, MovieFone,
or ICQ).
AOL Property. Any product, service or property owned, operated, marketed,
- ------------
distributed, or authorized to be distributed by or through AOL or its
Affiliates, including, without limitation, the AOL Service, AOL.com, and
CompuServe Service, CompuServe.com, Digital City and Netscape Netcenter.
AOL Purchaser. (i) Any person or entity who enters the ICP Internet Site or the
- -------------
ICP Programming from the AOL Network including, without limitation, from any
third party area therein (to the extent entry from such third party area is
traceable through both Parties' commercially reasonable efforts), and generates
Transaction Revenues (regardless of whether such person or entity provides an e-
mail address during registration or entrance to the ICP Internet Site which
includes a domain other than an "AOL.com" domain); and (ii) any other person or
entity who, when purchasing a product, good or service through an ICP
Interactive Site, provides an AOL.com domain name as part of such person or
entity's e-mail address and provided that any person or entity who has
previously satisfied the definition of AOL Purchaser will remain an AOL
Purchaser, and any subsequent purchases by such person or entity (e.g., as a
result of e-mail solicitations or any off-line means for receiving orders
requiring purchasers to reference a specific promotional identifier or tracking
code) will also give rise to Transaction Revenues hereunder (and will not be
conditioned on the person or entity's satisfaction of clauses (i) or (ii)
above).]
AOL Service. The narrow-band U.S. version of the America Online brand service,
- -----------
specifically excluding (a) AOL.com and any other AOL Interactive Site, (b) the
international versions of an America Online service (e.g., AOL Japan), (c) the
CompuServe(R) brand service and any other CompuServe products or services, (d)
Netscape Netcenter(TM) and any other Netscape products or services, (e)
"ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital City(TM),"
"NetMail(TM)," "Real Fans", "Love@AOL", "Entertainment Asylum," "AOL Hometown"
or any similar independent product, service or property which may be offered by,
through or with the U.S. version of the America Online brand service, (f) any
programming or content area offered by or through the U.S. version of the
America Online brand service over which AOL does not exercise complete
operational control (including, without limitation, Content areas controlled by
other parties and member-created Content areas), (g) any yellow pages, white
pages, classifieds or other search, directory or review services or Content
offered by or through the U.S. version of the America Online brand service, (h)
any property, feature, product or service which AOL or its affiliates may
acquire subsequent to the Effective Date and (i) any other version of an America
Online service which is materially different from the narrow-band U.S. version
of the America Online brand service, by virtue of its branding, distribution,
functionality, Content or services, including, without limitation, any co-
branded version of the service and any version distributed through any broadband
distribution platform or through any platform or device other than a desktop
personal computer.
Change of Control. (a) The consummation of a reorganization, merger or
- -----------------
consolidation or sale or other disposition of substantially all of the assets of
a party * * * or (b) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than 50% of either (i) the then outstanding
shares of common stock of such party; or (ii) the combined voting power of the
then outstanding voting securities of such party entitled to vote generally in
the election of directors.
CompuServe Service. The standard HTML version of the narrow-band U.S. version of
- -------------------
the CompuServe brand service, specifically excluding (a) any international
versions of such service (e.g., NiftyServe), (b) any web-based service including
"compuserve.com", "cserve.com" and "cs.com", or any similar product or service
offered by or through the U.S. version of the CompuServe brand service, (c)
Content areas owned, maintained or controlled by CompuServe affiliates or any
similar "sub-service," (d) any programming or Content area offered by or through
the U.S. version of the CompuServe brand service over which CompuServe does not
exercise complete or substantially complete operational control (e.g., third-
party Content areas), (e) any yellow pages, white pages, classifieds or other
search, directory or review services or Content (f) any co-branded or private
label branded version of the U.S. version of the CompuServe brand service, (g)
any version of the U.S. version of the CompuServe brand service which offers
Content, distribution, services or functionality materially different from the
Content, distribution, services or functionality associated with the standard,
narrow-band U.S. version of the CompuServe brand service, including, without
limitation, any version of such service distributed through any platform or
device other than a desktop personal computer, (h) any property, feature,
product or service which CompuServe or its affiliates may acquire subsequent to
the Effective Date, (i) the America Online brand service and any independent
product or service which may be offered by, through or with the U.S. version of
the America Online brand service and (j) the HMI versions of the CompuServe
brand service.
CompuServe.com. CompuServe's primary Internet-based Interactive Site marketed
- --------------
under the "CompuServe.com(TM)" brand, specifically excluding (a) the CompuServe
Service and AOL Service, (b) any international versions of such site, (c)
AOL.com, Netscape Netcenter, any other AOL or Netscape products or services or
interactive sites, (d) "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant
Messenger(TM)," "NetMail(TM)" or any similar independent product or service
offered by or through such site or any other AOL or CompuServe Interactive Site,
(e) any programming or Content area offered by or through such site over which
AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created Content
areas), (f) any programming or Content area offered by or through the U.S.
versions of the America Online brand service or CompuServe brand service which
was operated, maintained or controlled by the former AOL Studios division, (g)
any yellow pages, white pages, classifieds or other search, directory or review
services or Content offered by or through such site or any other AOL or
CompuServe Interactive Site, (h) any property, feature, product or
- ---------------
*** Certain informaion on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
36
<PAGE>
service which AOL or its affiliates may acquire subsequent to the Effective Date
and (i) any other version of an AOL or CompuServe Interactive Site which is
materially different from CompuServe's primary Internet-based Interactive Site
marketed under the "CompuServe.com(TM)" brand, by virtue of its branding,
distribution, functionality, Content or services, including, without limitation,
any co-branded versions and any version distributed through any broadband
distribution platform or through any platform or device other than a desktop
personal computer.
Confidential Information. Any information relating to or disclosed in the
- ------------------------
course of this Agreement, which is, or should be reasonably understood to be,
confidential or proprietary to the disclosing Party, including, but not limited
to, the material terms of this Agreement, information about AOL Members,
technical processes and formulas, source codes, product designs, sales, cost and
other unpublished financial information, product and business plans, projections
and marketing data. "Confidential Information" shall not include information
(a) already lawfully known to or independently developed by the receiving Party,
(b) disclosed in published materials, (c) generally known to the public, or (d)
lawfully obtained from any third party.
Content. Text, images, video, audio (including, without limitation, music used
- -------
in time relation with text, images, or video), and other data, products,
services, advertisements, promotions, links, pointers, technology and software.
Development and Services Agreement. "Development and Services Agreement" shall
- ----------------------------------
mean that certain Development and Services Agreement entered into between the
Parties of even date herewith.
Digital City. The standard, narrow-band U.S. version of Digital City's local
- -------------
content offerings marketed under the Digital City brand name, specifically
excluding (a) the AOL Service, AOL.com or any other AOL Interactive Site, (b)
any international versions of such local content offerings, (c) the
CompuServe(R) brand service and any other CompuServe products or services (d)
"Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital
City," "NetMail(TM)," "Electra", "Thrive", "Real Fans", "Love@AOL",
"Entertainment Asylum," "AOL Hometown," "My News" or any similar independent
product, service or property which may be offered by, through or with the
standard narrow band version of Digital City's local content offerings, (e) any
programming or Content area offered by or through such local content offerings
over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through such local content
offerings, (g) any property, feature, product or service which AOL or its
affiliates may acquire subsequent to the Effective Date, (h) any other version
of a Digital City local content offering which is materially different from the
narrow-band U.S. version of Digital City's local content offerings marketed
under the Digital City brand name, by virtue of its branding, distribution,
functionality, Content or services, including, without limitation, any co-
branded version of the offerings and any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer, and (i) Digital City- branded offerings in any local
area where such offerings are not owned or operationally controlled by AOL, Inc.
or DCI (e.g., Chicago, Orlando, South Florida, and Hampton Roads).
Dr. Koop Site. The Internet site and Content, currently located at
- -------------
URL:http://drkoop.com and all related URLs (including without limitation any
third party affiliated versions of such site (e.g., customized, mirrored,
private labeled sites (e.g., versions for private hospitals, broadcast
affiliates)), which are managed, maintained or owned by ICP or its agents or to
which ICP licenses information, content or other materials.
ICP Competitors. * * *ICP and AOL may mutually agree to revise this list on an
- ---------------
as mutually agreed upon basis; provided that, any revisions to such list shall
not affect placements, arrangements or relationships entered into or committed
to prior to the revision of such list.
ICP Interactive Site. Any interactive site or area (other than ICP Programming),
- --------------------
including without limitation the Dr. Koop Site and any customized, mirrored or
private-labeled site or area (e.g., versions for local hospitals and broadcast
affiliates), which is managed, maintained or owned by ICP or its agents or to
which ICP provides and/or licenses information, content or other materials,
including, by way of example and without limitation, (i) an ICP site on the
World Wide Web portion of the Internet or (ii) a channel or area delivered
through a "push" product such as the Pointcast Network or interactive
environment such as Microsoft's proposed Active Desktop or interactive
television service such as WebTV.
ICP Internet Site. Each of the versions of the Dr. Koop Site customized for
- -----------------
distribution through the AOL Network in accordance with this Agreement.
ICP Presence. Any (a) ICP trademark or logo, (b) headline or picture from ICP
- ------------
Content, (c) teaser, icon, or link to the ICP Internet Site or ICP Programming
and/or (d) other Content which originates from, describes or promotes ICP or
ICP's Content.
ICP Programming. Any (a) area within the AOL Network or outside the AOL Network
- ---------------
but exclusively available to AOL Members, which area is developed, programmed,
and/or managed by ICP, in whole or in part, pursuant to this Agreement and all
Content thereon (including, without limitation, message boards, chat and other
AOL Member-supplied content areas contained therein) including, without
limitation, any co-branded site or page, and community centers, (b) Content
provided to AOL by ICP pursuant to this Agreement for distribution on or through
the AOL Network other than on the ICP Internet Site, and (c) ICP Tools.
ICP Tool. An interactive utility owned, operated, marketed, distributed, or
- --------
authorized to be distributed by or through ICP or its agents that displays
results based on data entered by an end-user.
Impression. User exposure to an ICP Presence, as such exposure may be
- ----------
reasonably determined and measured by AOL in accordance with its standard
methodologies and protocols.
Interactive Service. * * *
- -------------------
Interactive Site. Any interactive site or area, including, by way of example and
- ----------------
without limitation, (i) an ICP site on the World Wide Web portion of the
Internet or (ii) a channel or area delivered through a "push" product such as
the Pointcast Network or interactive environment such as Microsoft's Active
Desktop.
Keyword Search Terms. The Keyword online search terms made available on the AOL
- --------------------
Service for use by AOL Members, combining AOL's Keyword online search modifier
with a term or phrase specifically related to ICP (and determined in accordance
with the terms of this Agreement).
Link. The mechanism by which a user at one Interactive Site can automatically
- -----
move to another Interactive Site, or any screen within such Interactive Site.
Linked Interactive Site. Any site or area outside of the AOL Network which is
- -----------------------
linked to ICP Programming (through a "pointer" or similar link) subject to
approval by AOL in accordance with the terms and conditions of this Agreement.
Linked ICP Interactive Site. Any ICP Interactive Site which is also a Linked
- ---------------------------
Interactive Site.
Licensed Content. All Content provided by ICP or its agents through the ICP
- ----------------
Internet Site and/or the AOL Network in connection with the subject matter of
this Agreement, including without limitation all ICP Programming.
Named Entity. * * * AOL may from time to time amend this definition by adding
- ------------
reasonably comparable parties and providing ICP with sixty (60) days prior
written notice thereof.
Net Revenues. The sum of Advertising Revenues and Transaction Revenues.
- ------------
Netscape Netcenter. AOL's primary Internet-based Interactive Site marketed
- ------------------
under the "Netscape Netcenter(TM)" brand and located at www.netscape.com or such
----------------
other URL as AOL may designate specifically excluding (a) the AOL Service and
AOL.com (b) any international versions of such site, (c) CompuServe.com, any
other CompuServe products or services or interactive sites, "ICQ," "AOL
NetFind(TM)," "AOL Instant Messenger(TM)," "NetMail(TM)" or any similar
independent product or service offered by or through the Netcenter site or any
other AOL Interactive Site, (d) any programming or Content area offered by or
through such site over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (e) any programming or Content area offered by or
through the U.S. version of the America Online brand service which was operated,
maintained or controlled by the former AOL Studios division, (f) any yellow
pages, white pages, classifieds or other search, directory or review services or
Content offered by or through such site or any other AOL Interactive Site, (g)
any property, feature, product or service which AOL or its affiliates may
acquire subsequent to the Effective Date and (h) any other version of an America
Online Interactive Site which is materially different from AOL's primary
Internet-based Interactive Site marketed under the Netscape Netcenter brand, by
virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded versions and any version
distributed through any
- ---------------
*** Certain informaion on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
37
<PAGE>
broadband distribution platform or through any platform or device other than a
desktop personal computer.
Page View. A user exposure to any page or screen on the ICP Internet Site and
- ---------
the ICP Interactive Site.
PMR Activation. The registration of an account by a user with the Personal
- --------------
Medical Record service (i.e., any affirmative action by a user to set up a
Personal Medical Record account) and at least * * * to the service by such user.
Product. Any product, good or service which ICP (or others acting on its behalf
- -------
or as distributors) offers, sells, provides, distributes or licenses to AOL
Members directly or indirectly through (i) the ICP Internet Site (including
through any Interactive Site linked thereto) or ICP Programming (including any
Linked Interactive Site), (ii) any other electronic means directed at AOL
Members (e.g., e-mail offers), or (iii) an "offline" means (e.g., toll-free
number) for receiving orders related to specific offers within the ICP Internet
Site or ICP Programming requiring purchasers to reference a specific promotional
identifier or tracking code, including, without limitation, products sold
through surcharged downloads (to the extent expressly permitted hereunder).
Restricted Screens. All screens within the health and/or medical area (and
- ------------------
specifically excluding any screen containing broad-band-oriented Content,
features or functionality within any such AOL Property) on each of the following
AOL Properties: (a) the AOL Service; (b) AOL.com; (c) Netscape Netcenter; (d)
CompuServe Service; (e) CompuServe.com; and (e) Digital City.
Term. The period beginning on the Effective Date and ending upon the expiration
- ----
or earlier termination of this Agreement.
Transaction Revenues. Aggregate amounts paid by AOL Purchasers in connection
- --------------------
with the sale, licensing, distribution or provision of any Products, including,
in each case, handling, shipping, service charges, and excluding, in each case,
(a) amounts collected for sales or use taxes or duties and (b) credits and
chargebacks for returned or canceled goods or services, but not excluding cost
of goods sold or any similar cost.
- ---------------
*** Certain informaion on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
38
<PAGE>
EXHIBIT C -- STANDARD LEGAL TERMS AND CONDITIONS
------------------------------------------------
I. AOL NETWORK
Content. ICP represents, warrants and covenants that all Content contained
- -------
within the ICP Internet Site and ICP Programming and all Licensed Content (i)
does and will conform to AOL's applicable Terms of Service, the terms of this
Agreement and any other standard, written policy of AOL and any applicable AOL
Property, (ii) does not and will not infringe on or violate any copyright,
trademark, U.S. patent, rights of publicity, moral rights or any other third
party right, including without limitation, any music performance or other music
related rights, and (iii) does not and will not contain any Content which
violates any applicable law or regulation ((i), (ii) and (iii) collectively,
the "Rules"). In the event that AOL notifies ICP in writing that any such
Content, as reasonably determined by AOL, does not comply or adhere to the
Rules, then ICP shall use its commercially reasonable best efforts to block
access by AOL Members to such Content. In the event that ICP cannot, through
its commercially reasonable best efforts, block access by AOL Members to such
Content in question, then ICP shall provide AOL prompt written notice of such
fact. AOL may (in addition AOL's other rights under this Agreement, at law or
in equity) then, at its option, either (i) restrict access from the AOL Network
to the Content in question using technology available to AOL or (ii) in the
event access cannot be restricted, direct ICP to remove any such Content. ICP
will cooperate with AOL's reasonable requests to the extent AOL elects to
implement any such access restrictions.
Health and Medical Information Content. ICP represents, warrants and covenants
- --------------------------------------
that: (a) ICP will not engage in or facilitate any practice or service on or
through the ICP Programming or the ICP Internet Site that would constitute the
illegal or unlicensed practice of medicine, the practice of pharmacy, or other
regulated professional practice in the health care area, as defined by
applicable state and federal laws, rules and government regulations and/or the
regulations, policies or guidelines of any applicable professional or
accrediting organization; (b) ICP possesses all necessary governmental
authorizations, approvals, consents, licenses, permits, certificates or other
rights and permissions to conduct its business as contemplated by this
Agreement; (c) if any of the Licensed Content professes to provide expert,
professional or other specialty advice or Content (such as, without limitation,
medical or psychological, religious, financial, etc.), ICP shall ensure that all
such Licensed Content is prepared or reviewed by licensed, insured and qualified
practitioners/professionals in such field with expertise on the particular topic
and such Licensed Content complies with applicable standards of the applicable
profession and all applicable laws and regulations; (d) any physicians used to
answer questions from visitors to the ICP Internet Site will be experienced,
qualified and competent to provide answers to the questions posed to them, and
possess any necessary special qualifications, training, or certification
appropriate in the areas in which they answer questions, and will be properly
licensed by the appropriate governing body of each jurisdiction where the nature
of heir conduct through the ICP Internet Site would require such licensing; and
(e) it will promptly provide AOL with such information as AOL may from time to
time reasonably request for the purpose of verifying ICP's compliance with its
obligations under this paragraph. In the event AOL reasonably determines that
there has been a violation of any of the foregoing covenants or if AOL
reasonably determines that any Content within the ICP Programming or the ICP
Internet Site may reasonably be expected to expose AOL or its Affiliates to
legal or financial liability or other adverse consequences, then AOL may (in
addition AOL's other rights under this Agreement, at law or in equity), at its
option, either (i) restrict access from the AOL Network to the Content in
question using technology available to AOL or (ii) in the event access cannot be
restricted, direct ICP to remove any such Content. ICP will cooperate with
AOL's reasonable requests to the extent AOL elects to implement any such access
restrictions.
AOL Network Distribution. The distribution, placements and/or promotions
- ------------------------
described in this Agreement or otherwise provided to ICP by AOL shall be used by
ICP solely for its own benefit, will link to and promote solely the Licensed
Content within the ICP Internet Site or ICP Programming expressly described on
Exhibit A and will not be resold, traded, exchanged, bartered, brokered or
otherwise offered or transferred to any third party or contain any branding
other than ICP's branding. Further, the Content of all such distribution,
placements and promotions shall be subject to AOL's policies relating to
advertising and promotion, including those relating to AOL's exclusivity
commitments and other contractual preferences to third parties; provided that
the foregoing shall not be deemed to limit AOL's obligations to ICP hereunder.
Changes to AOL Properties. AOL reserves the right to redesign or modify the
- -------------------------
organization, structure, "look and feel," navigation and other elements of the
AOL Service, AOL.com, CompuServe Service, CompuServe.com, Digital City, Netscape
Netcenter or any other AOL Property, including without limitation, by adding or
deleting channels, subchannels and/or screens. If AOL eliminates or modifies an
area on an AOL Property in a manner that substantially modifies the nature of
the distribution required under this Agreement in a material adverse fashion,
AOL will work with ICP in good faith to provide ICP with comparable distribution
reasonably satisfactory to ICP.
Accessibility; Kids & Teen Policies. AOL reserves the right, in its reasonable
- -----------------------------------
discretion at any time, to designate the ICP Internet Site, ICP Programming and
all linked Interactive Sites, or any portions thereof, as Content targeted to
Kids (children ages 12 and under), Young Teens (children 13-15) and/or Mature
Teens (16-17). In the event ICP disagrees with AOL's designation, ICP shall not
distribute or provide the Content in question on or through the ICP Internet
Site or ICP Programming until the Parties agree upon the proper designation of
such Content. ICP shall ensure that all Content (including all advertising)
distributed on or through the ICP Internet Site or ICP Programming which is
targeted to the above age groups, including but not limited to Content
designated as such by AOL, complies with any relevant AOL policy (Kids, Young
Teens, Mature Teens) including any viewruling obligations. Without limiting
the generality of the foregoing or any other provision of this Agreement, ICP
shall (i) provide clear and prominent notice of collection practices and all
possible uses of information before collecting personal identifying information
from Kids, Young Teens or Mature Teens online; (ii) never post personal
identifying information about Kids, Young Teens or Mature Teens online or sell
or otherwise disclose such information to third parties; (iii) all advertorial
advertising and sponsorships shall be clearly labeled as "advertorial" or with
similar language and (iv) ensure that all chat rooms and message boards are
monitored on a daily basis by staff that has undergone AOL Community Leader
training; and each chat room shall (a) open and close in accordance with a
posted schedule (i.e., no 24/7 access), (b) have a special "help" area for Kids,
Young Teens and/or Mature Teens, as applicable, and (c) be monitored (at least
on a floating basis) by and AOL-trained Community Leader. ICP shall notify AOL
in writing whenever it intends to distribute Content for these age groups on or
through the ICP Internet Site and/or ICP Programming to ensure proper age
restriction categorization.
Member Page. AOL will have no obligation with respect to the Content and
- -----------
services available on or through any Member Page including, but not limited to,
any duty to review or monitor any such Content and services. AOL expressly
disclaims any liability to ICP for the Content and services contained in any
Member Page or any expense, claim, demand, costs, loss or damage arising out of
any use of the ICP-provided Content available from, without limitation, a
Community Center or the ICP Internet Site. ICP agrees to release AOL and its
affiliates, including partners, directors, officers, employees and agents from
any and all claims, rights and recourses for such loss or damage.
Contests. ICP shall ensure that any contest, sweepstakes or similar promotion
- --------
conducted or promoted through the ICP Internet Site and/or ICP Programming (a
"Contest") complies with all applicable laws and regulations, except for
Contests sponsored by AOL. ICP shall provide AOL with (i) at least thirty (30)
days prior written notice of any Contest and (ii) upon AOL's request, an opinion
from ICP's counsel confirming that the Contest complies with all applicable
federal, state and local laws and regulations.
Disclaimers. Upon AOL's request, AOL agrees to include within the ICP Internet
- -----------
Site and/or ICP Programming a disclaimer (the specific form and substance to be
mutually agreed upon by the Parties) indicating that all Content (including any
products and services) is provided solely by ICP and not AOL, and any
transactions are solely between ICP and AOL Members using or purchasing such
Content and AOL is not responsible for any loss, expense or damage arising out
of the Licensed Content or services provided through the ICP Internet Site or
ICP Programming. In addition, ICP shall prominently provide a notice/disclaimer
on all areas and features in the ICP Programming substantially as follows: "The
following area or feature is provided solely for educational and entertainment
purposes only and is not intended to constitute professional medical or
psychological advice or counseling. If you need medical or psychological
services, please contact a licensed professional in your area. Always follow
the advice of your physician or therapist in regards to treatment information
and considerations, rather than any information contained herein, including
without limitation, in text files, message boards, chat rooms, articles, or
software libraries." ICP shall not in any manner state that AOL recommends or
endorses ICP or its Content. The Parties will review the above disclaimer from
time to time with the intent of minimizing each Party's exposure to liability.
39
<PAGE>
Insurance. At all times during the Term, ICP shall maintain insurance coverage
- ---------
no less than: * * *. ICP shall include AOL as a named insured party on all such
policy or policies. ICP shall provide AOL with a copy of such policy or
policies within sixty (60) days after the Effective Date, failing which, in
addition to all other available remedies, AOL shall be entitled to delay the
launch of the Licensed Content on the AOL Network. From time to time upon AOL's
request, ICP shall provide AOL with certificates from the respective insurance
company(ies) confirming ICP's compliance with this paragraph. ICP shall
promptly notify AOL of any material adverse change in such policy or policies.
Rewards Programs. ICP shall not offer, provide, implement or otherwise make
- ----------------
available on the ICP Internet Site or ICP Programming any promotional programs
or plans that are intended to provide customers with rewards or benefits in
exchange for, or on account of, their past or continued loyalty to, or patronage
or purchase of, the products or services of ICP or any third party (e.g., a
promotional program similar to a "frequent flier" program), unless such
promotional program or plan is provided exclusively through AOL's "AOL Rewards"
program, accessible on the AOL Service at Keyword: "AOL Rewards."
Navigation. In cases where an AOL Member performs a search for ICP through any
- ----------
search or navigational tool or mechanism that is accessible or available through
the AOL Network (e.g., promotions, Keyword Search Terms, or any other
navigational tools), AOL shall have the right to direct such AOL Member to the
ICP Internet Site, or any other ICP Interactive Site determined by AOL in its
reasonable discretion.
AOL Look and Feel. ICP acknowledges and agrees that AOL shall own all right,
- -----------------
title and interest in and to the AOL Look and Feel. In addition, AOL shall
retain editorial control over the portions of the AOL pages and forms which
frame the ICP Internet Site or ICP Programming (the "AOL Frames"). AOL may, at
its discretion, incorporate navigational icons, links and pointers or other
Content into such AOL Frames.
Operations. AOL shall be entitled to require reasonable changes to the ICP
- ----------
Internet Site and ICP Programming to the extent such site will, in AOL's good
faith judgment, adversely affect operations of the AOL Network; provided that
this sentence shall not be deemed to grant AOL any editorial control with
respect to the ICP Internet Site and ICP Programming.
Classifieds. ICP shall not implement or promote any classifieds listing
- -----------
features through ICP Programming without AOL's prior written approval. Such
approval may be conditioned upon, among other things, ICP's conformance with any
then-applicable service-wide technical or other standards related to online
classifieds.
Message Boards; Chat Rooms and Comparable Vehicles. Any Content submitted by
- --------------------------------------------------
ICP or its agents within message boards, chat rooms or any comparable vehicles
will be subject to the license grant relating to submissions to "public areas"
set forth in the AOL Terms of Service. ICP acknowledges that it has no rights
or interest in AOL Member submissions to message boards, chat rooms or any other
vehicles through which AOL Members may make submissions within the AOL Network.
ICP will refrain from editing, deleting or altering, without AOL's prior
approval, any opinion expressed or submission made by an AOL Member within ICP
Programming except in cases where ICP has a good faith belief that the Content
in question violates an applicable law, regulation, third party right or the
applicable AOL Property's Terms of Service.
Duty to Inform. ICP shall promptly inform AOL of any information related to the
- --------------
ICP Internet Site, ICP Programming or the Licensed Content which could
reasonably lead to a claim, demand or liability of or against AOL and/or its
Affiliates by any third party.
Response to Questions/Comments; Customer Service. ICP shall respond promptly
- ------------------------------------------------
and professionally to questions, comments, complaints and other reasonable
requests regarding the ICP Internet Site, ICP Programming or the Licensed
Content by AOL Members or on request by AOL, and shall cooperate and assist AOL
in promptly answering the same. ICP shall have sole responsibility for customer
service (including, without limitation, order processing, billing, shipping,
etc.) and AOL shall have no responsibility with respect thereto. ICP shall
comply with all applicable requirements of any federal, state or local consumer
protection or disclosure law.
Production Work. In the event that ICP requests any AOL production assistance,
- ---------------
ICP shall work with AOL to develop detailed production plans for the requested
production assistance (the "Production Plan"). Following receipt of the final
Production Plan, AOL shall notify ICP of (i) AOL's availability to perform the
requested production work, (ii) the proposed fee or fee structure for the
requested production work and (iii) the estimated development schedule for such
work. To the extent the Parties reach agreement regarding implementation of
agreed-upon Production Plan, such agreement shall be reflected in a separate
work order signed by the Parties. All fees to be paid to AOL for any such
production work shall be paid in advance. To the extent ICP elects to retain a
third party provider to perform any such production work, work produced by such
third party provider must generally conform to AOL's production standards
available at Keyword "Styleguide." The specific production resources which AOL
allocates to any production work to be performed on behalf of ICP shall be as
determined by AOL in its sole discretion. With respect to any routine
production, maintenance or related services which AOL reasonably determines are
necessary for AOL to perform in order to support the proper functioning and
integration of the Anchor Tenant Button and the ICP Internet Site ("Routine
Services"), ICP will pay the then-standard fees charged by AOL for such Routine
Services.
Production Tools. AOL shall determine in its sole discretion, which of its
- ----------------
proprietary publishing tools (each a "Publishing Tool") shall be made available
to ICP in order to develop and implement the Licensed Content during the Term
(e.g., to build Rainman sites). ICP shall be granted a nonexclusive license to
use any such Tool, which license shall be subject to: (i) ICP's compliance with
all rules and regulations relating to use of the Publishing Tools, as published
from time to time by AOL, (ii) AOL's right to withdraw or modify such license at
any time, and (iii) ICP's express recognition that AOL provides all Publishing
Tools on an "as is" basis, without warranties of any kind.
Launch Date. In the event that any terms contained herein relate to or depend
- ------------
on the launch date of the ICP Internet Site or other property contemplated by
this Agreement, which launch date is later than the Effective Date, then it is
the intention of the Parties to record such launch date in a written instrument
signed by both Parties promptly following such launch date; provided that, in
the absence of such a written instrument, the launch date shall be as reasonably
determined by AOL based on the information available to AOL.
Keywords. Any Keyword Search Terms to be directed to the ICP Internet Site
- --------
shall be (i) subject to availability for use by ICP and (ii) limited to the
combination of the Keyword search modifier combined with a registered trademark
of ICP. AOL reserves the right to revoke at any time ICP's use of any Keyword
Search Terms which do not incorporate registered trademarks of ICP. ICP
acknowledges that its utilization of a Keyword Search Term will not create in
it, nor will it represent it has, any right, title or interest in or to such
Keyword Search Term, other than the right, title and interest ICP holds in ICP's
registered trademark independent of the Keyword Search Term. Without limiting
the generality of the foregoing, ICP will not: (a) attempt to register or
otherwise obtain trademark or copyright protection in the Keyword Search Term;
or (b) use the Keyword Search Term, except for the purposes expressly required
or permitted under this Agreement; provided that the foregoing shall not be
deemed to limit ICP in obtaining trademark or copyright protection in any term
or phrase not incorporating the AOL Keyword search modifier. This Section shall
survive the completion, expiration, termination or cancellation of this
Agreement.
Accounts. To the extent AOL has granted ICP any accounts on the AOL Service,
- --------
ICP will be responsible for the actions taken under or through its accounts,
which actions are subject to AOL's applicable Terms of Service and for any
surcharges, including, without limitation, all premium charges, transaction
charges, and any applicable communication surcharges incurred by any account
issued to ICP, but ICP will not be liable for charges incurred by any account
relating to AOL's standard monthly usage fees and standard hourly charges, which
charges AOL will bear. Upon the termination of this Agreement, all accounts,
related screen names and any associated usage credits or similar rights, will
automatically terminate. AOL will have no liability for loss of any data or
content related to the proper termination of any such account.
II. TRADEMARKS
Trademark License. In designing and implementing any marketing, advertising, or
- -----------------
other promotional materials (expressly excluding Press Releases) related to this
Agreement and/or referencing the other Party and/or its trade names, trademarks
and service marks (the "Promotional Materials") and subject to the other
provisions contained herein, ICP shall be entitled to use the following trade
names, trademarks and service marks of AOL: the "America Online" brand service,
"AOL" service/software and AOL's triangle logo and, in connection therewith, ICP
shall comply with the AOL styleguide available at keyword: "style guide"; and
AOL and its Affiliates shall be entitled to use the trade names, trademarks and
service marks of ICP (collectively, together with the AOL marks listed above,
the "Marks"); provided that each Party: (i) does not create a unitary composite
mark involving a Mark of the other Party without the prior written approval of
such other Party and (ii) displays symbols and notices clearly and sufficiently
indicating the trademark status and
- ---------------
*** Certain informaion on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
40
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ownership of the other Party's Marks in accordance with applicable trademark law
and practice. This Section shall survive the completion, expiration, termination
or cancellation of this Agreement.
Rights. Each Party acknowledges that its utilization of the other Party's Marks
- ------
will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.
Quality Standards. Each Party agrees that the nature and quality of its
- -----------------
products and services supplied in connection with the other Party's Marks shall
conform to quality standards communicated in writing by the other Party for use
of its trademarks. Each Party agrees to supply the other Party, upon request,
with a reasonable number of samples of any Materials publicly disseminated by
such Party which utilize the other Party's Marks. Each Party shall comply with
all applicable laws, regulations and customs and obtain any required government
approvals pertaining to use of the other Party's Marks.
Promotional Materials. Each Party will submit to the other Party, for its prior
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written approval, which shall not be unreasonably withheld or delayed, any
Promotional Materials; provided, however, that after initial public announcement
of the business relationship between the Parties in accordance with the approval
and other requirements contained herein, either Party's subsequent factual
reference in Promotional Materials to the existence of a business relationship
between AOL and ICP, including, without limitation, the availability of the
Licensed Content through the AOL Network, or use of screen shots relating to the
distribution under this Agreement (so long as the AOL Network is clearly
identified as the source of such screen shots) for promotional purposes shall
not require the approval of the other Party. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the distribution of the Licensed Content through the AOL Network and reused for
such purpose until such approval is withdrawn with reasonable prior notice. In
the event such approval is withdrawn, existing inventories of Promotional
Materials may be depleted.
Infringement Proceedings. Each Party agrees to promptly notify the other Party
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of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
III. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party that: (i) such Party has
the full corporate right, power and authority to enter into this Agreement, to
grant the licenses granted hereunder and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not materially violate any material agreement to which such Party is a
party or by which it is otherwise bound; (iii) when executed and delivered by
such Party, this Agreement will constitute the legal, valid and binding
obligation of such Party, enforceable against such Party in accordance with its
terms; (iv) such Party's Promotional Materials will neither infringe on any
copyright, U.S. patent or any other third party right nor violate any applicable
law or regulation and (v) such Party acknowledges that the other Party makes no
representations, warranties or agreements related to the subject matter hereof
which are not expressly provided for in this Agreement.
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement. Each Party agrees that it will
take reasonable steps, at least substantially equivalent to the steps it takes
to protect its own proprietary information, during the term of this Agreement,
and for a period of three years following expiration or termination of this
Agreement, to prevent the disclosure of Confidential Information of the other
Party, other than to its employees, or to its other agents who must have access
to such Confidential Information for such Party to perform its obligations
hereunder, who will each agree to comply with this section. Notwithstanding the
foregoing, either Party may issue a press release or other disclosure containing
Confidential Information without the consent of the other Party, to the extent
such disclosure is required by law, rule, regulation or government or court
order. In such event, the disclosing Party will provide at least five (5)
business days prior written notice of such proposed disclosure to the other
Party (unless a shorter period is required by an applicable legal requirement)..
Further, in the event such disclosure is required of either Party under the
laws, rules or regulations of the Securities and Exchange Commission or any
other applicable governing body, such Party will (i) redact mutually agreed-upon
portions of this Agreement to the fullest extent permitted under applicable
laws, rules and regulations and (ii) submit a request to such governing body
that such portions and other provisions of this Agreement receive confidential
treatment under the laws, rules and regulations of the Securities and Exchange
Commission or otherwise be held in the strictest confidence to the fullest
extent permitted under the laws, rules or regulations of any other applicable
governing body.
V. RELATIONSHIP WITH AOL MEMBERS
Solicitation of Subscribers. (a) During the term of this Agreement and for a
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two year period thereafter, ICP will not use the AOL Network (including, without
limitation, the e-mail network contained therein) to solicit AOL Members on
behalf of another Interactive Service. More generally, ICP will not send
unsolicited, commercial e-mail (i.e., "spam") or other online communications
through or into AOL's products or services, absent a Prior Business
Relationship. For purposes of this Agreement, a "Prior Business Relationship"
will mean that the AOL Member to whom commercial e-mail or other online
communication is being sent has voluntarily either (i) engaged in a transaction
with ICP or (ii) provided information to ICP through a contest, registration, or
other communication, which included clear notice to the AOL Member that the
information provided could result in commercial e-mail or other online
communications being sent to that AOL Member by ICP or its agents. Any
commercial e-mail or other online communications to AOL Members which are
otherwise permitted hereunder will (a) include a prominent and easy means to
"opt-out" of receiving any future commercial e-mail communications from ICP and
(b) shall also be subject to AOL's then-standard restrictions on distribution of
bulk e-mail (e.g., related to the time and manner in which such e-mail can be
distributed through or into the AOL product or service in question).
(b) ICP shall ensure that its collection, use and disclosure of information
obtained from AOL Members under this Agreement ("Member Information") complies
with (i) all applicable laws and regulations and (ii) AOL's standard privacy
policies, available on the AOL Service at the keyword term "Privacy" (or, in the
case of the ICP Internet Site, ICP's standard privacy policies so long as such
policies are prominently published on the site and provide adequate notice,
disclosure and choice to users regarding ICP's collection, use and disclosure of
user information). ICP will not disclose Member Information collected hereunder
to any third party in a manner that identifies AOL Members as end users of an
AOL product or service or use Member Information collected under this Agreement
to market another Interactive Service.
Email Newsletters. Any email newsletters sent to AOL Members by ICP or its
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agents shall (i) be subject to AOL's policies on use of the email functionality,
including but not limited to AOL's policy on unsolicited bulk email, (ii) be
sent only to AOL Members requesting to receive such newsletters, (iii) not
contain Content which violates AOL's Terms of Service, and (iv) not contain any
advertisements, marketing or promotion for any other Interactive Service.
AOL Member Communications. To the extent ICP is otherwise permitted to send
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communications to AOL Members (in accordance with the other requirements
contained herein): in any such communications to AOL Members on or off the ICP
Internet Site (including, without limitation, e-mail solicitations), ICP will
limit the subject matter of such communications to those categories of products,
services and/or content that are specifically contemplated by this Agreement and
will not actively encourage AOL Members to take any action inconsistent with the
scope and purpose of this Agreement, including without limitation, the following
actions: (i) using an Interactive Site other than the ICP Internet Site for the
purchase of Products, (ii) using Content other than the Licensed Content; (iii)
bookmarking of Interactive Sites; or (iv) changing the default home page on the
AOL browser. Additionally, with respect to such AOL Member communications, in
the event that ICP encourages an AOL Member to purchase products through such
communications, ICP shall ensure that (a) the AOL Network is expressly promoted
as the primary means through which the AOL Member can access the ICP Internet
Site (including without limitation by stating the applicable Keyword Search Term
and including direct links to specific offers within the ICP Internet Site) and
(b) any link to the ICP Internet Site will link to a page which indicates to the
AOL Member that such user is in a site which is affiliated with the AOL Network.
Customer Data; AOL Data. Any data generated directly from ICP Programming or
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ICP Tools, including, without limitation, customer names, addresses and medical
information frequency but excluding * * * information and AOL screennames (the
"Customer Data"), shall be and remain * * * . ICP agrees that AOL may use the
Customer Data subject to the terms of this Agreement and AOL's then-applicable
privacy policies; provided that both Parties shall use customer-specific medical
profile information on a customer-by-customer basis in accordance with both
Parties' applicable
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*** Certain informaion on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
41
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privacy policies. AOL agrees that during the Term, ICP may use the Customer Data
subject to the terms of this Agreement and AOL's then-applicable privacy
policies; provided that ICP (a) shall comply with the foregoing paragraphs of
this Section V of this Exhibit C, (b) shall provide users the right to have
their Customer Data deleted from any database created by or on behalf of ICP,
and (c) shall not have the right to use the Customer Data to market or promote
any consumer direct information, services or products reasonably construed to be
in competition with AOL or any AOL Property. Any data provided by AOL to ICP
(e.g., usage reports) (the "AOL Data") shall be and remain the property of AOL,
and the AOL Data will be promptly returned to AOL by ICP in the form in which
such data is maintained by ICP or, if AOL so elects, will be destroyed, upon (i)
AOL's request, (ii) expiration or termination of this Agreement for any reason,
or (iii) with respect to any particular AOL Data, on such earlier date that the
same is no longer required by ICP in order to provide the services required
hereunder. ICP will not use the AOL Data for any purpose other than that of
providing such services, nor will the AOL Data, or any part thereof, be
disclosed, sold, assigned, leased, or otherwise disposed of to third parties by
ICP or commercially exploited by or on behalf of ICP, its employees or agents.
ICP will not possess or assert any lien or other right against or to the AOL
Data. The Parties agree to amend the provisions of this paragraph from time to
time to in good faith to the extent necessary to comply with applicable law,
rule or regulation; provided that if any such amendment to the provisions of
this paragraph has, or is likely to have, an adverse effect on either Party,
then such Party may refer such matter to the Management Committee for
resolution.
VI. TREATMENT OF CLAIMS
Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER
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PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY
DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES), ARISING FROM BREACH OF THIS AGREEMENT, THE USE OF OR INABILITY TO USE
THE AOL NETWORK OR ANY OTHER PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT
LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS
(COLLECTIVELY, "DISCLAIMED DAMAGES"); PROVIDED THAT THE FOREGOING SHALL NOT
RESTRICT A PARTY'S RIGHTS FOR INDEMNIFICATION FOR THIRD PARTY CLAIMS AS SET
FORTH IN THE "INDEMNITY" SECTION BELOW. EXCEPT AS PROVIDED BELOW IN THE
"INDEMNITY" SECTION, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR MORE
THAN * * * ; PROVIDED THAT EACH PARTY SHALL REMAIN LIABLE FOR THE AGGREGATE
AMOUNT OF ANY PAYMENT OBLIGATIONS OWED TO THE OTHER PARTY UNDER THE PROVISIONS
OF THIS AGREEMENT; AND PROVIDED FURTHER THAT THE FOREGOING LIABILITY CAP SHALL
NOT APPLY TO (1) EITHER PARTY'S BREACH OF THIS AGREEMENT INVOLVING FRAUD,
INTENTIONAL MISCONDUCT OR GROSS NEGLIGENCE OR (2) EITHER PARTY'S INTENTIONAL
BREACH OF ANY TERM, CONDITION OR OBLIGATION UNDER THIS AGREEMENT.
No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
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NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL NETWORK,
ANY AOL PUBLISHING TOOLS, OR THE LICENSED CONTENT, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED
WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, EACH OF AOL AND ICP SPECIFICALLY
DISCLAIMS ANY WARRANTY REGARDING THE PROFITABILITY OF AOL NETWORK OR THE ICP
INTERNET SITE.
Indemnity. Each Party will defend, indemnify, save and hold harmless the other
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Party and the officers, directors, agents, affiliates, distributors, franchisees
and employees of the other Party from any and all third party claims, demands,
liabilities, costs or expenses, including reasonable attorneys' fees
("Liabilities"), resulting from the indemnifying Party's material breach of any
obligation, representation, or warranty of this Agreement.
If a Party entitled to indemnification hereunder (the "Indemnified Party")
becomes aware of any matter it believes is indemnifiable hereunder involving any
claim, action, suit, investigation, arbitration or other proceeding against the
Indemnified Party by any third party (each an "Action"), the Indemnified Party
shall give the other Party (the "Indemnifying Party") prompt written notice of
such Action. Such notice shall (i) provide the basis on which indemnification
is being asserted and (ii) be accompanied by copies of all relevant pleadings,
demands, and other papers related to the Action and in the possession of the
Indemnified Party. The Indemnifying Party shall have a period of ten (10) days
after delivery of such notice to respond. The Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, with the Indemnifying Party
and its counsel in the defense and the Indemnified Party shall have the right to
participate fully, at its own expense, in the defense of such Action. If a
dispute arises over whether the Party requesting indemnification hereunder is so
entitled, the Party requesting indemnification shall be free, without prejudice
to any of such Party's rights hereunder, to compromise or defend (and control
the defense of) such Action. Any compromise or settlement of an Action shall
require the prior written consent of both Parties hereunder, such consent not to
be unreasonably withheld or delayed.
Acknowledgment. AOL AND ICP EACH ACKNOWLEDGES THAT THE PROVISIONS OF THIS
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AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED, VOLUNTARY ALLOCATION BETWEEN
THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN) ASSOCIATED WITH THE TRANSACTIONS
CONTEMPLATED HEREUNDER. THE LIMITATIONS AND DISCLAIMERS RELATED TO WARRANTIES
AND LIABILITY CONTAINED IN THIS AGREEMENT ARE INTENDED TO LIMIT THE
CIRCUMSTANCES AND EXTENT OF LIABILITY. THE PROVISIONS OF THIS SECTION VI SHALL
BE ENFORCEABLE INDEPENDENT OF AND SEVERABLE FROM ANY OTHER ENFORCEABLE OR
UNENFORCEABLE PROVISION OF THIS AGREEMENT.
VII. ARBITRATION
(a) The Parties shall act in good faith and use commercially reasonable efforts
to promptly resolve any claim, dispute, claim, controversy or disagreement (each
a "Dispute") between the Parties or any of their respective subsidiaries,
affiliates, successors and assigns under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby. If the Parties cannot resolve the Dispute within such
timeframe, the Dispute shall be submitted to the Management Committee for
resolution. For ten (10) days after the Dispute was submitted to the Management
Committee, the Management Committee shall have the exclusive right to resolve
such Dispute; provided further that the Management Committee shall have the
final and exclusive right to resolve Disputes arising from any provision of this
Agreement which expressly or implicitly provides for the Parties to reach mutual
agreement as to certain terms. If the Management Committee is unable to
amicably resolve the Dispute during the ten (10) day period, then the Management
Committee will consider in good faith the possibility of retaining a third party
mediator to facilitate resolution of the Dispute. In the event the Management
Committee elects not to retain a mediator, the Dispute will be subject to the
resolution mechanisms described below. "Management Committee" shall mean a
committee made up of a senior executive from each of the Parties for the purpose
of resolving Disputes under this Section and generally overseeing the
relationship between the Parties contemplated by this Agreement. Neither Party
shall seek, nor shall be entitled to seek, binding outside resolution of the
Dispute unless and until the Parties have been unable to amicably resolve the
dispute as set forth in this paragraph (a) and then, only in compliance with the
procedures set forth in this Section.
(b) Except for Disputes relating to issues of (i) proprietary rights, including
but not limited to intellectual property and confidentiality, and (ii) any
provision of this Agreement which expressly or implicitly provides for the
Parties to reach mutual agreement as to certain terms (which shall be resolved
by the Parties solely and exclusively through amicable resolution as set forth
in paragraph (a), any Dispute not resolved by amicable resolution as set forth
in paragraph (a) shall be governed exclusively and finally by arbitration. Such
arbitration shall be conducted by the American Arbitration Association ("AAA")
in Washington, D.C. and shall be initiated and conducted in accordance with the
Commercial Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures shall
not apply in order to promote the efficient arbitration of Disputes where the
nature of the Dispute, including without limitation the amount in controversy,
does not justify the application of such procedures.
(c) The arbitration panel shall consist of three arbitrators. Each Party shall
name an arbitrator within ten (10) days after the delivery of the Demand. The
two arbitrators named by the Parties may have prior relationships with the
naming Party, which in a judicial setting would be considered a conflict of
interest. The third arbitrator,
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*** Certain informaion on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
42
<PAGE>
selected by the first two, shall be a neutral participant, with no prior working
relationship with either Party. If the two arbitrators are unable to select a
third arbitrator within ten (10) days, a third neutral arbitrator will be
appointed by the AAA from the panel of commercial arbitrators of any of the AAA
Large and Complex Resolution Programs. If a vacancy in the arbitration panel
occurs after the hearings have commenced, the remaining arbitrator or
arbitrators may not continue with the hearing and determination of the
controversy, unless the Parties agree otherwise.
(d) The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and not state law, shall
govern the arbitrability of all Disputes. The arbitrators shall allow such
discovery as is appropriate to the purposes of arbitration in accomplishing a
fair, speedy and cost-effective resolution of the Disputes. The arbitrators
shall reference the Federal Rules of Civil Procedure then in effect in setting
the scope and timing of discovery. The Federal Rules of Evidence shall apply in
---
toto. The arbitrators may enter a default decision against any Party who fails
- ------
to participate in the arbitration proceedings.
(e) The arbitrators shall have the authority to award compensatory damages
only. Any award by the arbitrators shall be accompanied by a written opinion
setting forth the findings of fact and conclusions of law relied upon in
reaching the decision. The award rendered by the arbitrators shall be final,
binding and non-appealable, and judgment upon such award may be entered by any
court of competent jurisdiction. The Parties agree that the existence, conduct
and content of any arbitration shall be kept confidential and no Party shall
disclose to any person any information about such arbitration, except as may be
required by law or by any governmental authority or for financial reporting
purposes in each Party's financial statements.
(f) Each Party shall pay the fees of its own attorneys, expenses of witnesses
and all other expenses and costs in connection with the presentation of such
Party's case (collectively, "Attorneys' Fees"). The remaining costs of the
arbitration, including without limitation, fees of the arbitrators, costs of
records or transcripts and administrative fees (collectively, "Arbitration
Costs") shall be born equally by the parties. Notwithstanding the foregoing,
the arbitrators may modify the allocation of Arbitration Costs and award
Attorneys' Fees in those cases where fairness dictates a different allocation of
Arbitration Costs between the Parties and an award of Attorneys' Fees to the
prevailing Party as determined by the arbitrators.
(g) Any Dispute that is not subject to final resolution by the Management
Committee or to arbitration under this Section or law (collectively, "Non-
Arbitration Claims") shall be brought in a court of competent jurisdiction in
the State of New York. Each Party irrevocably consents to the exclusive
jurisdiction of the courts of the State of New York and the federal courts
situated in the State of New York, over any and all Non-Arbitration Claims and
any and all actions to enforce such claims or to recover damages or other relief
in connection with such claims or to enforce a judgment rendered in an
arbitration proceeding.
VIII. MISCELLANEOUS
Auditing Rights. Each Party shall maintain complete, clear and accurate records
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of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, AOL shall have the right, at its expense, to
conduct a reasonable and necessary copying and inspection of portions of the
Records of ICP that are directly related to amounts payable to AOL pursuant to
this Agreement, which right may, at AOL's option, be exercised by directing an
independent certified public accounting firm to conduct such inspection. For
the sole purpose of ensuring compliance with this Agreement, ICP shall have the
right, at its expense, to direct an independent certified public accounting firm
subject to strict confidentiality restrictions to conduct a reasonable and
necessary copying and inspection of portions of the Records of AOL that are
directly related to amounts payable to ICP pursuant to this Agreement. Any such
audit may be conducted after twenty (20) business days prior written notice,
subject to the following. Such audits shall not be made more frequently than
once every twelve months. No such audit of AOL shall occur during the period
beginning on June 1 and ending October 1. No such audit of ICP shall occur
during the period beginning on December 1 and ending April 1. In lieu of
providing access to its Records as described above, AOL shall be entitled to
provide ICP with a report from an independent certified public accounting firm
confirming the information to be derived from such Records.
Excuse. Neither Party shall be liable for, or be considered in breach of or
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default under this Agreement on account of, any delay or failure to perform as
required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.
Independent Contractors. The Parties to this Agreement are independent
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contractors. Neither Party is an agent, representative or partner of the other
Party. Neither Party shall have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement shall not be interpreted or
construed to create an association, agency, joint venture or partnership between
the Parties or to impose any liability attributable to such a relationship upon
either Party.
Notice. Any notice, approval, request, authorization, direction or other
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communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname "AOLNotice" in
the case of AOL) or by confirmed facsimile; (ii) on the delivery date if
delivered personally to the Party to whom the same is directed; (iii) one
business day after deposit with a commercial overnight carrier, with written
verification of receipt; or (iv) five business days after the mailing date,
whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no. 703-
265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of ICP, except as otherwise specified herein, the notice address shall be the
address for ICP set forth in the first paragraph of this Agreement, with the
other relevant notice information, including the recipient for notice and, as
applicable, such recipient's fax number or AOL e-mail address, to be as
reasonably identified by AOL.
No Waiver. The failure of either Party to insist upon or enforce strict
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performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
Return of Information. Upon the expiration or termination of this Agreement,
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each Party shall, upon the written request of the other Party, return or destroy
(at the option of the Party receiving the request) all confidential information,
documents, manuals and other materials specified by the other Party.
Survival. Sections IV, V, VI, VII and VIII of this Exhibit C, shall survive the
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completion, expiration, termination or cancellation of this Agreement. In
addition, all payment terms of this Agreement and any provision which, by its
nature, must survive the completion, expiration, termination or cancellation of
this Agreement, shall survive the completion, expiration, termination or
cancellation of this Agreement.
Entire Agreement. This Agreement sets forth the entire agreement and supersedes
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any and all prior agreements of the Parties with respect to the transactions set
forth herein. Neither Party shall be bound by, and each Party specifically
objects to, any term, condition or other provision which is different from or in
addition to the provisions of this Agreement (whether or not it would materially
alter this Agreement) and which is proffered by the other Party in any
correspondence or other document, unless the Party to be bound thereby
specifically agrees to such provision in writing.
Amendment. No change, amendment or modification of any provision of this
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Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
Further Assurances. Each Party shall take such action (including, but not
- ------------------
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by the other Party for the implementation or continuing
performance of this Agreement.
Assignment. ICP shall not assign this Agreement or any right, interest or
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benefit under this Agreement without the prior written consent of AOL.
Assumption of this Agreement by any successor to ICP (including, without
limitation, by way of merger or consolidation) shall be subject to AOL's prior
written approval. Subject to the foregoing, this Agreement shall be fully
binding upon, inure to the benefit of and be enforceable by the Parties hereto
and their respective successors and assigns.
Subcontractors. To the extent ICP utilizes consultants or subcontractors to
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perform a material portion of its obligations under this Agreement, such
consultants and/or subcontractors shall be subject to AOL's prior written
approval and ICP shall provide AOL with direct contact information for the
employees of such consultants and/or subcontractors who are responsible for
performing such obligations, which employees shall be available during business
hours for consultation with AOL.
Construction; Severability. In the event that any provision of this Agreement
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conflicts with the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over the Parties to
this Agreement, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
43
<PAGE>
Remedies. Except where otherwise specified, the rights and remedies granted to
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a Party under this Agreement are cumulative and in addition to, and not in lieu
of, any other rights or remedies which the Party may possess at law or in
equity.
Applicable Law. This Agreement shall be interpreted, construed and enforced in
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all respects in accordance with the laws of the State of New York except for its
conflicts of laws principles.
Export Controls. Both parties shall adhere to all applicable laws, regulations
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and rules relating to the export of technical data and shall not export or re-
export any technical data, any products received from the other Party or the
direct product of such technical data to any proscribed country listed in such
applicable laws, regulations and rules unless properly authorized.
Headings. The captions and headings used in this Agreement are inserted for
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convenience only and shall not affect the meaning or interpretation of this
Agreement.
Counterparts. This Agreement may be executed in counterparts, each of which
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shall be deemed an original and all of which together shall constitute one and
the same document.
44
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EXHIBIT D
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TOOLS AND FUNCTIONALITY CATEGORIES
Exibit D-1 - Integrated Tools and Functionality Categories:
- -----------------------------------------------------------
1. Namespace - ICP shall use the AOL namespace * * * (including ICP Tools
therein). ICP will connect its own registration system to the AOL
registration systems through standard integration mechanisms to be
documented in the implemenation plan. With respect to AOL namespace
user registration, ICP agrees to collect the data requested by AOL and
transfer such data to AOL in a real time data transfer. If ICP
collects information about users in such registration process in
addition to information supplied by the users during the registration
process, such information shall made available to AOL, in a format and
timeframe as the Parties shall mutually agree, and subject to the
Parties applicable privacy policies and applicable legal
requirements;*
2. Web-hosted calendaring - ICP will use AOL's Web-hosted calendaring
functionality and tools to provide customized calendars to * * *. As
part of such integration, ICP will create all events in event data
format compatible with the AOL calendar so that health events can be
automatically added to AOL calendar; and
3. Real time instant online messaging functionality (e.g., ICQ(TM) and
AOL Instant Messenger(TM)).
Exibit D-2 - Additional Tools and Functionality Categories:
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1. community/communications tools (e.g., chat, message boards, voice
message, IP telephony, email, address book, web-based email and
greeting cards but specifically excluding real time instant online
messaging functionality);
2. navigation services (e.g., search and directory products, white pages,
and yellow pages);
3. personalization services (e.g., homesteading, hosting, data exchange
and calendaring functions); and
4. commerce/content aggregation services.
* With respect to AOL namespace and user registration technology, AOL shall
have the right to pass-through * * * to ICP to the extent necessary for proper
functionality and performance of such namespace and user registration
technology.
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
45
<PAGE>
EXHIBIT E
---------
CERTIFICATION OF COMPLIANCE WITH COMMITMENTS
REGARDING PROMOTIONS
Pursuant to Section 3.3 of the Anchor Tenant Agreement between ______________
("ICP") and America Online, Inc. ("AOL"), dated as of _________________, 1999
(the "Agreement"), the following report is delivered to AOL for the period
beginning _____________ and ending __________ (the "Period"):
I. Promotional Commitments
ICP hereby certifies to AOL that ICP completed the following promotional
commitments during the Period:
<TABLE>
<CAPTION>
Type of Promotion Date(s) of Duration/Circulation of Relevant Contract
Promotion Promotion Section
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1.
- ----------------------------------------------------------------------------------------------
2.
- ----------------------------------------------------------------------------------------------
3.
</TABLE>
IN WITNESS WHEREOF, this Certificate has been executed this ___ day of
___________, 199_.
- -----------------------------------
By:
--------------------------------
Print Name:
------------------------
Title:
-----------------------------
Date:
------------------------------
46
<PAGE>
EXHIBIT F
---------
OPERATING STANDARDS
-------------------
1. ICP Internet Site Infrastructure. ICP will be responsible for all
--------------------------------
communications, hosting and connectivity costs and expenses associated with
the ICP Internet Site. ICP will provide all hardware, software,
telecommunications lines and other infrastructure necessary to meet traffic
demands on the ICP Internet Site from the AOL Network. ICP will design and
implement the network between the AOL Service and ICP Internet Site such
that (i) no single component failure will have a materially adverse impact
on AOL Members seeking to reach the ICP Internet Site from the AOL Network
and (ii) no single line under ICP's reasonable control will run at more
than * * *average utilization for a 5-minute peak in a daily period. In
this regard, ICP will provide AOL, upon request, with a detailed network
diagram regarding the architecture and network infrastructure supporting
the ICP Internet Site. In the event that ICP elects to create a custom
version of the ICP Internet Site in order to comply with the terms of this
Agreement, ICP will bear responsibility for all aspects of the
implementation, management and cost of such customized site.
2. Optimization; Speed. ICP will use commercially reasonable efforts to ensure
-------------------
that: (a) the functionality and features within the ICP Internet Site are
optimized for the client software then in use by AOL Members; and (b) the
ICP Internet Site is designed and populated in a manner that minimizes
delays when AOL Members attempt to access such site. At a minimum, ICP will
ensure that the ICP Internet Site's data transfers initiate within fewer
than * * * on average. Prior to commercial launch of any material
promotions described herein, ICP will permit AOL to conduct performance and
load testing of the ICP Internet Site (in person or through remote
communications), with such commercial launch not to commence until such
time as AOL is reasonably satisfied with the results of any such testing.
3. Technical Problems. ICP agrees to use commercially reasonable efforts to
------------------
address material technical problems (over which ICP exercises control)
affecting use by AOL Members of the ICP Internet Site (an "ICP Technical
Problem") promptly following notice thereof. In the event that ICP is
unable to promptly resolve an ICP Technical Problem following notice
thereof from AOL (including, without limitation, infrastructure
deficiencies producing user delays), AOL will have the right to regulate
the promotions it provides to ICP hereunder until such time as ICP corrects
the ICP Technical Problem at issue.
4. Monitoring. ICP will ensure that the performance and availability of the
----------
ICP Internet Site is monitored on a * * * basis. ICP will provide AOL with
contact information (including e-mail, phone, pager and fax information, as
applicable, for both during and after business hours) for ICP's principal
business and technical representatives, for use in cases when issues or
problems arise with respect to the ICP Internet Site.
5. Security. ICP will utilize Internet standard encryption technologies (e.g.,
--------
Secure Socket Layer - SSL) to provide a secure environment for conducting
transactions and/or transferring private member information (e.g. credit
card numbers, banking/financial information, and member address
information) to and from the ICP Internet Site. ICP will facilitate
periodic reviews of the ICP Internet Site by AOL in order to evaluate the
security risks of such site. ICP will promptly remedy any security risks or
breaches of security as may be identified by AOL's Operations Security
team.
6. Technical Performance.
---------------------
i. ICP will design the ICP Internet Site to support the AOL-Client
embedded versions of the Microsoft Internet Explorer 3.XX and 4.XX
browsers (Windows and Macintosh), the Netscape Browser 4.XX and make
commercially reasonable efforts to support all other AOL browsers
listed at: "http://webmaster.info.aol.com."
ii. To the extent ICP creates customized pages on the ICP Internet Site
for AOL Members, ICP develop and employ a methodology to detect AOL
Members (e.g., examine the HTTP User-Agent field in order to identify
the "AOL Member-Agents" listed at: http://webmaster.info.aol.com" and
------------------------------
referenced under the heading "Browser Detection." In the event AOL
changes any requirements for the ICP Internet Site at such URL, ICP
shall have a reasonable period of time in which to incorporate such
new requirements into the ICP Internet Site and will not be deemed in
breach of this Agreement for any delay to the extent such delay is
caused by such changed requirement
iii. ICP will periodically review the technical information made available
by AOL at http://webmaster.info.aol.com.
------------------------------
iv. ICP will design its site to support HTTP 1.0 or later protocol as
defined in RFC 1945 and to adhere to AOL's parameters for refreshing
or preventing the caching of information in AOL's proxy system as
outlined in the document provided at the following URL:
http://webmaster.info.aol.com. ICP is responsible for the manipulation
-------------------------------
of these parameters in web based objects so as allow them to be cached
or not cached as outlined in RFC 1945.
v. Prior to releasing material, new functionality or features through the
ICP Internet Site ("New Functionality"), ICP will use commercially
reasonable efforts to either (i) test the New Functionality to confirm
its compatibility with AOL Service client software and (ii) provide
AOL with written notice of the New Functionality so that AOL can
perform tests of the New Functionality to confirm its compatibility
with the AOL Service client software. Should any new material, new
functionality or features through the ICP Internet Site be released
without notification to AOL, AOL will not be responsible for any
adverse member experience until such time that compatibility tests can
be performed and the new material, functionality or features qualified
for the AOL Service.
7. AOL Internet Services Partner Support. AOL will provide ICP with access to
-------------------------------------
the standard online resources, standards and guidelines documentation,
technical phone support, monitoring and after-hours assistance that AOL
makes generally available to similarly situated web-based partners. AOL
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
47
<PAGE>
support will not, in any case, be involved with content creation on behalf
of ICP or support for any technologies, databases, software or other
applications which are not supported by AOL or are related to any ICP area
other than the ICP Internet Site. Support to be provided by AOL is
contingent on ICP providing to AOL demo account information (where
applicable), a detailed description of the ICP Internet Site's software,
hardware and network architecture and access to the ICP Internet Site for
purposes of such performance and the coordination load testing as AOL
elects to conduct.
8. ICP Programming. The terms and conditions of this Exhibit applicable to the
---------------
ICP Internet Site shall apply equally to any ICP Programming that is (a)
programmed in HTML or (b) web-based.
9. Problem Resolution. ICP agrees to use commercially reasonable efforts to
------------------
provide the following service levels in response to problems with the ICP
Internet Site:
. For material functions of the ICP Internet Site that have become
inoperable, ICP will use its best efforts to provide a bug fix or
workaround within * * * after ICP's receipt of the first report of
such error.
. For other functions of the ICP Internet Site that are impaired or
otherwise fail to operate in accordance with agreed upon
specifications, ICP will provide a bug fix or workaround within* *
* after the first report of such error.
. For all other problems with the functionality or performance of the
ICP Internet Site, ICP will use commercially reasonable efforts to
fix such problems within * * * after the first report of such
problems, or if not reasonably practicable, as soon as reasonably
feasible.
For any problem that is not, or reasonably cannot be, resolved within the
above time frames, ICP shall provide AOL with prompt notice of ICP's
inability to timely remedy such problem. Within thirty (30) days of the
Effective Date, the Parties shall mutually agree on the procedures for
implementing the above problem resolution process (e.g., exchanging contact
names, email addresses and telephone numbers).
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
48
<PAGE>
EXHIBIT G
---------
KEYWORD GUIDELINES
------------------
PRINT/GRAPHIC
. Preferred listing: (AOL Logo appears) America Online Keyword: Dr. Koop
America Online Keyword: Dr. Koop
. If necessary, due to space constraints, listing may (pending approval)
---
appear as follows: AOL Keyword: Dr. Koop
. Every effort should be made to have `America Online' spelled out
. Capitalization - listing should appear in initial caps only
Note: When America Online is abbreviated to AOL - AOL must appear in
----
all caps. K of Keyword must always be capitalized
. Font, Font style and Size must all be consistent
. Listing size must be of equal prominence to that of any/all other URLs
featured
BROADCAST/RADIO
. America Online Keyword must announced entirely (even if an accompanying
graphic is set with AOL versus America Online)
Example voiceover would read:
"For more information, please visit America Online Keyword: Dr. Koop"
. AOL must approve all uses prior to usage
----------------------------------------
49
<PAGE>
EXHIBIT H
---------
FORM OF TIME WARRANT
--------------------
50
<PAGE>
EXHIBIT I
---------
FORM OF PAGE VIEW WARRANT
-------------------------
51
<PAGE>
EXHIBIT J
---------
FORM OF PMRA WARRANT
--------------------
52
<PAGE>
EXHIBIT 10.51
CONFIDENTIAL
------------
DEVELOPMENT AND SERVICES AGREEMENT
----------------------------------
This Agreement (this "Agreement"), effective as of July 1, 1999 (the "Effective
Date"), is made and entered into by and between America Online, Inc. ("AOL"), a
Delaware corporation, with its principal offices at 22000 AOL Way, Dulles,
Virginia 20166, and drkoop.com, Inc., ("Company"), a Delaware corporation, with
its principal offices at 8920 Business Park Drive, Suite 200, Austin, Texas
78759 (each a "Party" and collectively the "Parties").
INTRODUCTION
------------
AOL provides online access and services through the AOL Network, including
without limitation the AOL Service, Netscape Netcenter, the CompuServe brand
service, Digital City and AOL.com (as such terms are defined herein).
Company is a provider of various health and medical care information, products
and services, including products and services currently offered through the
Internet at http://www.drkoop.com.
AOL and Company wish to enter into an agreement on the terms and conditions set
forth herein whereby Company will have principal responsibility for developing,
producing, managing and providing Content for an online personal medical records
and health information service (as defined herein, "PMR Service") permitting
individual consumers to maintain and access online personal medical records
information and to access related value added services, products and content
provided by or in conjunction with third parties such as medical insurance
companies. The PMR Service will be managed by Company for AOL as provided
herein (the "AOL PMR Service"). In addition, Company will have the right to
operate the PMR Service on Company's own behalf on the Dr. Koop Site (the
"Company PMR Service")
Concurrently herewith, the Parties are entering into an Interactive Services
Agreement of even date pursuant to which AOL is providing access to an Internet
Site of Company through the AOL Network (the "Interactive Services Agreement").
Defined terms used but not defined in the body of the Agreement or in the other
Exhibits attached to this Agreement will have the respective meanings set forth
on Exhibit A attached hereto.
- --------------------
* * * Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
<PAGE>
TERMS
-----
1. Development.
-----------
1.1. Initial Specifications and Development. Company and AOL will, within
--------------------------------------
forty-five (45) days following the Effective Date, jointly agree in
writing upon a development plan setting forth detailed specifications
for the PMR Service to be developed by Company. Such development
plan, as it may be amended from time to time by written agreement of
both Parties, is referred to in this Agreement as the "Development
Plan." The Development Plan will provide for the PMR Service to
utilize AOL namespace and applicable elements and characteristics of
that namespace (collectively the "AOL Namespace Technology"), so that
all users of the PMR Service will be able to utilize AOL products,
services, tools and utilities that utilize the AOL Namespace
Technology. The Development Plan will also include the requirement
that the PMR Service (a) conform with then-existing technologies
identified by AOL which are optimized for the AOL Service and are
compatible with AOL's then-available client and host software and the
AOL Network; and (b) meet AOL's then current reasonable volume and
performance requirements. The Development Plan will also include a
commitment by Company to develop and maintain as part of the PMR
Service an applications programming interface ("API") to facilitate
the transmission and passage of data between AOL and Third Party
Service Providers, which API shall be developed and maintained at a
quality level consistent with industry APIs intended to facilitate
electronic data interchange between commerce partners. Company's
commitment to development and maintenance of the API pursuant to this
Agreement does not extend to Backend servicing of Third Party Service
Provider interfaces and connections to the API, which services the
Parties understand Company may perform at a separate charge to such
Third Party Service Providers.
1.1 Timetable. The Parties will agree on a project timetable for
---------
development and launch of the PMR Service as part of the Development
Plan. Such project timetable, as it may be amended from time to time
by written agreement of both Parties, is referred to in this
Agreement as the "Project Timetable."
1.2 Company Development Responsibilities. Company will be principally
------------------------------------
responsible for the development of the PMR Service in accordance with
this Agreement, including all technology and aspects thereof, such as
user interface, database and database management technology and
interface technology to interface the PMR Service to third parties
and content and data from such third parties. Company agrees to
diligently perform the development services and to develop and
provide the PMR Service in accordance with the Development Plan, the
Project Timetable
<PAGE>
and the operating standards set forth in Exhibit "C" (the "Operating
Standards"). Company will be responsible for devoting such personnel,
equipment and resources as are required to accomplish such
development.
1.3 AOL Development Responsibilities. The Parties recognize that the
--------------------------------
Development Plan may provide for certain development tasks to be
undertaken by AOL, where AOL has particular knowledge or expertise
that would advance or facilitate such development. To the extent that
the Development Plan provides that AOL is responsible for certain
development tasks, AOL will diligently perform the development
services for which it is responsible as set forth in the Development
Plan, and AOL will be responsible for devoting such personnel,
equipment and resources as are required to accomplish such
development tasks in accordance with the Development Plan and the
Project Timetable.
1.4 Testing and Acceptance. The PMR Service shall, upon completion, be
----------------------
subjected to such testing as each party may desire to conduct, and
the PMR Service will not be deployed until approved by both Company
and AOL. Upon completion of any such testing conducted by AOL, AOL
shall provide Company written notice of approval or disapproval of
the PMR Service. The Development Plan and/or Project Timetable shall
set forth more detailed procedures, responsibilities and timetables
for the acceptance testing process. Any disapproval by AOL shall be
based upon AOL's determination that the PMR Service fails to conform
to the Development Plan or is not suitable for commercial release and
deployment. In the event of disapproval by AOL, AOL shall give its
reasons for disapproval in reasonable detail, specifying the nature
of the deficiencies, and Company shall thereafter use reasonable
efforts to modify the PMR Service and resubmit it for further
acceptance testing by AOL. This process shall continue until the PMR
Service has been approved by AOL. The date on which AOL notifies
Company that AOL approves the PMR Service is referred to herein as
the "AOL Approval Date." Any subsequent enhancements, modifications
or revisions to the PMR Service will also be subject to AOL's and
Company's approval of the specifications therefor and AOL's and
Company's testing and approval thereof as set forth in this Section
1.5. No changes or additions will be made to the PMR Service until
such changes or additions (a) conform with specifications agreed to
by AOL, (b) conform with then-existing technologies identified by AOL
which are optimized for the AOL Service and are compatible with AOL's
then-available client and host software and the AOL Network; (c) meet
AOL's then current reasonable volume and performance requirements;
(d) meet such other requirements as AOL may reasonably require as a
condition to acceptance of such changes or additions; and (e) have
been accepted pursuant to this Section 1.5.
<PAGE>
1.2. Additional Development Services.
-------------------------------
(a) Requirements. At all times during the Term, Company will
undertake such development and make such changes to the PMR
Service as may be required to ensure that the PMR substantially
complies with the Operating Standards.
(b) Changes. After the initial development of the PMR Service,
-------
Company may make such changes to the PMR Service as Company
deems appropriate to maintain the PMR Service as a market-
competitive service, provided that such changes will be subject
to AOL's written approval, not to be unreasonably withheld. In
addition, Company will make such changes to the PMR Service as
AOL may reasonably request from time to time. Without limiting
the foregoing, Company will make such changes to the PMR
Service as AOL may reasonably request in order to implement
technological innovations as well as to integrate with the PMR
Services complementary products, services and/or technologies
designated by AOL that are provided by AOL or third parties,
including without limitation Third Party Service Providers. In
the event AOL requests that Company implement technological
innovations or complementary products, services and/or
technologies offered by an AOL Strategic Partner, Company will
undertake such changes using the technological innovations,
products, services and/or technologies offered by such third
party. In the event AOL requests that Company implement
technological innovations or complementary products, services
and/or technologies offered by a third party other than an AOL
Strategic Partner, Company may elect either to undertake such
changes using the technological innovations, products, services
and/or technologies offered by such third party or to deliver
to AOL within thirty (30) days following AOL's initial request
for such implementation a written plan for implementation of
alternative third party or Company technological innovations,
products, services and/or technologies offering comparable or
better functionality and performance, which plan shall be
subject to AOL's approval, not to be unreasonably withheld.
Company will provide development services under this Section
1.6(a)(ii) on a high priority basis and on at least as high a
priority basis as provided to any third party. Upon any request
by AOL for changes or any approval by AOL of changes proposed
by Company, the parties will agree upon the specifications for
such changes and a development schedule for such changes.
(c) Agreements with Third Party Service Providers. The Parties
---------------------------------------------
recognize that a significant portion of the value of the PMR
Service is its ability to interface with products and services
offered by Third
<PAGE>
Party Service Providers. The Parties recognize that the
Development Plan may provide for certain development tasks to
be undertaken by third parties, where one or more third parties
has particular knowledge or expertise that would advance or
facilitate such development. If AOL reasonably requests that
Company integrate with the PMR Service complementary products,
services or technologies provided by an AOL Strategic Partner,
Company will negotiate in good faith with such third party and
will enter into, on commercially reasonable terms, such
agreements with such third party as may be required to
accomplish such integration. In the event that AOL obtains a
commitment from a Third Party Service Provider to integrate
with the PMR Service complementary products or services of such
Third Party Service Provider that are anticipated to expand the
number of consumers with access to the PMR Service, AOL may
require that Company co-brand or ingredient brand the PMR
Service with the name or logo of such Third Party Service
Provider in accordance with branding commitments negotiated by
AOL and such Third Party Service Provider, subject to the
requirements set forth in Section 2.2(a) with respect to
ingredient branding to be accorded to Company. For other
complementary products, services or technologies integrated
with the PMR Service, AOL and Company will negotiate in good
faith with one another regarding any co-branding or ingredient
branding requested by the third party providing such
complementary products, services or technologies. All
agreements that Company enters into with any Third Party
Service Providers shall explicitly provide that upon expiration
or termination of the Term of this Agreement, the Third Party
Service Provider shall not be restricted or limited in any
manner from providing its products and services to AOL, either
directly or through one or more third party transaction
processors, it being the intention that AOL will have the
ability to continue to offer the PMR Service with any related
products or services of Third Party Service Providers that were
offered during the Term as part of the PMR Service. AOL shall
be a named third party beneficiary of any such agreements.
(d) Development Committee. AOL and Company shall each designate an
---------------------
individual to serve as development representatives (the
"Development Representatives") on a development committee (the
"Development Committee"). The initial Development
Representative appointed by each Party shall be subject to the
other Party's approval, not to be unreasonably withheld. Upon
AOL's request, the Development Committee shall also include a
development representative appointed by an AOL Strategic
Partner. If either Party replaces the initially designated
Development Representative, such Development Representative
must be replaced by a person of similar rank and stature unless
the
<PAGE>
parties otherwise agree. The Development Committee shall meet
on a regularly scheduled basis to discuss development
activities and priorities relating to the PMR Service, new
technological innovations, complementary products, services
and/or technologies, and other matters relating to the ongoing
development and maintenance of the PMR Service, including
without limitation competitive and business justifications for
implementing particular changes. Through the Development
Committee, the Parties will approve an updated and revised
Development Plan for the PMR Service at least once every six
(6) months. In the event that AOL requests that Company
integrate with the PMR Service complementary products, services
or technologies provided by an AOL Strategic Partner that are
reasonably necessary in order to maintain the PMR Service as a
market-competitive service, and such integration or
implementation would require Company to incur extraordinary
unanticipated fees or expenses (such as, by way of example,
extraordinary license fees or extraordinary additional hardware
expenses), the Development Committee shall discuss the matter
and attempt to agree on an appropriate allocation of such
expenses between the Parties.
(e) Additions As Part of General Obligations. All additions and
----------------------------------------
changes provided hereunder will be developed, constructed,
programmed, hosted and maintained by Company as required
hereunder.
(f) AOL Right To Opt Out of Features. The features and functions of
--------------------------------
the AOL PMR Service and the Company PMR Service shall be the
same (subject to such user interface modifications as may be
developed by AOL pursuant to Section 2.1(a) that may
differentiate the appearance of the AOL PMR Service as it
appears on various services on the AOL Network), provided that
AOL shall have the right to decline to include in the AOL PMR
Service any features or functions of the PMR Service
implemented by Company in the Company PMR that AOL finds
unsuitable or undesirable for any reason.
(g) Data Mining and Market Research. AOL and Company shall within
sixty (60) days following the Effective Date, jointly agree in
writing upon a plan setting forth goals and procedures and
allocating responsibilities for storing and manipulating
Customer Data and generating such summary and aggregate reports
and other compilations of Customer Data as the Parties may
desire for purposes permitted under this Agreement (the "Data
Mining Plan").
<PAGE>
2. Ownership.
---------
2.1. Joint Ownership of PMR Service and Underlying Rights.
----------------------------------------------------
(a) Ownership and Assignments. Except as otherwise provided in this
-------------------------
Section 2 and subject to the limitations set forth in Section
2.1(b) and (c) of this Agreement, the PMR Service and all
proprietary rights in the PMR Service created, developed, owned
or other acquired or used during the Term, including all PMR
Rights, shall be jointly owned by Company and AOL in equal,
undivided shares, and Company and AOL shall each have all the
rights of a joint owner of such rights, subject to the
limitations and restrictions set forth in this Agreement. To
the extent such rights would, in the absence of any assignment
of rights, be owned by one Party, such Party hereby transfers
and assigns such co-ownership rights to the other Party.
Notwithstanding the foregoing, neither Company nor AOL shall
have any duty to account to one another or to pay to one
another any revenues derived from their respective exploitation
of the PMR Service or PMR Rights, except as specifically
provided in this Agreement. Any technology or other proprietary
rights or other rights created or acquired by or on behalf of a
Party after the Term (including any rights that would be
considered PMR Rights if created or acquired during the Term)
shall belong exclusively to the party creating such rights.
Without limiting the foregoing, each Party shall own exclusive
rights in any derivative works, modifications, enhancements,
adaptations or improvements it creates after the Term based on
or derived from any of the PMR Rights, subject to the joint
ownership of the underlying PMR Rights. Despite the foregoing,
at any time, including during the Initial Term, AOL will have
the right to modify, adapt, enhance and customize the user
interface of the PMR Service as it appears on the AOL Network
(or cause Company to do so on behalf of AOL), and any such
modifications, adaptations, enhancements and customizations,
and all proprietary rights therein, shall belong exclusively to
AOL. It is understood that the PMR Service that is jointly
owned by the Parties will itself have a full featured user
interface. Customization of such user interface undertaken by
AOL for which AOL would own all proprietary rights might
include, by way of example, customization to make the user
interface of the AOL PMR Service conform to the AOL Look and
Feel of one or more of the services comprising the AOL Service,
such as the aol.com, CompuServe or America Online brand
services. In addition, Company shall not acquire any ownership
rights in or to the AOL Namespace Technology; provided that
Company shall have the right to utilize such technology solely
for the PMR Service after the Term. It is understood that,
except as expressly set forth herein, the foregoing is intended
to provide each Party with joint
<PAGE>
rights in and to all aspects of the PMR Service. Each Party
will have the right to possession of all aspects of the jointly
owned technology, including source code and all documentation
of any nature whatsoever. Company shall promptly deliver to AOL
copies of all jointly owned technology, including source code
and documentation, as it is developed.
(b) License. Recognizing that the PMR Service will be developed, in
-------
part, by modifying, enhancing and creating derivative works
based upon the Dr. Koop Personal Medical Records System,
Company hereby grants to AOL a perpetual, non-terminable non-
exclusive license to any and all portions and elements of the
Dr. Koop Personal Medical Records System that are incorporated
in or become a part of the PMR Service. Such license includes
all rights that a joint owner of all proprietary rights would
have in the portions and elements of the Dr. Koop Personal
Medical Records System so incorporated into the PMR Service,
and Company acknowledges and agrees that, as set forth in
Section 2.1(a), Company and AOL will be joint owners of all
rights in the PMR Service.
(c) Third Party Agreements. All agreements that are entered into
----------------------
with any third party with respect to the PMR Service shall
explicitly provide that upon expiration or termination of the
Term of this Agreement, such third party shall not be
restricted or limited in any manner from entering into a
similar agreement directly with AOL or a third party, it being
the Parties' intention that AOL will have the ability to
continue to offer the PMR Service with any and all features,
functions and capabilities that were offered during the Term as
part of the PMR Service. AOL shall be a named third party
beneficiary of any such agreements.
(d) Limits on Use by Company. Despite its joint ownership of the
------------------------
PMR Service and PMR Rights, during the Initial Term, Company
will have the right to use the PMR Service and PMR Rights only
as follows: (i) to perform its duties under this Agreement,
(ii) to implement the Company PMR Service on the Dr. Koop Site,
and (iii) to authorize third parties to deploy, display or
offer the Company PMR Service, provided that any such third
party deploying, displaying or offering the Company PMR Service
during the Initial Term offers is in the business of offering
medical or health related products and services and is not in
the business of offering Interactive Services or Interactive
Sites targeted to consumers, and provided that Company shall
use commercially reasonable efforts to obtain from any such
third party a written agreement in a form approved by AOL
containing (a) commitments to provide AOL with a reasonably
prominent AOL-branded button
<PAGE>
on the first screen of such service, above-the-fold, promoting
the availability of the AOL PMR Service; and (b) commitments to
promote the availability of the AOL PMR Service in all offline
advertising, marketing and promotional materials relating to
such third party's deployment, display or offering of the
Company PMR Service, in accordance with specific details of
such branding and promotional requirements to be mutually
approved by AOL and Company, which the Parties agree not to
unreasonably withhold. Any such agreement with such third party
shall also contain such provisions as AOL reasonably requires
to protect AOL's trademark rights. Except as provided in this
Section 2.1(c), Company shall have no right, directly or
indirectly to utilize the PMR Service or the PMR Rights in any
other manner, including to deploy, display or offer the PMR
Service or the Company PMR Service (or any other personal
medical records service) through any Interactive Site or
Interactive Service or otherwise, or to permit any third party
directly or indirectly to deploy, display or offer the PMR
Service or the Company PMR Service (or any other personal
medical records service) through any other Interactive Site,
Interactive Service or otherwise. After the Initial Term,
subject only to express limitations set forth in this
Agreement, Company will have the right to implement and utilize
the PMR Service and PMR Rights in its sole and complete
discretion without limitation.
(e) Limits on Use by AOL. Despite its joint ownership of the PMR
--------------------
Technology and PMR Rights, during the Initial Term, AOL will
have the right to implement and deploy the PMR Technology and
PMR Rights and the PMR Service anywhere on the AOL Network, and
the right to sublicense to third parties the right to implement
and deploy the PMR Technology, the PMR Rights and PMR Service
outside the AOL Network. In the event AOL sublicenses the PMR
Service for deployment outside the AOL Network, AOL shall
require that any sublicensee provide Company ingredient
branding comparable to and subject to the minimum requirements
of the ingredient branding that AOL is required to accord to
Company as set forth in Section 2.2(a), and in the event that
AOL receives license fees for such sublicensing of the PMR
Service for deployment outside the AOL Network, AOL shall pay
Company an amount equal to * * * of such license fees which are
paid to AOL for the right to deploy the PMR Service during the
Initial Term. After the Initial Term, AOL will have the right
to implement and utilize the
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
PMR Technology, the PMR Rights and the PMR Service in its sole
and complete discretion without limitation.
(f) Limits on Use After the Term. Despite the provisions of
----------------------------
Sections 2.1(a), (b), (c), (d) and (e) which, subject to the
provisions of Section 6.11, permit generally unlimited use of
the PMR Service and PMR Rights by each Party after the Initial
Term, at all times, including after the Initial Term and after
the Term, the rights of the Parties with respect to use of
Customer Data shall be subject to the limitations set forth in
Section 5.4 of Exhibit "B", and each Party shall utilize any
PMR Service Data and any other rights of any third party in
accordance with any privacy rights, any applicable laws, rules
and regulations and/or any contractual rights of such third
party, and shall indemnify the other Party hereto against any
claims of any such third party arising out of or related to the
use by such Party of such Customer Data or PMR Service Data.
(g) Facilitation of Licensing of Tools and Technology. To the
-------------------------------------------------
extent that the ongoing use and/or maintenance of the PMR
Service requires access to proprietary tools or technology of
either Party and/or of third parties, each Party agrees to make
such Party's necessary tools and/or technology available to the
other Party at no charge for the purpose of using and
maintaining the PMR Service, agrees not to interfere with the
other Party's ability to obtain any necessary licenses to such
tools and/or technology available from third parties, and
agrees to use commercially reasonable efforts to facilitate
contacts and discussions between any such third parties and the
other Party to this Agreement to obtain any such necessary
licenses.
2.2. Ownership of AOL PMR Service and Company PMR Service.
----------------------------------------------------
(a) AOL Ownership of AOL PMR Service. Subject to the provisions of
--------------------------------
Section 2.1 concerning ownership of the PMR Service and PMR
Rights, AOL will own all other aspects of the AOL PMR Service.
Without limiting the foregoing: (1) AOL shall retain ownership
of all trademarks and service marks used in connection with the
AOL PMR Service (other than marks licensed from Company); (2)
AOL will own all right, title and interest in and to all
aspects of the Advertising, transactional and promotional
spaces within the AOL PMR Service (including, without
limitation, Advertising, transactional and promotional spaces
on any AOL forms or pages which are included within, precede,
follow, frame or otherwise are associated with the Licensed
Content, the AOL PMR Service and/or any Linked Interactive
Sites), including without limitation all ad banners and
sponsorship opportunities for the AOL PMR Service, but not
including the Backend; (3) AOL will have the
<PAGE>
exclusive right to sell Advertising, transactions and
promotions within the AOL PMR Service and Company will have no
right to sell any such item and the specific advertising
inventory within any AOL forms or pages or the AOL PMR Service
and all aspects of its sale and use will be as determined
solely by AOL; (4) AOL will own all URL's, screennames and
other screen space attributes of the AOL PMR Service; and (5)
except as otherwise expressly provided in this Agreement, AOL
will own and control all relationships with AOL Members, AOL
End-Users, AOL PMR Users, AOL PMR Members and other users of
the AOL PMR Services. In addition, the AOL PMR Service will be
branded by AOL in its sole and complete discretion and all such
branding will be owned by AOL, provided that, during the
Initial Term, AOL will provide Company ingredient branding such
as "Powered by drkoop.com, inc." on the first screen of the AOL
PMR Service appearing on any portion of the AOL Network and on
all subsequent screens of the AOL PMR Service appearing on any
portion of the AOL Network, provided that AOL may withhold
Company ingredient branding on any screen other than the
initial screen where AOL is providing ingredient or co-branding
to a third party. AOL shall also have the right to provide
Company greater branding determined by AOL in its discretion.
Without limiting the foregoing rights, AOL may also provide one
or more Third Party Service Providers with branding on the AOL
PMR Service, and may require Company to provide co-branding to
one or more Third Party Service Providers as provided in
Section 1.6(c). AOL will at all times during the Term have the
right to continue to provide ingredient branding and/or co-
branding as provided above, but its obligations to provide any
such branding will expire at the end of the Initial Term.
Subject to the provisions of this Section 2.2(a), AOL and
Company shall mutually agree on the placement and appearance of
the ingredient branding provided to Company by AOL, with
Company's approval not to be unreasonably withheld. AOL shall
have a period of one hundred twenty (120) days following the
Effective Date to conduct due diligence with respect to whether
Company has the right to grant to AOL the rights granted to AOL
by Company pursuant to this Agreement. Notwithstanding anything
to the contrary set forth in this Section 2.2(a), in the event
AOL reasonably concludes that Company does not have the right
to grant material rights granted to AOL pursuant to this
Agreement, or that the exercise by AOL of material rights
granted by Company to AOL pursuant to this Agreement will
likely subject Company and/or AOL to legal action by a third
party, AOL shall have no obligation to provide or require its
sublicensees to provide any ingredient branding or co-branding
to Company pursuant to this Agreement, without limiting any of
AOL's other rights or remedies.
<PAGE>
(b) Company Ownership of Company PMR Service. Subject to the
----------------------------------------
provisions of Section 2.1 concerning ownership of the PMR
Service and PMR Rights, Company will own all other aspects of
the Company PMR Service. Without limiting the foregoing: (1)
Company shall retain ownership of all trademarks and service
marks used in connection with the Company PMR Service (other
than those marks, if any, licensed from AOL - it being
understood that Company has no such rights under this
Agreement); (2) subject to the rights of AOL under the
Interactive Services Agreement, Company will own all right,
title and interest in and to all aspects of the Advertising,
transactional and promotional spaces within the Company PMR
Service (including, without limitation, Advertising,
transactional and promotional spaces on any Company forms or
pages which are included within, precede, follow, frame or
otherwise are associated with the Company PMR Service and/or
any Linked Company Interactive Sites), including without
limitation all ad banners and sponsorship opportunities for the
Company PMR Service; (3) subject to the rights of AOL under the
Interactive Services Agreement, Company will have the exclusive
right to sell Advertising, transactions and promotions within
the Company PMR Service; (4) subject to the provisions of
Section 2.1(a) with respect to AOL's ownership of AOL Namespace
Technology, Company will own all URL's, screennames and other
screen space attributes of the Company PMR Service; and (5)
Company will own and control all relationships with users of
the Company PMR Service.
(c) General Intent. The provisions of Sections 2.2(a) and (b) are
--------------
intended to reserve for each Party rights in or to the
particular front-end implementation of the PMR Service (i.e.,
the AOL PMR Service or the Company PMR Service, as applicable)
solely to the extent the rights in such implementation are
different from the rights in or to the PMR Service and PMR
Rights. The Parties agree that, subject to the terms and
conditions of this Agreement, all proprietary rights in the
Backend of the PMR Service and PMR Rights are intended to be
solely owned by Company, except that Customer Data and all
rights therein shall be jointly owned, subject to the terms and
conditions of this Agreement, regardless of whether such
Customer Data is collected, manipulated or resident at the
Backend or the front end, provided that those portions of
Customer Data generated by Company through Permitted Products
and Services shall belong exclusively to Company.
3. Management of AOL PMR Service by Company for AOL.
------------------------------------------------
3.1. Management. Except as expressly provided herein, during the Term,
----------
Company will, on behalf of AOL, develop, implement, manage, maintain,
<PAGE>
host and operate the PMR Service for use by AOL as the AOL PMR
Service (including reviewing, deleting, editing, creating, updating
and otherwise managing all Content available on or through the AOL
PMR Service) in strict accordance with the terms of this Agreement.
Except as expressly provided herein and in the Interactive Services
Agreement, all Content on the AOL PMR Service, including without
limitation, all Products, Links, buttons, promotions, sponsorships or
similar Content and all features and transaction opportunities
available from the PMR Service will be as agreed to by the Parties as
described in the Development Plan, with only such changes as are made
or approved by AOL; provided that Company may make changes to the
non-core functionality of the AOL PMR Service as reasonably necessary
to update and maintain the AOL PMR Service in the ordinary course of
management of such service upon written notice to AOL, provided such
changes do not materially affect the functioning of, or Products or
Content available through, the AOL PMR Service and do not modify the
user interface or user registration or access process or methodology.
AOL may establish written overall guidelines regarding such changes
that will eliminate the need for approval or notification of changes
on a case by case basis if such changes are within the agreed upon
guidelines. Except as contemplated by the foregoing, Company will not
place Content on the AOL PMR Service or make any change to the PMR
Service, or any aspect thereof, including the user interface, without
AOL's prior approval and AOL has sole control over all such aspects.
In addition, AOL will have the right to establish and provide to
Company reasonable rules governing the permitted Content to be
provided by third parties as part of the AOL PMR Service, and to
cause Company to remove any materially nonconforming Content from the
AOL PMR Service and to refuse such Content for the AOL PMR Service
(such as Content from specific third parties or specific Products).
As set forth more fully in, and subject to the provisions of, Section
2.2, AOL has and will retain control and management over all aspect
of the AOL PMR Service, including all Advertising, promotional and
transactional space for the AOL PMR Service and Company is merely
managing such service for AOL subject to AOL's control.
3.2. Hosting; Communications. Company will be responsible during the
-----------------------
Initial Term and the Tail Period (if applicable) for all
communications, hosting and connectivity costs and expenses
associated with the AOL PMR Service, provided that, AOL at its
discretion and cost may host any or all of the AOL PMR Service,
including the initial screen or elements thereof. Company will
provide all computer hardware (e.g., servers, network devices,
routers, switches, telephones and other similar equipment) and all
computer software (e.g., web servers, operating systems,
applications, databases and other similar resources) necessary to
make the AOL PMR Service available on and through the AOL Network. To
the extent necessary for the AOL PMR Service to be competitive with
the top two then-current market leaders in personal medical records
management
<PAGE>
services as set forth in Section 1 of Exhibit "C", Company will
utilize a dedicated high speed connection to maintain quick and
reliable transport of information to and from the Company Data Center
and the Internet and T1 or similar connections to and from the
Company Data Center and AOL's servers. AOL will be given the
opportunity to review and comment upon significant changes to
Company's communications and hosting equipment and architecture for
the PMR Service. AOL may elect to have Company provide some or all of
the operation and hosting services provided in this Section 3 to AOL
during the Extension Period (if applicable). Company shall provide to
AOL on a weekly basis a report specifying for the prior week
aggregate usage, page views, Impressions and new registered users for
the AOL PMR Service, and setting forth such additional information
and data regarding usage of the AOL PMR Service as AOL reasonably
requests.
3.3. Operating Standards. In its operation and hosting of the PMR Service,
-------------------
Company will ensure that the PMR Service substantially complies at
all times with the Operating Standards.
3.4. Customer Service. In its operation and hosting of the PMR Service,
----------------
Company will provide the customer service and support specified for
the AOL PMR Service on Exhibit D.
3.5. Links to Other Sites.
--------------------
(a) No Links. There will be no Linked Interactive Site for the AOL
--------
PMR Service except as expressly approved by AOL; provided,
however, that notwithstanding the foregoing but subject to
Section 3.5(b), Company may include a Link to third party
Interactive Sites for contextual or editorial purposes so long
as (a) such Links only link to the specific contextually
relevant page(s) of such third party Interactive Site, which
such page(s) appear in a "second" browser window that is
smaller than the original Company browser window; (b) Company
includes navigational ability within such page(s) for AOL
Members to return to the AOL PMR Service; and (c) Company shall
use commercially reasonable efforts to ensure that such page(s)
do not include Links to areas outside of a Company Interactive
Site or the AOL PMR Service. In the event AOL is dissatisfied
with any Link from the AOL PMR Service and AOL so notifies
Company in writing, then Company shall use its commercially
reasonable best efforts to block access by AOL Members to such
Link. In the event that Company cannot, through its
commercially reasonable best efforts, block access by AOL
Members to such Link in question, then Company shall provide
AOL prompt written notice of such fact. AOL may (in addition to
AOL's other rights under this Agreement, at law or in equity)
then, at its option, either (i) restrict access from the AOL
Network to the
<PAGE>
Link in question using technology available to AOL or (ii) in
the event access cannot be restricted, direct Company to remove
any such Link. Company will cooperate with AOL's reasonable
requests to the extent AOL elects to implement any such access
restrictions. AOL will have no obligations of any kind with
respect to any Linked Interactive Site (other than a Linked
Interactive Site owned or controlled by AOL). Company will be
responsible for any hosting or communication costs associated
with any Linked Company Interactive Sites (including, without
limitation, the costs associated with (i) any agreed-upon
direct connections between the AOL Network and such Linked
Company Interactive Site, or (ii) a mirrored version of such
Linked Company Interactive Site).
(b) Traffic Flow. Company will ensure that AOL traffic is either
------------
kept within a Linked Company Interactive Site or channeled back
into the AOL Network. To the extent that AOL notifies Company
in writing that, in AOL's judgment, links from the Linked
Company Interactive Site cause more than a de minimus amount of
AOL traffic to be diverted outside of such site and the AOL
Network in a manner that has a detrimental effect on the
traffic flow of the AOL audience, then Company will promptly
reduce the number of Links out of such site(s). If Company
cannot or does not so limit diverted traffic from the Linked
Company Interactive Site, AOL reserves the right to terminate
the Links from the AOL Network to the Linked Company
Interactive Site at issue.
(c) Competitive Services. Company will not promote, and will ensure
--------------------
that Third Party Service Providers do not promote, Interactive
Services on pages in the AOL PMR Service other than those that
AOL controls. To the extent technically possible, Company will
limit or prevent disclosure to a Third Party Service Provider
that a specific customer visit is from an AOL Customer, unless
otherwise permitted by AOL.
4. Exclusivity.
-----------
4.1. No Similar or Competitive Products or Services. During the Term,
----------------------------------------------
neither the Company nor any of its Affiliates will provide to any
Third Party for use on an Interactive Site, as part of any product or
service other than the PMR Service, any Products or services
substantially similar to the Products or services offered on the PMR
Service.
4.2. Limitations on Marketing of Products and Services. Without limiting
-------------------------------------------------
the restrictions set forth in Exhibit B on solicitation of AOL
Members, Company will not during the Term solicit AOL Members for any
products or services except as permitted in this Section 4. Subject
to the terms and
<PAGE>
conditions of this Agreement, Company shall have the right, during
the Initial Term, to use Member Information that constitutes part of
the PMR Service Data to solicit AOL PMR Members solely through the
AOL Network and solely for Permitted Products and Services. As used
herein the term "Permitted Products and Services" shall mean those
health and medical products and services approved in writing by AOL.
AOL shall provide an initial list of Permitted Products and services
not later than ninety (90) days prior to the projected Launch Date
set forth in the Development Plan. AOL will consider and discuss in
good faith with Company on an annual basis expanding the definition
of Permitted Products and Services to include additional health and
medical products and services that Company desires to market to AOL
PMR Members and that require medical or health industry specific
knowledge and/or expertise not possessed by AOL, provided that AOL
shall have no obligation to approve the inclusion within such
definition of any product or service competitive with a product or
service offered by AOL or an AOL Strategic Partner or to which AOL
has made commitments of exclusivity. AOL agrees, upon Company's
request, to use commercially reasonable efforts to facilitate
contacts and discussions between any such third parties and Company
to explore whether a mutually advantageous business relationship may
be established between such third party and Company. During the Tail
Period or Extension Period, subject to the terms and conditions of
this Agreement, Company shall have the right to use Member
Information that constitutes part of the PMR Service Data to solicit
Existing Customers only, solely through the AOL Network and solely
for Permitted Products and Services, provided that AOL may in its
sole discretion elect to permit Company during the Tail Period or
Extension Period to solicit all AOL PMR Members rather than only
Existing Customers, subject to the other limitations of this
sentence. Any software, products and services developed by Company to
implement the Permitted Products and Services and all proprietary
rights therein shall belong solely to Company. Company shall pay to
AOL * * * of PPS Front End Revenues generated during the Term of this
Agreement.
5. Revenue Sharing.
---------------
5.1. No Sharing Except As Specifically Provided. Except as expressly
------------------------------------------
provided herein, there will be no payments between the Parties, or
any sharing of revenues with respect to the PMR Service, the Company
PMR Service or the AOL PMR Service (including any Advertising
Revenues or Transaction Revenues or Net Revenues). Without limiting
the foregoing,
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AOL shall retain all revenues of any nature arising out of or in
connection with the AOL PMR Service and Company shall, subject to the
provisions of the Interactive Services Agreement, retain all revenues
from the Company PMR Service. Despite the foregoing, the Company PMR
Service shall be considered part of the * * * for all purposes of
revenue sharing between the Parties pursuant to the Interactive
Services Agreement. In addition, each Party shall retain any rights
and revenues it receives from its use of or implementation of the PMR
Service or the PMR Rights; without limiting the foregoing, in the
event that Company receives any revenues from any third party in
connection with the Backend of the PMR Service (such as through data
or content agreements with medical providers, insurance companies,
etc.), it shall retain such revenues.
5.2. Revenue Sharing.
---------------
(a) In consideration of the license to the Dr. Koop Personal
Medical Records System granted to AOL by Company pursuant to
Section 2.1(b), AOL shall pay to Company the sum of Eight
Million Dollars ($8,000,000), payable as follows: * * *. In the
event AOL terminates this Agreement prior to four (4) years
following the Effective Date pursuant to Section 6.3, 6.4, 6.5
or 6.6, or pursuant to Section 6.7 as a result of a Change of
Control of Company, Company shall refund to AOL a pro rata
portion of such Eight Million Dollar ($8,000,000), with the
amount of such refund diminishing on a straight line basis from
the Effective Date to the date of such termination, calculated
daily over such four (4) year period. In the event AOL
exercises its "Buy-Out Right" pursuant to Section 7.3 of the
Interactive Services Agreement, AOL's right to receive a refund
pursuant to this Section 5.2(a) shall terminate.
(b) Other than the payments expressly provided for in this
Agreement, Company will be responsible for and pay all costs
associated with its services and obligations hereunder,
including development, implementation, programming, hosting and
production work associated with constructing, hosting,
programming, and maintaining the PMR Service and the AOL PMR
Service, all costs associated with the Additional Development
Services set forth in Section 1.6, and all costs associated
with obtaining the Content for the AOL PMR Service, and AOL
will have no obligation to repay or otherwise provide Company
with compensation for such services, other than the mutual
covenants and conditions of this Agreement and the Interactive
Services Agreement.
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
(c) AOL shall pay to Company * * * of CPMR Revenues generated
during the Initial Term. The Parties understand that it is
AOL's intention to enter into one or more Consumer Accumulative
Transactions with third parties and that it may be necessary
for AOL to commit to pay such third party(ies) a portion of
CPMR Revenues. In the event AOL fails to enter into an
agreement within six (6) months following the Effective Date
pursuant to which AOL agrees to pay a third party a portion of
CPMR Revenues, AOL shall pay to Company * * * of CPMR Revenues
generated during the remainder of the Initial Term from
Consumer Accumulative Transactions and * * * of CPMR Revenues
generated during the remainder of the Initial Term from Non-
Consumer Accumulative Transactions.
(d) If there is a Tail Period, AOL will pay Company for providing
the AOL PMR Service and all services required of Company during
the Tail Period hereunder an amount equal to the greater of (i)
the Cost Plus Reimbursement for such services provided during
the Tail Period pursuant to Section 3 or (ii) * * * of CPMR
Revenues generated during the Tail Period. If there is a Tail
Period, Company will pay AOL * * * of Backend Revenues
generated during the Tail Period.
(e) If there is an Extension Period, AOL shall pay Company an
amount equal to * * * of Existing Customer CPMR Revenues
generated during the Extension Period. In addition, for any
services pursuant to Section 3, if any, that AOL requests
Company to provide during the Extension Period, AOL will pay
Company an amount equal to the Cost Plus Reimbursement for such
services. If there is an Extension Period, Company shall pay
AOL an amount equal to * * * of Existing Customer Backend
Revenues generated during the Extension Period.
6. Term; Termination.
-----------------
6.1. Term. The Initial Term, any Tail Period, if any, any Extension
----
Period, if any, and any Transition Period, if any, are referred to
herein as the "Term."
6.2. Initial Term. Unless earlier terminated as set forth herein, the
------------
initial term of this Agreement will be co-terminus with the term of
the Interactive
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Services Agreement ("Initial Term"); provided that, if AOL terminates
the Interactive Services Agreement prior to the expiration of its
initial term pursuant to Section 7.2, 7.4, 7.5 or 7.6 of the
Interactive Services Agreement, the Initial Term will, at AOL's
discretion, either terminate concurrently with termination of the
Interactive Services Agreement or continue for the entire proposed
initial term of the Interactive Services Agreement (as if not
terminated). Despite the foregoing, it is understood that this
Agreement is separate from and severable from the Interactive
Services Agreement and that such agreements may be terminated or
extended separately and that no termination of this Agreement will
automatically terminate the Interactive Services Agreement.
6.3. Termination Prior to Launch. AOL will have the right to terminate
---------------------------
this Agreement prior to the Launch Date of the AOL PMR Service if, as
a result of Company's failure to fulfill its obligations, the
Development Plan is not agreed to within the period specified in
Section 1.1 or the Launch Date of the AOL PMR Service fails to occur
by the milestone date specified therefor in the Development Plan. The
Development Plan may include mutually agreed grace periods for
achievement of the Launch Date and may include mutually agreed
mechanisms for extending the milestone date if delays are caused by
AOL's failure to fulfill its obligations.
6.4. Termination for Breach. Either Party may terminate this Agreement at
----------------------
any time in the event of a material breach by the other Party which
remains uncured after thirty (30) days written notice thereof.
6.5. Special Termination by AOL. AOL shall have the right to terminate
--------------------------
this Agreement immediately by providing Company written notice (a) in
the event any claim or proceeding is brought against Company for
professional negligence or wrongdoing, including without limitation,
regarding malpractice or practicing medicine without the appropriate
license(s), which claim appears on its face to be potentially
meritorious or appears to have the potential for significantly
damaging or tarnishing the reputation of the Company or AOL; (b) in
the event of any act, omission, event or other cause that would allow
AOL to terminate the Interactive Services Agreement; provided that
all proper notice and cure periods (if applicable) are given, and
provided that AOL terminates the Interactive Services Agreement, or
(c) upon any event giving rise to a material claim for
indemnification by Company hereunder based upon Licensed Content,
provided that such termination right is exercised within ninety (90)
days after the circumstance giving rise to such right of termination.
6.6. Termination for Bankruptcy/Insolvency or Changes in Business. Either
------------------------------------------------------------
Party may terminate this Agreement immediately following written
notice to the other Party if the other Party (i) ceases to do
business in the normal course, (ii) becomes or is declared insolvent
or bankrupt, (iii) is the subject
<PAGE>
of any proceeding related to its liquidation or insolvency (whether
voluntary or involuntary) which is not dismissed within ninety (90)
calendar days or (iv) makes an assignment for the benefit of
creditors.
6.7. Termination on Change of Control. In the event of a Change of Control
--------------------------------
of AOL during the Initial Term or a Change of Control of Company
during the Initial Term that results in a Specified Entity
(identified as such as of the date the related definitive agreement
is entered into) acquiring substantially all of the assets of Company
or acquiring, either individually or as part of a group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended) beneficial ownership (within the meaning of
Rule 13d-3 promulgated under such Act) of more than * * * of either
(i) the then outstanding shares of common stock of Company; or (ii)
the combined voting power of the then outstanding voting securities
of Company entitled to vote generally in the election of directors,
(a) AOL shall have the right, within thirty (30) days following
receipt of written notice from Company that the Change of Control is
effective, to terminate the Agreement by providing thirty (30) days
prior written notice, and (b) AOL shall also have the right to
terminate the Initial Term and elect to extend this Agreement for the
Tail Period provided in Section 6.8 or for the Extension Period as
provided in Section 6.9.
6.8. Tail Period. Upon the expiration or termination of the Initial Term,
AOL shall have the right, upon written notice to Company, to extend
this Agreement for an additional period (the "Tail Period") of six
(6) years. During the Tail Period, all of the terms and conditions of
this Agreement applicable during the Initial Period shall continue to
apply, except that AOL may elect at any time during the Tail Period
to discontinue according ingredient branding to Company as provided
in Section 2.2(a), provided that if AOL elects to discontinue such
ingredient branding, Company may elect to discontinue the branding
accorded to AOL pursuant to Section 2.1(c). AOL shall have the right
to terminate the Tail Period at any time upon thirty (30) days prior
written notice to Company. Company shall assure that it continues to
perform its services during any Tail Period and/or Transition Period
such that AOL does not experience any material diminution in quality
or timeliness of performance of services by Company during such
period s.
6.9. Extension Period. Upon the expiration or termination of the Initial
----------------
Term, AOL shall have the right, upon written notice to Company, to
extend this Agreement for an additional period (the "Extension
Period") of three (3) years. During the Extension Period, all of the
terms and conditions of this
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Agreement applicable during the Initial Period shall continue to
apply, except that (a) AOL may elect at any time during the Extension
Period to discontinue according ingredient branding to Company as
provided in Section 2.2(a), provided that if AOL elects to
discontinue such ingredient branding, Company may elect to
discontinue the branding accorded to AOL pursuant to Section 2.1(c),
and (b) Company shall provide to AOL during the Extension Period only
such communications, hosting and connectivity services as AOL
requests. AOL shall have the right to terminate the Extension Period
at any time upon thirty (30) days prior written notice to Company.
Company shall assure that it continues to perform any services it is
obligated to provide during the Extension Period such that AOL does
not experience any material diminution in quality or timeliness of
performance of services by Company during such periods.
6.10. Transition Period and Facilitation. Company will facilitate the
----------------------------------
conversion of AOL Customers who enroll in the AOL PMR Service
hereunder to a new AOL-sourced solution at the expiration or
termination of the Term of this Agreement for any reason and will
cooperate with all of AOL's reasonable requests in such conversion
process (provided that AOL shall pay for Company's services as
provided in Section 3.2(b)). At AOL's request, Company shall,
commencing eighteen (18) months prior to the end of the Initial Term,
prepare a detailed transition plan for AOL's review and approval,
including plans for data conversion and any associated software
development required to convert to a new AOL-sourced solution.
Company shall complete such transition plan and obtain AOL's approval
thereof not later than twelve (12) months prior to the end of the
Initial Term. During the period of such conversion, AOL will have the
right, but not the obligation, to have Company provide all of the
services hereunder for up to eighteen (18) months (as selected by AOL
in its discretion) after the Initial Term or during the Tail Period
or after any expiration or termination of the Term of this Agreement
for any reason whatsoever (the "Transition Period"). AOL may
terminate the Transition Period at any time upon thirty (30) days
prior written notice to Company. During the Transition Period, the
terms of this Agreement will continue to apply, including all revenue
sharing arrangements in effect immediately prior to the commencement
of the Transition Period and all payments by AOL for services
provided by Company, except that AOL may elect at any time during the
Transition Period to discontinue according ingredient branding to
Company as provided in Section 2.2(a). AOL shall pay Company for any
incremental transition services provided during the Transition Period
that would not otherwise have been provided by Company on a Cost Plus
Reimbursement basis. Company acknowledges and agrees that the
provision of such transition services are critical to AOL's business
and reputation and that monetary damages will be inadequate to
compensate AOL for damages in the event Company fails to provide such
transition services; accordingly, Company agrees that, without
limitation of any of AOL's other rights and remedies, AOL shall be
entitled to injunctive relief
<PAGE>
and specific performance remedies to compel Company to provide such
transition services.
6.11. Rights Following Termination. Notwithstanding anything to the
----------------------------
contrary set forth in this Agreement, in the event of a termination
of this Agreement by AOL pursuant to Section 6.4, 6.5 or 6.6, or
pursuant to Section 6.7 as a result of a Change of Control of
Company, Company shall have no rights following such termination to
use any Customer Data for any purpose whatsoever. In the event of
any other expiration or termination of this Agreement, Company and
AOL shall have the rights following such expiration or termination
of a joint owner of all proprietary rights in the PMR Service and
the PMR Service Data, subject to those limitations set forth in
Section 2.1(e).
6.12. Press Releases. Upon execution, the Parties shall jointly prepare a
--------------
press release announcing this Agreement, which release shall be
disseminated at a mutually agreeable time. Thereafter, press
releases and other disclosures will be governed by the terms of
Section IV of Exhibit "B".
6.13. Terms and Conditions; Other Exhibits. Exhibits "A" through "D"
------------------------------------
including the legal terms and conditions set forth on Exhibit "B"
attached hereto, are hereby made a part of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.
AMERICA ONLINE, INC. DRKOOP.COM, INC.
By: By:
-------------------------------- -------------------------------
Print Name: Print Name:
------------------------ -----------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
----------------------------- -----------------------------
<PAGE>
EXHIBIT A -- DEFINITIONS
-------------------------
DEFINITIONS. The following definitions shall apply to this Agreement:
- -----------
Advertising Sales Commission. Has the meaning set forth in Exhibit B of the
- ----------------------------
Interactive Services Agreement.
Affiliate. As to AOL, any agent, distributor or franchisee of AOL, or an entity
- ---------
in which AOL holds at least a * * * equity interest.. As to Company, any entity
or person controlling, controlled by or under common control with Company.
AOL Advertising Revenues. All cash revenues for any relevant period actually
- ------------------------
charged to and collected from advertisers by AOL for display of advertising, net
of reasonable Advertising Sales Commissions and costs of sale and Third Party
Payments. In the event any, all or a portion of such advertising are provided
to one or more third parties for consideration other than cash, then the amount
of revenues, if any, actually booked by AOL for financial accounting purposes in
connection therewith shall be included as part of the AOL Advertising
Revenue(s). AOL Advertising Revenue(s) does not include any advertising for
which no consideration is paid to AOL, such as, by way of example, AOL's own
promotional advertising for AOL goods or services, or public service advertising
made available by AOL at no charge to third parties.
AOL Approval Date. Has the meaning set forth in Section 1.5.
- -----------------
AOL.com. AOL's primary Internet-based Interactive Site marketed under the
- -------
"AOL.COM(TM)" brand, specifically excluding (a) the AOL Service, (b) any
international versions of such site, (c) CompuServe.com, Netscape Netcenter, any
other CompuServe or Netscape products or services or interactive sites, (d)
"ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "NetMail(TM)" or any
similar independent product or service offered by or through such site or any
other AOL Interactive Site, (e) any programming or Content area offered by or
through such site over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (f) any programming or Content area offered by or
through the U.S. version of the America Online brand service which was operated,
maintained or controlled by the former AOL Studios division, (g) any yellow
pages, white pages, classifieds or other search, directory or review services or
Content offered by or through such site or any other AOL Interactive Site, (h)
any property, feature, product or service which AOL or its Affiliates may
acquire subsequent to the Effective Date and (i) any other version of an America
Online Interactive Site which is materially different from AOL's primary
Internet-based Interactive Site marketed under the "AOL.COM(TM)" brand, by
virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded versions and any version
distributed through any broadband distribution platform or through any platform
or device other than a desktop personal computer.
AOL End-User. Any registered user of an AOL Property.
- ------------
AOL Hometown. AOL's interactive service, marketed under the "AOL Hometown"
- ------------
brand available to users of the AOL Network and the World Wide Web portion of
the Internet through which such users may publish and maintain World Wide Web
pages, use community tools and engage in other interactive activities,
specifically excluding (a) the AOL Service and AOL.com, (b) any international
versions of such service and such site, (c) the CompuServe(R) brand service,
Netscape Netcenter, "ICQ," "AOL NetFind(TM)," "AOL Instant Messenger(TM),"
"NetMail(TM)" or any similar independent product or service offered by or
through any other AOL Interactive Site, (d) any programming or Content area
offered by or through such site over which AOL does not exercise complete
operational control (including, without limitation, Content areas controlled by
other parties and member-created Content areas, such as, without limitation,
partner community center pages and Member Pages), (e) any yellow pages, white
pages, classifieds or other search, directory or review services or Content
offered by or through such site or any other AOL Interactive Site, (f) any
property, feature, product or service which AOL or its Affiliates may acquire
subsequent to the Effective Date and (h) any other version of an America Online
Interactive Site which is materially different from AOL's primary interactive
service marketed under the "AOL Hometown" brand, by virtue of its branding,
distribution, functionality, Content or services, including, without limitation,
any co-branded versions and any version distributed through any broadband
distribution platform or through any platform or device other than a desktop
personal computer.
AOL Look and Feel. The distinctive and particular elements of graphics, design,
- -----------------
organization, presentation, layout, user interface, navigation, trade dress and
stylistic convention (including the digital implementations thereof) within the
AOL Network and the total appearance and impression substantially formed by the
combination, coordination and interaction
_______________________
* * * Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
Exhibit A - Page 1
<PAGE>
of these elements and including the look and feel of the AOL PMR Service to the
extent different from the look and feel of the PMR Service.
AOL Member(s). Authorized users (including any sub-accounts under an authorized
- -------------
master account) of the AOL Network or any AOL Property.
AOL Namespace Technology Has the meaning set forth in Section 1.1.
- ------------------------
AOL Net Revenues. The sum of AOL Advertising Revenues and AOL Transaction
- ----------------
Revenues.
AOL Network. (i) The AOL Service, (ii) AOL.com, (iii) CompuServe Services, (iv)
- ------------
CompuService.com, (v) Digital City, (vi) Netscape Netcenter and (vii) any other
product or service owned, operated, distributed or authorized to be distributed
by or through AOL or its Affiliates worldwide through which such party elects to
offer the AOL PMR Service or Licensed Content (which may include, without
limitation, AOL-related Internet sites, "offline" information browsing products,
international versions of the any of the foregoing, including those managed by
AOL or it Affiliates), MovieFone and ICQ.
AOL PMR Member. An AOL PMR User who accesses the AOL PMR Service, submits
- --------------
Customer Data, and authorizes such Customer Data to be placed in the data bank
of the PMR Service.
AOL PMR Service. The version of the PMR Service operated on the AOL Network or
- ---------------
any AOL Property or sublicensed by AOL to others pursuant to the terms of this
Agreement.
AOL Property. Any product, service or property owned, operated, marketed,
- ------------
distributed, or authorized to be distributed by or through AOL or its
Affiliates, including, without limitation, the AOL Service, AOL.com, CompuServe
Service, CompuServe.com, Digital City and Netscape Netcenter and any other
property on the AOL Network.
AOL Service. The narrow-band U.S. version of the America Online brand service,
- -----------
specifically excluding (a) AOL.com and any other AOL Interactive Site, (b) the
international versions of an America Online service (e.g., AOL Japan), (c) the
CompuServe(R) brand service and any other CompuServe products or services, (d)
Netscape Netcenter(TM) and any other Netscape products or services, (e)
"ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital City(TM),"
"NetMail(TM)," "Real Fans", "Love@AOL", "Entertainment Asylum," "AOL Hometown"
or any similar independent product, service or property which may be offered by,
through or with the U.S. version of the America Online brand service, (f) any
programming or content area offered by or through the U.S. version of the
America Online brand service over which AOL does not exercise complete
operational control (including, without limitation, Content areas controlled by
other parties and member-created Content areas), (g) any yellow pages, white
pages, classifieds or other search, directory or review services or Content
offered by or through the U.S. version of the America Online brand service, (h)
any property, feature, product or service which AOL or its Affiliates may
acquire subsequent to the Effective Date and (i) any other version of an America
Online service which is materially different from the narrow-band U.S. version
of the America Online brand service, by virtue of its branding, distribution,
functionality, Content or services, including, without limitation, any co-
branded version of the service and any version distributed through any broadband
distribution platform or through any platform or device other than a desktop
personal computer.
AOL PMR User. (i) Any person or entity who enters the PMR Service or the AOL PMR
- ------------
Service from the AOL Network or any AOL Property, including, without limitation,
from any third party area therein (to the extent entry from such third party
area is traceable through both Parties' commercially reasonable efforts)
(regardless of whether such person or entity provides an e-mail address during
registration or entrance to the PMR Service which includes a domain other than
an "AOL.com" domain); and (ii) any other person or entity who, when entering the
PMR Service or AOL PMR Service provides an AOL.com domain name as part of such
person or entity's e-mail address.
AOL Strategic Partner. Any person or entity with which AOL has a significant
- ---------------------
business relationship involving two or more areas of business cooperation.
API. Has the meaning set forth in Section 1.1.
- ---
Backend. The engine and management system that interface with PMR Service and
- -------
those portions that interface and connect from such engine and management
systems to back-end, non-consumer users/suppliers/vendors for the PMR Service,
such as medical providers, insurance companies, etc, other than through the end-
user front-ends of the AOL PMR Service or the Company Server.
Backend Revenues. Aggregate amounts collected plus the fair market value of any
- ----------------
other compensation received, such as barter services, by Company or Company's
agents, as the case may be, arising from the provision by Company of services or
products to Backend users, suppliers or vendors for the PMR Service, including
without limitation Third Party Service Providers.
Change of Control. (a) The consummation of a reorganization, merger or
- -----------------
consolidation or sale or other disposition of substantially all of the assets of
a party * * * or (b) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit A - Page 2
<PAGE>
* * * of either (i) the then outstanding shares of common stock of such party;
or (ii) the combined voting power of the then outstanding voting securities of
such party entitled to vote generally in the election of directors.
Company Competitor. Has the meaning set forth in Exhibit B of the Interactive
- ------------------
Services Agreement.
Company Interactive Site. Any interactive site or area (other than Company
- ------------------------
Programming) including without limitation the Dr. Koop Site and any customized,
mirrored or private-labeled site or area (e.g., versions for local hospitals and
broadcast Affiliates), which is managed, maintained or owned by Company or its
agents or to which Company provides and/or licenses information, content or
other materials, including, by way of example and without limitation, (i) any
Company site on the World Wide Web portion of the Internet or (ii) a channel or
area delivered through a "push" product such as the Pointcast Network or
interactive environment such as Microsoft's proposed Active Desktop or
interactive television service such as WebTV.
Company Internet Site. Each of the versions of the Dr. Koop Site customized for
- ---------------------
distribution through the AOL Network in accordance with the Interactive Services
Agreement.
Company Programming. Any (a) area within the AOL Network or outside the AOL
- -------------------
Network but exclusively available to AOL Members, which area is developed,
programmed, and/or managed by Company, in whole or in part, pursuant to the
Interactive Services Agreement or this Agreement and all Content thereon
(including, without limitation, message boards, chat and other AOL Member-
supplied content areas contained therein) including, without limitation, any co-
branded site or page, and community centers, (b) Content provided to AOL by
Company pursuant to this Agreement for distribution on or through the AOL
Network other than on the Company Internet Site, and (c) Company Tools.
Company PMR Service. The service that may be provided by Company on the Dr.
- -------------------
Koop Site utilizing the PMR Technology and PMR Rights.
Company Tool. An interactive utility owned, operated, marketed, distributed or
- ------------
authorized to be distributed by or through Company or it agents that displays
results based on data entered by an end-user.
CompuServe Service. The standard HTML version of the narrow-band U.S. version of
- -------------------
the CompuServe brand service, specifically excluding (a) any international
versions of such service (e.g., NiftyServe), (b) any web-based service including
"compuserve.com", "cserve.com" and "cs.com", or any similar product or service
offered by or through the U.S. version of the CompuServe brand service, (c)
Content areas owned, maintained or controlled by CompuServe affiliates or any
similar "sub-service," (d) any programming or Content area offered by or through
the U.S. version of the CompuServe brand service over which CompuServe does not
exercise complete or substantially complete operational control (e.g., third-
party Content areas), (e) any yellow pages, white pages, classifieds or other
search, directory or review services or Content (f) any co-branded or private
label branded version of the U.S. version of the CompuServe brand service, (g)
any version of the U.S. version of the CompuServe brand service which offers
Content, distribution, services or functionality materially different from the
Content, distribution, services or functionality associated with the standard,
narrow-band U.S. version of the CompuServe brand service, including, without
limitation, any version of such service distributed through any platform or
device other than a desktop personal computer, (h) any property, feature,
product or service which CompuServe or its affiliates may acquire subsequent to
the Effective Date, (i) the America Online brand service and any independent
product or service which may be offered by, through or with the U.S. version of
the America Online brand service and (j) the HMI versions of the CompuServe
brand service.
CompuServe.com. CompuServe's primary Internet-based Interactive Site marketed
- --------------
under the "CompuServe.com(TM)" brand, specifically excluding (a) the CompuServe
Service and AOL Service, (b) any international versions of such site, (c)
AOL.com, Netscape Netcenter, any other AOL or Netscape products or services or
interactive sites, (d) "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant
Messenger(TM)," "NetMail(TM)" or any similar independent product or service
offered by or through such site or any other AOL or CompuServe Interactive Site,
(e) any programming or Content area offered by or through such site over which
AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created Content
areas), (f) any programming or Content area offered by or through the U.S.
versions of the America Online brand service or CompuServe brand service which
was operated, maintained or controlled by the former AOL Studios division, (g)
any yellow pages, white pages, classifieds or other search, directory or review
services or Content offered by or through such site or any other AOL or
CompuServe Interactive Site, (h) any property, feature, product or service which
AOL or its Affiliates may acquire subsequent to the Effective Date and (i) any
other version of an AOL or CompuServe Interactive Site which is materially
different from CompuServe's primary Internet-based Interactive Site marketed
under the "CompuServe.com(TM)" brand, by virtue of its branding, distribution,
functionality, Content or services, including, without limitation, any co-
branded versions and any version distributed through any broadband distribution
platform or through any platform or device other than a desktop personal
computer.
Confidential Information. Any information relating to or disclosed in the
- ------------------------
course of this Agreement, which is, or should be reasonably understood to be,
confidential or proprietary to the disclosing Party, including, but not
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit A - Page 3
<PAGE>
limited to, the material terms of this Agreement, information about AOL Members,
technical processes and formulas, source codes, product designs, sales, cost and
other unpublished financial information, product and business plans, projections
and marketing data. "Confidential Information" shall not include information (a)
already lawfully known to or independently developed by the receiving Party, (b)
disclosed in published materials, (c) generally known to the public, or (d)
lawfully obtained from any third party.
Consumer Accumulative Transaction. A transaction or agreement entered into by
- ---------------------------------
AOL with a third party by which AOL anticipates that it will materially expand
the number of consumers who access the PMR Service to include consumers with
which such third party has a preexisting relationship.
Content. Text, images, video, audio (including, without limitation, music used
- -------
in time relation with text, images, or video), and other data, products,
services, advertisements, promotions, Links, pointers, technology and software.
Cost Plus Reimbursement. For providing the AOL PMR Service to AOL, or for any
- -----------------------
applicable services provided by Company to AOL, an amount equal to the least of
(i) Company's incremental direct costs (without any burden, any allocation of
overhead general administrative costs or any other indirect costs) in providing
such services to AOL hereunder plus * * * of such incremental direct costs; (ii)
the fair market value of such services; and (iii) any charges for similar
services Company provides to any third party, however situated. For purposes
hereof, incremental costs will mean only those costs incurred by Company in
excess of Company's costs in operating the Company PMR Service or any aspect of
the PMR Service for the Company or for any third party, or of otherwise
providing any similar service or Content for any other purpose including to any
third party or in connection with any other Interactive Site or other use. For
purposes hereof, fair market value shall be determined considering all relevant
circumstances; provided that if there are services then being provided on
Interactive Sites which are similar to or competitive with the PMR Service, fair
market value hereunder may not exceed the costs and charges of such other
services. If there are no similar or competitive services, the primary
comparison will be to other internet management services, with appropriate
adjustments to take into account relevant differences to the extent such
services are not similar or competitive.
CPMR Revenues. Consists of (a) AOL Net Revenues generated from pages on the AOL
- -------------
PMR Service targeted to consumers and (b) Data Mining Revenues.
Customer Data. Has the meaning set forth in Section 5.4 of Exhibit "C".
- -------------
Data Mining Plan. Has the meaning set forth in Section 1.6(g).
- ----------------
Data Mining Revenues. Cash revenues charged and collected by AOL for the use,
- --------------------
sale, licensing or exploitation of Customer Data (whether in the form of
individual data or summary or aggregate reports or compilations of Customer
Data).
Development Committee. Has the meaning set forth in Section 1.6(d).
- ---------------------
Development Representatives. Has the meaning set forth in Section 1.6(d).
- ---------------------------
Development Plan. Has the meaning set forth in Section 1.1.
- ----------------
Digital City. The standard, narrow-band U.S. version of Digital City's local
- -------------
content offerings marketed under the Digital City brand name, specifically
excluding (a) the AOL Service, AOL.com or any other AOL Interactive Site, (b)
any international versions of such local content offerings, (c) the
CompuServe(R) brand service and any other CompuServe products or services (d)
"Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital
City," "NetMail(TM)," "Electra", "Thrive", "Real Fans", "Love@AOL",
"Entertainment Asylum," "AOL Hometown," "My News" or any similar independent
product, service or property which may be offered by, through or with the
standard narrow band version of Digital City's local content offerings, (e) any
programming or Content area offered by or through such local content offerings
over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through such local content
offerings, (g) any property, feature, product or service which AOL or its
Affiliates may acquire subsequent to the Effective Date, (h) any other version
of a Digital City local content offering which is materially different from the
narrow-band U.S. version of Digital City's local content offerings marketed
under the Digital City brand name, by virtue of its branding, distribution,
functionality, Content or services, including, without limitation, any co-
branded version of the offerings and any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer, and (i) Digital City- branded offerings in any local
area where such offerings are not owned or operationally controlled by AOL, Inc.
or DCI (e.g., Chicago, Orlando, South Florida, and Hampton Roads).
Dr. Koop Personal Medical Records System. All existing software owned by
- ----------------------------------------
Company and used on or in connection with the operation and/or maintenance of
the Dr. Koop Site.
Dr. Koop Site. The Internet site and Content, currently located at
- -------------
URL:http://drkoop.com and all related URLs (including without limitation any
third party affiliated versions of such site (e.g., customized, mirrored, co-
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit A - Page 4
<PAGE>
branded private labeled sites (e.g., versions for private hospitals, broadcast
affiliates)), which are managed, maintained or owned by Company or its agents
or to which Company licenses information, content or other materials.
Existing Customers. Any person who, during the Initial Term, becomes an AOL PMR
- ------------------
Member.
Existing Customer Ratio. In any accounting period after the Initial Term, the
- -----------------------
ratio of Existing Customers to total AOL PMR Members. Total AOL PMR Members
during any accounting period after the Initial Term shall be the average of the
number of AOL PMR Members as of the beginning of such period and the number of
AOL PMR Members as of the end of such period.
Existing Customer Backend Revenues. In any accounting Period after the Initial
- ----------------------------------
Term, Backend Revenues for such period multiplied by the Existing Customer Ratio
for such period.
Existing Customer CPMR Revenues. In any accounting period after the Initial
- -------------------------------
Term, (a) AOL Advertising Revenues generated from pages on the AOL PMR Service
targeted to consumers for such period multiplied by the Existing Customer Ratio
for such period, plus (b) AOL Transaction Revenues generated from Existing
Customers.
Extension Period. Has the meaning set forth in Section 6.9.
- ----------------
Keyword Search Terms. Has the meaning set forth in Exhibit B of the Interactive
- --------------------
Services Agreement.
Initial Term. Has the meaning set forth in Section 6.2.
- ------------
Interactive Service. * * *.
- -------------------
Interactive Services Agreement. Has the meaning set forth in the Recitals, as
- ------------------------------
such agreement may be amended from time to time.
Interactive Site. Any interactive site or area, including, by way of example and
- ----------------
without limitation, (i) a Company site on the World Wide Web portion of the
Internet or (ii) a channel or area delivered through a "push" product such as
the Pointcast Network or interactive environment such as Microsoft's Active
Desktop.
Launch Date. The date on which the AOL PMR Service first becomes generally
- -----------
available (other than in beta versions) to AOL Members as contemplated by the
timing schedule set forth in Section 1.1 hereof.
Link. The mechanism by which a user at one Interactive Site can automatically
- -----
move to another Interactive Site, or any screen within such Interactive Site.
Linked Interactive Site. Any site or area outside of the AOL Network which is
- -----------------------
linked to Company Programming or the AOL PMR Service (through a "pointer" or
similar Link) subject to approval by AOL in accordance with the terms and
conditions of this Agreement.
Linked Company Interactive Site. Any Company Interactive Site which is also a
- ------ ------------------------
Linked Interactive Site.
Licensed Content. All Content provided by Company or its agents through the AOL
- ----------------
PMR Service, the Company Internet Site and/or the AOL Network in connection with
the subject matter of this Agreement, including without limitation all Company
Programming.
Notwithstanding any other provision of this Agreement it is understood that AOL
will have the same rights as Company in and to Licensed Content that is part of
the PMR Service or PMR Rights or is obtained in connection therewith, and that
such Licensed Content is co-owned by Company and AOL pursuant to Section 2 of
this Agreement. If License Content is licensed from a third party, then AOL and
Company shall each have all licensed rights, subject to the terms of this
Agreement.
Member Page. Has the meaning set forth in Exhibit B of the Interactive Services
- -----------
Agreement.
Net Revenues. Has the meaning set forth in Exhibit B of the Interactive
- ------------
Services Agreement.
Netscape Netcenter. AOL's primary Internet-based Interactive Site marketed
- ------------------
under the "Netscape Netcenter(TM)" brand and located at www.netscape.com or such
----------------
other URL as AOL may designate specifically excluding (a) the AOL Service and
AOL.com (b) any international versions of such site, (c) CompuServe.com, any
other CompuServe products or services or interactive sites, "ICQ," "AOL
NetFind(TM)," "AOL Instant Messenger(TM)," "NetMail(TM)" or any similar
independent product or service offered by or through the Netcenter site or any
other AOL Interactive Site, (d) any programming or Content area offered by or
through such site over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (e) any programming or Content area offered by or
through the U.S. version of the America Online brand service which was operated,
maintained or controlled by the former AOL Studios division, (f) any yellow
pages, white pages, classifieds or other search, directory or review services or
Content offered by or through such site or any other AOL Interactive Site, (g)
any property, feature, product or service which AOL or its Affiliates may
acquire subsequent to the Effective Date and (h) any other version of an America
Online Interactive Site which is materially different from AOL's primary
Internet-based Interactive Site marketed under the Netscape Netcenter brand, by
virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded versions and any version
distributed through any broadband distribution
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit A - Page 5
<PAGE>
platform or through any platform or device other than a desktop personal
computer.
Non-Consumer Accumulative Transaction. A transaction or agreement entered into
- -------------------------------------
by AOL with a third party in which AOL does not anticipate materially expanding
the number of consumers who access the PMR Service to include consumers with
which such third party has a preexisting relationship.
Operating Standards. Has the meaning set forth in Section 1.3.
- -------------------
Permitted Products and Services. Has the meaning set forth in Section 4.2(b).
- -------------------------------
PMR Rights. All rights to data, contracts, technology and intellectual property
- ----------
and other rights developed or acquired during the Term by Company in connection
with the PMR Service or its ownership or operation, including the PMR Service
Data but not including Backend contracts with vendors to or Backend customers of
the PMR Service, including medical providers, insurance companies and any party
making data inquiries relating to data other than the Customer Data or supplying
data other than Customer Data.
PMR Service. An application and related tools and utilities that collect and/or
- -----------
display and/or communicate healthcare information, communicates and/or act as a
repository or database of personal and/or general healthcare information and/or
personal medical records, and/or permit users to input data into such repository
or database and/or manage, transmit or organize any of the foregoing. The PMR
Service includes, without limitation, the API, any software programs and
business logic that effectuate any collection, manipulation, and/or storage of
data and/or any transfer of data to and from the consumer user interface of the
PMR Service and the data repository of the PMR Service. The PMR Service does
not include the Backend.
PMR Service Data. All Customer Data and other data provided to or obtained by
- ----------------
the PMR Service through the Backend, together with all Customer Data and other
data provided by any End-User of the AOL PMR Service or the Company PMR Service
with authorization that it be placed in the data bank of the PMR Service, but
not including any Customer Data except as so expressly authorized.
PPS Front End Revenues. (a) Amounts paid to Company by AOL PMR Members in
- ----------------------
connection with the sale, licensing, distribution or provision of any Permitted
Products and Services and excluding, in each case, (i) amounts collected for
sales or use taxes or duties and (ii) credits and chargebacks for returned or
canceled goods or services, but not excluding cost of goods sold or any similar
cost; and (b) amounts paid to Company by third parties for the right to sell,
license, distribute, provide or promote Permitted Products and Services to AOL
PMR Members.
Product. Any product, good or service which Company (or others acting on its
- -------
behalf or as distributors) offers, sells, provides, distributes or licenses to
AOL Members directly or indirectly through (i) the AOL PMR Service or the PMR
Service (including through any Interactive Site linked thereto) (ii) any other
electronic means directed at AOL Members (e.g., e-mail offers), or (iii) an
"offline" means (e.g., toll-free number) for receiving orders related to
specific offers within the AOL PMR Service or the PMR Service, requiring
purchasers to reference a specific promotional identifier or tracking code,
including, without limitation, products sold through surcharged downloads (to
the extent expressly permitted hereunder) and also including all Products as
defined in Exhibit B of the Interactive Services Agreement.
Project Timetable. Has the meaning set forth in Section 1.2.
- -----------------
Specified Entity shall mean any of the following entities and any affiliates of
- ----------------
such entities:* * *. AOL shall have the right in its reasonable discretion to
add reasonably comparable parties to the definition of Specified Entity from
time to time upon sixty (60) days written notice to Company.
Tail Period. Has the meaning set forth in Section 6.8.
- -----------
Term. The period beginning on the Effective Date and ending upon the expiration
- ----
or earlier termination of this Agreement (including the Initial Term and any
Tail Period and Transition Period).
Third Party Payments. Payments made to third parties in connection with
- --------------------
distribution of an AOL Service that are directly related to revenue generated by
AOL for the display of advertising.
Third Party Service Providers. Any third party that provides Content, products
- -----------------------------
or services which AOL determines are supplementary or compatible with the PMR
Service, can be utilized in conjunction with the PMR Service or provide similar
or alternative functionality to the PMR Service.
Transaction Revenues. Aggregate amounts paid by AOL PMR Users in connection with
- --------------------
the sale, licensing, distribution or provision of any products which is
generated from pages on the AOL PMR Service and excluding, in each case, (a)
amounts collected for sales or use taxes or duties and (b) credits and
chargebacks for returned or canceled goods or services, but not excluding cost
of goods sold or any similar cost
Transition Period. Has the meaning set forth in Section 6.10.
- -----------------
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit A - Page 6
<PAGE>
EXHIBIT B -- STANDARD LEGAL TERMS AND CONDITIONS
------------------------------------------------
I. AOL NETWORK
1.1 Content. Company represents, warrants and covenants that all Content
-------
contained within or provided through the PMR Service, the AOL PMR Service, the
Company Internet Site, all Company Programming and all Licensed Content (i) does
and will conform to AOL's applicable Terms of Service, the terms of this
Agreement and any other standard, written policy of AOL and any applicable AOL
Property, (ii) does not and will not infringe on or violate any copyright,
trademark, U.S. patent, rights of publicity, moral rights or any other third
party right, including without limitation, any music performance or other music
related rights, and (iii) does not and will not contain any Content which
violates any applicable law or regulation ((i), (ii) and (iii) collectively,
the "Rules"). In the event that AOL notifies Company in writing that any such
Content, as reasonably determined by AOL, does not comply or adhere to the
Rules, then Company shall use its commercially reasonable best efforts to block
access by AOL PMR Users to such Content. In the event that Company cannot,
through its commercially reasonable best efforts, block access by AOL Members to
such Content in question, then Company shall provide AOL prompt written notice
of such fact. AOL may (in addition AOL's other rights under this Agreement, at
law or in equity) then, at its option, either (i) restrict access from the AOL
Network to the Content in question using technology available to AOL or (ii) in
the event access cannot be restricted, direct Company to remove any such
Content. Company will cooperate with AOL's reasonable requests to the extent
AOL elects to implement any such access restrictions. AOL will have no
obligations with respect to the Products or Content made available by or on
behalf of Company on or through the AOL PMR Service or the PMR Service,
including, but not limited to, any duty to review or monitor any such Products
or Content.
1.2 Health and Medical Information Content. Company represents, warrants and
--------------------------------------
covenants that (a) Company will not engage in or facilitate any practice or
service on or through the PMR Service, the AOL PMR Service, the Company
Programming or the Company Internet Site that would constitute the illegal or
unauthorized practice of medicine, the practice of pharmacy, or other regulated
professional practice in the health care area, as defined by applicable state
and federal laws, rules and government regulations and/or the regulations,
policies or guidelines of any applicable professional or accrediting
organization; (b) Company possesses all necessary governmental authorizations,
approvals, consents, licenses, permits, certificates or other rights and
permissions to conduct its business as contemplated by this Agreement; (c) if
any of the Licensed Content professes to provide expert, professional or other
specialty advice or Content (such as, without limitation, medical or
psychological, religious, financial, etc.), Company shall ensure that all such
Licensed Content is prepared or reviewed by licensed, insured and qualified
practitioners/professionals in such field with expertise on the particular topic
and such Licensed Content complies with applicable standards of the applicable
profession and all applicable laws and regulations; (d) any physicians used to
answer questions from users of the PMR Service, the AOL PMR Service and/or the
Company Internet Site will be experienced, qualified and competent to provide
answers to the questions posed to them, and possess any necessary special
qualifications, training, or certification appropriate in the areas in which
they answer questions, and will be properly licensed by the appropriate
governing body of each jurisdiction where the nature of heir conduct through the
PMR Service, the AOL PMR Service, or the Company Internet Site would require
such licensing; and (e) it will promptly provide AOL with such information as
AOL may from time to time reasonably request for the purpose of verifying
Company's compliance with its obligations under this paragraph. In the event
AOL reasonably determines that there has been a violation of any of the
foregoing covenants, or if AOL reasonably determines that any Content within the
PMR Service, the AOL PMR Service or the Company Internet Site may reasonably be
expected to expose AOL or its Affiliates to legal or financial liability or
other adverse consequences, then AOL may (in addition AOL's other rights under
this Agreement, at law or in equity), at its option, either (i) restrict access
from the AOL Network to the Content in question using technology available to
AOL or (ii) in the event access cannot be restricted, direct Company to remove
any such Content. Company will cooperate with AOL's reasonable requests to the
extent AOL elects to implement any such access restrictions.
1.3 AOL Network Distribution. The distribution, placements and/or promotions
------------------------
described in this Agreement or otherwise provided to Company by AOL shall be
used by Company solely for its own benefit, will link to and promote solely the
Licensed Content within the AOL PRM System, the Company Internet Site or Company
Programming. Content provided for the PMR Service or the AOL PMR Service will
not be resold, traded, exchanged, bartered, brokered or otherwise offered or
transferred to any third party or contain any branding other than branding
contemplated by this Agreement. Further, the Content of all such distribution,
placements and promotions shall be subject to AOL's policies relating to
advertising and promotion, including those relating to AOL's exclusivity
commitments and other contractual preferences to third parties.
Exhibit B - Page 1
<PAGE>
1.4 Changes to AOL Properties. AOL reserves the right to redesign or modify
-------------------------
the organization, structure, "look and feel," navigation and other elements of
the AOL Service, AOL Hometown, AOL.com or any other AOL Property, including
without limitation, by adding or deleting channels, subchannels and/or screens.
1.5 Accessibility; Kids & Teen Policies. AOL reserves the right, in its
-----------------------------------
reasonable discretion at any time, to designate the AOL PMR Service, Company
Internet Site, Company Programming and all linked Interactive Sites, or any
portions thereof, as Content targeted to Kids (children ages 12 and under),
Young Teens (children 13-15) and/or Mature Teens (16-17). In the event Company
disagrees with AOL's designation, Company shall not distribute or provide the
Content in question on or through the AOL PMR Service, Company Internet Site or
Company Programming until the Parties agree upon the proper designation of such
Content. Company shall ensure that all Content (including all advertising)
distributed on or through the Company Internet Site or Company Programming which
is targeted to the above age groups, including but not limited to Content
designated as such by AOL, complies with any relevant AOL policy (Kids, Young
Teens, Mature Teens) including any viewruling obligations. Without limiting
the generality of the foregoing or any other provision of this Agreement,
Company shall (i) provide clear and prominent notice of collection practices and
all possible uses of information before collecting personal identifying
information from Kids, Young Teens or Mature Teens online; (ii) never post
personal identifying information about Kids, Young Teens or Mature Teens online
or sell or otherwise disclose such information to third parties; (iii) all
advertorial advertising and sponsorships shall be clearly labeled as
"advertorial" or with similar language and (iv) ensure that all chat rooms and
message boards are monitored on a daily basis by staff that has undergone AOL
Community Leader training; and each chat room shall (a) open and close in
accordance with a posted schedule (i.e., no 24/7 access), (b) have a special
"help" area for Kids, Young Teens and/or Mature Teens, as applicable, and (c) be
monitored (at least on a floating basis) by and AOL-trained Community Leader.
Company shall notify AOL in writing whenever it intends to distribute Content
for these age groups on or through the PMR Service, Company Internet Site and/or
Company Programming to ensure proper age restriction categorization.
1.6 Member Page. AOL will have no obligation with respect to the Content and
-----------
services available on or through any Member Page including, but not limited to,
any duty to review or monitor any such Content and services. AOL expressly
disclaims any liability to Company for the Content and services contained in any
Member Page or any expense, claim, demand, costs, loss or damage arising out of
any use of the Company-provided Content available from, without limitation, a
Community Center, the PMR Service, the AOL PMR Service or the Company Internet
Site. Company agrees to release AOL and its Affiliates, including partners,
directors, officers, employees and agents from any and all claims, rights and
recourses for such loss or damage.
1.7 Contests. Company shall ensure that any contest, sweepstakes or similar
--------
promotion conducted or promoted through the PMR Service, the AOL PMR Service or
the Company Internet Site and/or Company Programming (a "Contest") complies with
all applicable laws and regulations, except for Contests sponsored by AOL.
Company shall provide AOL with (i) at least thirty (30) days prior written
notice of any Contest and (ii) upon AOL's request, an opinion from Company's
counsel confirming that the Contest complies with all applicable federal, state
and local laws and regulations.
1.8 No Auctions. All sales, if any, of Products through the PMR Service or
-----------
the AOL PMR Service will be conducted through a direct sales format; Company
will not promote, sell, offer or otherwise distribute any Products through any
format other than a direct sales format (e.g., through auctions or clubs)
without the prior written consent of AOL.
1.9 Disclaimers. Upon AOL's request, AOL agrees to include within the PMR
-----------
Service and/or the AOL PMR Service, and/or the Company Internet Site and/or
Company Programming disclaimers (the specific form and substance to be mutually
agreed upon by the Parties) indicating that all Content (including any Products
and services) is provided solely by Company and not AOL, and any transactions
are solely between Company and AOL Members using or purchasing such Content and
AOL is not responsible for any loss, expense or damage arising out of the
Licensed Content or services provided through the PMR Service, the AOL PMR
Service, the Company Internet Site or Company Programming. In addition, Company
shall prominently provide a notice/disclaimer on the Welcome Mat and all
applicable areas and features of the PMR Service and the AOL PMR Service
substantially as follows: "The following area or feature is provided solely for
educational and entertainment purposes only and is not intended to constitute
professional medical or psychological advice or counseling. If you need medical
or psychological services, please contact a licensed professional in your area.
Always follow the advice of your physician or therapist in regards to treatment
information and considerations, rather than any information contained herein,
including without limitation, in text files, message boards, chat rooms,
articles, or software libraries. Company shall not in any manner state that AOL
recommends or endorses Company or its Content. The Parties will review the above
disclaimer from time to time with the intent of minimizing each Party's exposure
to liability.
Exhibit B - Page 2
<PAGE>
1.10 Insurance. At all times during the Term, Company shall maintain insurance
---------
coverage no less than:* * *. Company shall include AOL as a named insured party
on all such policy or policies. Company shall provide AOL with a copy of such
policy or policies within sixty (60) days after the Effective Date, failing
which, in addition to all other available remedies, AOL shall be entitled to
delay the launch of the Licensed Content on the AOL Network. From time to time
upon AOL's request, Company shall provide AOL with certificates from the
respective insurance company(ies) confirming Company's compliance with this
paragraph. Company shall promptly notify AOL of any material adverse change in
such policy or policies.
1.11 Rewards Programs. Company shall not offer, provide, implement or
----------------
otherwise make available on the PMR Service, the AOL PMR Service, the Company
Internet Site or the Company Programming any promotional programs or plans that
are intended to provide customers with rewards or benefits in exchange for, or
on account of, their past or continued loyalty to, or patronage or purchase of,
the products or services of Company or any third party (e.g., a promotional
program similar to a "frequent flier" program), unless such promotional program
or plan is provided exclusively through AOL's "AOL Rewards" program, accessible
on the AOL Service at Keyword: "AOL Rewards."
1.12 Navigation. In cases where an AOL Member performs a search for Company
----------
through any search or navigational tool or mechanism that is accessible or
available through the AOL Network (e.g., promotions, Keyword Search Terms, or
any other navigational tools), AOL shall have the right to direct such AOL
Member to the Company Internet Site, or any other Company Interactive Site
determined by AOL in its reasonable discretion. AOL will also have the right to
establish in its discretion navigational Links and pointers connecting the AOL
PMR Service with other areas on or outside of the AOL Network.
1.13 AOL Look and Feel. Company acknowledges and agrees that AOL shall own all
-----------------
right, title and interest in and to the AOL Look and Feel, including all of the
look and feel of the AOL PMR Service (subject to Company's ownership in any
Licensed Content, Company tradenames and marks and other copyrighted material of
Company with the PMR Service. In addition, AOL shall retain editorial control
over the portions of the AOL pages and forms which frame the AOL PMR Service or
the Company Internet Site or Company Programming (the "AOL Frames"). AOL may, at
its discretion, incorporate navigational icons, Links and pointers or other
Content into such AOL Frames.
1.14 Operations. AOL shall be entitled to require reasonable changes to the
----------
AOL PMR Service, the PMR Service, the Company Internet Site and Company
Programming to the extent such services or site will, in AOL's good faith
judgment, adversely affect operations of the AOL Network, provided that this
sentence shall not be deemed to grant AOL any editorial control with respect to
the Company Internet Site and Company Programming.
1.15 Classifieds. Company shall not implement or promote any classifieds
-----------
listing features through the PMR Service, the AOL PMR Service, the Company
Programming without AOL's prior written approval. Such approval may be
conditioned upon, among other things, Company's conformance with any then-
applicable service-wide technical or other standards related to online
classifieds.
1.16 Message Boards; Chat Rooms and Comparable Vehicles. Any Content submitted
--------------------------------------------------
by Company or its agents within message boards, chat rooms or any comparable
vehicles will be subject to the license grant relating to submissions to "public
areas" set forth in the AOL Terms of Service. Company acknowledges that it has
no rights or interest in AOL Member submissions to message boards , chat rooms
or any other vehicles through which AOL Members may make submissions within the
AOL Network. Company will refrain from editing, deleting or altering, without
AOL's prior approval, any opinion expressed or submission made by an AOL Member
within Company Programming or the AOL PMR Service, except in cases where Company
has a good faith belief that the Content in question violates an applicable law,
regulation, third party right or the applicable AOL Property's Terms of Service.
1.17 Duty to Inform. Company shall promptly inform AOL of any information
--------------
related to the PMR Service, the AOL PMR Service, the Company Internet Site,
Company Programming or the Licensed Content which could reasonably lead to a
claim, demand or liability of or against AOL and/or its Affiliates by any third
party.
1.18 Customer Service. Company shall respond promptly and professionally to
----------------
questions, comments, complaints and other reasonable requests regarding the PMR
Service, the AOL PMR Service, the Company Internet Site, Company Programming or
the Licensed Content by AOL Members or on request by AOL, and shall cooperate
and assist AOL in promptly answering the same. Company shall have sole
responsibility for customer service (including, without limitation, order
processing, billing, shipping, etc.) and AOL shall have no responsibility with
respect thereto. Company shall comply with all applicable requirements of any
federal, state or local consumer protection or disclosure law.
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit B - Page 3
<PAGE>
1.19 Production Work. In the event that Company requests any AOL production
---------------
assistance, Company shall work with AOL to develop detailed production plans for
the requested production assistance (the "Production Plan"). Following receipt
of the final Production Plan, AOL shall notify Company of (i) AOL's availability
to perform the requested production work, (ii) the proposed fee or fee structure
for the requested production work and (iii) the estimated development schedule
for such work. To the extent the Parties reach agreement regarding
implementation of agreed-upon Production Plan, such agreement shall be reflected
in a separate work order signed by the Parties. All fees to be paid to AOL for
any such production work shall be paid in advance. To the extent Company
elects to retain a third party provider to perform any such production work,
work produced by such third party provider must generally conform to AOL's
production standards available at Keyword "Styleguide." The specific production
resources which AOL allocates to any production work to be performed on behalf
of Company shall be as determined by AOL in its sole discretion. With respect to
any routine production, maintenance or related services which AOL reasonably
determines are necessary for AOL to perform in order to support the proper
functioning and integration of the Anchor Tenant Button and the Company Internet
Site ("Routine Services"), Company will pay the then-standard fees charged by
AOL for such Routine Services.
1.20 Production Tools. AOL shall determine in its sole discretion, which of
----------------
its proprietary publishing tools (each a "Tool") shall be made available to
Company in order to develop and implement the Licensed Content during the Term
(e.g., to build Rainman sites). Company shall be granted a nonexclusive license
----
to use any such Tool, which license shall be subject to: (i) Company's
compliance with all rules and regulations relating to use of the Tools, as
published from time to time by AOL, (ii) AOL's right to withdraw or modify such
license at any time, and (iii) Company's express recognition that AOL provides
all Tools on an "as is" basis, without warranties of any kind.
1.21 Launch Date. In the event that any terms contained herein relate to or
------------
depend upon the launch date of the AOL PMR Service, it is the intention of the
Parties to record the Launch Date in a written instrument signed by both Parties
promptly following such Launch Date; provided that, in the absence of such a
written instrument, the Launch Date shall be as reasonably determined by AOL
based on the information available to AOL.
1.22 Keywords. Any Keyword Search Terms to be directed to the PMR Service,
--------
the AOL PMR Service or the Company Internet Site shall be (i) subject to
availability for use by Company and (ii) limited to the combination of the
Keyword search modifier combined with a registered trademark of Company. AOL
reserves the right to revoke at any time Company's use of any Keyword Search
Terms which do not incorporate registered trademarks of Company. Company
acknowledges that its utilization of a Keyword Search Term will not create in
it, nor will it represent it has, any right, title or interest in or to such
Keyword Search Term, other than the right, title and interest Company holds in
Company's registered trademark independent of the Keyword Search Term. Without
limiting the generality of the foregoing, Company will not: (a) attempt to
register or otherwise obtain trademark or copyright protection in the Keyword
Search Term; or (b) use the Keyword Search Term, except for the purposes
expressly required or permitted under this Agreement. This Section shall survive
the completion, expiration, termination or cancellation of this Agreement.
1.23 Accounts. To the extent AOL has granted Company any accounts on the AOL
--------
Service, Company will be responsible for the actions taken under or through its
accounts, which actions are subject to AOL's applicable Terms of Service and for
any surcharges, including, without limitation, all monthly charges and usage
fees premium charges, transaction charges, and any applicable communication
surcharges incurred by any account issued to Company, [but Company will not be
liable for charges incurred by any account relating to AOL's standard monthly
usage fees and standard hourly charges, which charges AOL will bear]. Upon the
termination of this Agreement, all accounts, related screen names and any
associated usage credits or similar rights, will automatically terminate. AOL
will have no liability for loss of any data or content related to the proper
termination of any such account.
II. TRADEMARKS
2.1 Trademark License. In designing and implementing any marketing,
-----------------
advertising, or other promotional materials (expressly excluding Press Releases)
related to this Agreement and/or referencing the other Party and/or its trade
names, trademarks and service marks (the "Promotional Materials") and subject to
the other provisions contained herein, Company shall be entitled to use the
following trade names, trademarks and service marks of AOL: the "America Online"
brand service, "AOL" service/software and AOL's triangle logo and, in connection
therewith, Company shall comply with the AOL styleguide available at keyword:
"style guide"; and AOL and its Affiliates shall be entitled to use the trade
names, trademarks and service marks of Company (collectively, together with the
AOL marks listed above, the "Marks"); provided that each Party: (i) does not
create a unitary composite mark involving a Mark of the other Party without the
prior written approval of such other Party and (ii) displays symbols and notices
clearly and sufficiently indicating the trademark status and ownership of the
other Party's Marks in accordance with applicable trademark law and practice.
This Section does not
Exhibit B - Page 4
<PAGE>
provide Company to use any of the Marks of AOL other than in connection with the
AOL PMR Service. This Section shall survive the completion, expiration,
termination or cancellation of this Agreement.
2.2 Rights. Each Party acknowledges that its utilization of the other Party's
------
Marks will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.
2.3 Quality Standards. Each Party agrees that the nature and quality of its
-----------------
products and services supplied in connection with the other Party's Marks shall
conform to quality standards communicated in writing by the other Party for use
of its trademarks. Each Party agrees to supply the other Party, upon request,
with a reasonable number of samples of any Materials publicly disseminated by
such Party which utilize the other Party's Marks. Each Party shall comply with
all applicable laws, regulations and customs and obtain any required government
approvals pertaining to use of the other Party's Marks.
2.4 Promotional Materials. Each Party will submit to the other Party, for its
---------------------
prior written approval, which shall not be unreasonably withheld or delayed, any
Promotional Materials; provided, however, that after initial public announcement
of the business relationship between the Parties in accordance with the approval
and other requirements contained herein, either Party's subsequent factual
reference in Promotional Materials to the existence of a business relationship
between AOL and Company, including, without limitation, the availability of the
AOL PMR Service and the Licensed Content through the AOL Network, or use of
screen shots relating to the distribution under this Agreement (so long as the
AOL Network is clearly identified as the source of such screen shots) for
promotional purposes shall not require the approval of the other Party. Once
approved, the Promotional Materials may be used by a Party and its Affiliates
for the purpose of promoting the distribution of the AOL PMR Service and/or
Licensed Content through the AOL Network and reused for such purpose until such
approval is withdrawn with reasonable prior notice. In the event such approval
is withdrawn, existing inventories of Promotional Materials may be depleted.
2.5 Infringement Proceedings. Each Party agrees to promptly notify the other
------------------------
Party of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
III. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party that: (i) such Party has
the full corporate right, power and authority to enter into this Agreement, to
grant the licenses granted hereunder and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not materially violate any material agreement to which such Party is a
party or by which it is otherwise bound; (iii) when executed and delivered by
such Party, this Agreement will constitute the legal, valid and binding
obligation of such Party, enforceable against such Party in accordance with its
terms; (iv) such Party's Promotional Materials will neither infringe on any
copyright, U.S. patent or any other third party right nor violate any applicable
law or regulation and (v) such Party acknowledges that the other Party makes no
representations, warranties or agreements related to the subject matter hereof
which are not expressly provided for in this Agreement.
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement. Each Party agrees that it will
not use Confidential Information of the other Party other than for purposes of
this Agreement and will take reasonable steps, at least substantially equivalent
to the steps it takes to protect its own proprietary information, during the
term of this Agreement, and for a period of three years following expiration or
termination of this Agreement, to prevent the disclosure of Confidential
Information of the other Party, other than to its employees, or to its other
agents who must have access to such Confidential Information for such Party to
perform its obligations hereunder, who will each agree to comply with this
section. Notwithstanding the foregoing, either Party may issue a press release
or other disclosure containing Confidential Information without the consent of
the other Party, to the extent such disclosure is required by law, rule,
regulation or government or court order. In such event, the disclosing Party
will provide at least five (5) business days prior written notice of such
proposed disclosure to the other Party (unless a shorter period is required by
an applicable legal requirement). Further, in the event such disclosure is
required of either Party under the laws, rules or regulations of the Securities
and Exchange Commission or any other applicable governing body, such Party will
(i) redact mutually agreed-upon portions of this Agreement to the fullest extent
permitted under applicable laws, rules and regulations and (ii) submit a request
to such governing body that such portions and other provisions of this Agreement
receive confidential
Exhibit B - Page 5
<PAGE>
treatment under the laws, rules and regulations of the Securities and Exchange
Commission or otherwise be held in the strictest confidence to the fullest
extent permitted under the laws, rules or regulations of any other applicable
governing body.
V. RELATIONSHIP WITH AOL MEMBERS
5.1 Solicitation of Subscribers.
---------------------------
(a) During the term of this Agreement and for a two year period
thereafter, Company will not use the AOL Network (including, without limitation,
the e-mail network contained therein) to solicit AOL Members on behalf of
another Interactive Service. More generally, Company will not send unsolicited,
commercial e-mail (i.e., "spam") or other online communications through or into
AOL's products or services, absent a Prior Business Relationship. For purposes
of this Agreement, a "Prior Business Relationship" will mean that the AOL Member
to whom commercial e-mail or other online communication is being sent has
voluntarily either (i) engaged in a transaction with Company (not including any
transaction through the AOL PMR Service); or (ii) provided information to
Company through a contest, registration, or other communication, which included
clear notice to the AOL Member that the information provided could result in
commercial e-mail or other online communications being sent to that AOL Member
by Company or its agents. Any commercial e-mail or other online communications
to AOL Members which are otherwise permitted hereunder will (a) include a
prominent and easy means to "opt-out" of receiving any future commercial e-mail
communications from Company and (b) shall also be subject to AOL's then-standard
restrictions on distribution of bulk e-mail (e.g., related to the time and
manner in which such e-mail can be distributed through or into the AOL product
or service in question).
(b) Company shall ensure that its collection, use and disclosure of
information obtained from AOL Members under this Agreement ("Member
Information") complies with (i) all applicable laws and regulations and (ii)
AOL's standard privacy policies, available on the AOL Service at the keyword
term "Privacy" (or, in the case of the Company Internet Site, Company's standard
privacy policies so long as such policies are prominently published on the site
and provide adequate notice, disclosure and choice to Members regarding
Company's collection, use and disclosure of user information). Company will not
disclose Member Information collected hereunder to any third party in a manner
that identifies AOL Members as end users of an AOL product or service or use
Member Information collected under this Agreement to market another Interactive
Service.
5.2 Email Newsletters. Any email newsletters sent to AOL Members by Company
-----------------
or its agents shall (i) be subject to AOL's policies on use of the email
functionality, including but not limited to AOL's policy on unsolicited bulk
email, (ii) be sent only to AOL Members requesting to receive such newsletters,
(iii) not contain Content which violates AOL's Terms of Service, and (iv) not
contain any advertisements, marketing or promotion for any other Interactive
Service .
5.3 AOL Member Communications. To the extent Company is otherwise permitted
-------------------------
to send communications to AOL Members (in accordance with the other requirements
contained herein): in any such communications to AOL Members on or off the
Company Internet Site (including, without limitation, e-mail solicitations),
Company will limit the subject matter of such communications to those categories
of products, services and/or content that are specifically contemplated by this
Agreement and will not encourage AOL Members to take any action inconsistent
with the scope and purpose of this Agreement, including without limitation, the
following actions: (i) using an Interactive Site other than the Company Internet
Site for the purchase of Products, (ii) using Content other than the Licensed
Content; (iii) bookmarking of Interactive Sites; or (iv) changing the default
home page on the AOL browser. Additionally, with respect to such AOL PMR User
communications, in the event that Company encourages an AOL PMR User to purchase
products through such communications, Company shall ensure that (a) the AOL
Network is expressly promoted as the primary means through which the AOL PMR
User can access the Company Internet Site (including without limitation by
stating the applicable Keyword Search Term and including direct Links to
specific offers within the Company Internet Site) and (b) any Link to the
Company Internet Site will link to a page which indicates to the AOL PMR User
that such user is in a site which is affiliated with the AOL Network.
5.4 Customer Data; AOL Data. Any data provided by customers that is generated
-----------------------
directly from the * * * or produced by Company in performing its obligations in
managing such service, including, without limitation, customer names, addresses,
credit card information and AOL screennames is referred to herein as the
"Customer Data"). Notwithstanding the joint ownership of the Customer Data
provided in Section 2.1(a), Company (a) shall comply with all paragraphs of this
Section 5, (b) shall provide users the right to have their Customer Data deleted
from any database created by or on behalf of Company, (c) shall not have the
right to use the Customer Data to market or promote any consumer direct
information, services or products reasonably construed to be in competition with
the PMR
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit B - Page 6
<PAGE>
Services, including without limitation any product or service that permits
consumers to view, enter or modify Customer Data; and (d) shall not have the
right to sell, license or provide Customer Data (whether in the form of
individual data or summary or aggregate reports or compilations of Customer
Data) to any third party without AOL's prior written consent. Without limiting
the foregoing, Company's and AOL's use of the Customer Data shall be subject to
the terms of this Agreement and AOL's then-applicable privacy policies; provided
that both Parties shall use customer-specific medical profile information on a
customer-by-customer basis in accordance with both Parties' applicable privacy
policies. Any data provided by AOL to Company (e.g., usage reports) (the "AOL
Data") shall be and remain the property of AOL, and the AOL Data will be
promptly returned to AOL by Company in the form in which such data is maintained
by Company or, if AOL so elects, will be destroyed, upon (i) AOL's request, (ii)
expiration or termination of this Agreement for any reason, or (iii) with
respect to any particular AOL Data, on such earlier date that the same is no
longer required by Company in order to provide the services required hereunder.
Company will not use the AOL Data for any purpose other than that of providing
such services, nor will the AOL Data, or any part thereof, be disclosed, sold,
assigned, leased, or otherwise disposed of to third parties by Company or
commercially exploited by or on behalf of Company, its employees or agents.
Company will not possess or assert any lien or other right against or to the AOL
Data. The Parties agree to amend the provisions of this paragraph from time to
time to in good faith to the extent necessary to comply with applicable law,
rule or regulation; provided that if any such amendment to the provisions of
this paragraph has, or is likely to have, an adverse effect on either Party,
then such Party may refer such matter to the Management Committee for
resolution.
VI. TREATMENT OF CLAIMS
6.1 Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE
---------
OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), ARISING FROM BREACH OF THIS AGREEMENT, THE USE OF OR INABILITY TO
USE PMR SERVICE, THE AOL PMR SERVICE THE AOL NETWORK OR ANY OTHER PROVISION OF
THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED
PROFITS OR LOST BUSINESS (COLLECTIVELY, "DISCLAIMED DAMAGES"); PROVIDED THAT THE
FOREGOING SHALL NOT RESTRICT A PARTY'S RIGHTS FOR INDEMNIFICATION AS SET FORTH
IN SECTION 6.3 BELOW. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY" SECTION,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR MORE THAN * * *; PROVIDED
THAT EACH PARTY SHALL REMAIN LIABLE FOR THE AGGREGATE AMOUNT OF ANY PAYMENT
OBLIGATIONS OWED TO THE OTHER PARTY UNDER THE PROVISIONS OF THIS AGREEMENT; AND
PROVIDED FURTHER THAT THE FOREGOING LIABILITY CAP SHALL NOT APPLY TO (1) EITHER
PARTY'S BREACH OF THIS AGREEMENT INVOLVING FRAUD, INTENTIONAL MISCONDUCT OR
GROSS NEGLIGENCE OR (2) EITHER PARTY'S INTENTIONAL BREACH OF ANY TERM, CONDITION
OR OBLIGATION UNDER THIS AGREEMENT.
6.2 No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
------------------------
AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS,
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE PMR
SERVICE, THE AOL PMR SERVICE, THE AOL NETWORK, ANY AOL PUBLISHING TOOLS, OR THE
LICENSED CONTENT, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING
OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH
OF COMPANY AND AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING THE
PROFITABILITY OF AOL NETWORK, THE PMR SERVICE, THE AOL PMR SERVICE OR THE
COMPANY INTERNET SITE.
6.3 Indemnity.
---------
(a) Each Party will defend, indemnify, save and hold harmless the other
Party and the officers, directors, agents, affiliates, distributors, franchisees
and employees of the other Party from any and all third party claims, demands,
liabilities, costs or expenses, including reasonable attorneys' fees
("Liabilities"), resulting from the indemnifying Party's material breach of any
obligation, representation, or warranty of this Agreement.
(b) If a Party entitled to indemnification hereunder (the "Indemnified
Party") becomes aware of any matter it believes is indemnifiable hereunder
involving any claim, action, suit, investigation, arbitration or other
proceeding against the Indemnified Party by any third party (each an "Action"),
the Indemnified Party shall give the other Party (the "Indemnifying Party")
prompt written
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit B - Page 7
<PAGE>
notice of such Action. Such notice shall (i) provide the basis on which
indemnification is being asserted and (ii) be accompanied by copies of all
relevant pleadings, demands, and other papers related to the Action and in the
possession of the Indemnified Party. The Indemnifying Party shall have a period
of ten (10) days after delivery of such notice to respond. If the Indemnifying
Party elects to defend the Action or does not respond within the requisite ten
(10) day period, the Indemnifying Party shall be obligated to defend the Action,
at its own expense, and by counsel reasonably satisfactory to the Indemnified
Party. The Indemnified Party shall cooperate, at the expense of the Indemnifying
Party, with the Indemnifying Party and its counsel in the defense and the
Indemnified Party shall have the right to participate fully, at its own expense,
in the defense of such Action. If the Indemnifying Party responds within the
required ten (10) day period and elects not to defend such Action, the
Indemnified Party shall be free, without prejudice to any of the Indemnified
Party's rights hereunder, to compromise or defend (and control the defense of)
such Action. In such case, the Indemnifying Party shall cooperate, at its own
expense, with the Indemnified Party and its counsel in the defense against such
Action and the Indemnifying Party shall have the right to participate fully, at
its own expense, in the defense of such Action. If a dispute arises over whether
the Party requesting indemnification hereunder is so entitled, the Party
requesting indemnification shall be free, without prejudice to any of such
Party's rights hereunder, to compromise or defend (and control the defense of)
such Action. Any compromise or settlement of an Action shall require the prior
written consent of both Parties hereunder, such consent not to be unreasonably
withheld or delayed.
6.4 Acknowledgment. AOL AND COMPANY EACH ACKNOWLEDGES THAT THE PROVISIONS OF
--------------
THIS AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED, VOLUNTARY ALLOCATION
BETWEEN THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN) ASSOCIATED WITH THE
TRANSACTIONS CONTEMPLATED HEREUNDER. THE LIMITATIONS AND DISCLAIMERS RELATED TO
WARRANTIES AND LIABILITY CONTAINED IN THIS AGREEMENT ARE INTENDED TO LIMIT THE
CIRCUMSTANCES AND EXTENT OF LIABILITY. THE PROVISIONS OF THIS SECTION VI SHALL
BE ENFORCEABLE INDEPENDENT OF AND SEVERABLE FROM ANY OTHER ENFORCEABLE OR
UNENFORCEABLE PROVISION OF THIS AGREEMENT.
VII. ARBITRATION
(a) The Parties shall act in good faith and use commercially reasonable
efforts to promptly resolve any claim, dispute, claim, controversy or
disagreement (each a "Dispute") between the Parties or any of their respective
subsidiaries, affiliates, successors and assigns under or related to this
Agreement or any document executed pursuant to this Agreement or any of the
transactions contemplated hereby. If the Parties cannot resolve the Dispute
within such timeframe, the Dispute shall be submitted to the Management
Committee for resolution. For ten (10) days after the Dispute was submitted to
the Management Committee, the Management Committee shall have the exclusive
right to resolve such Dispute; provided further that the Management Committee
shall have the final and exclusive right to resolve Disputes arising from any
provision of this Agreement which expressly or implicitly provides for the
Parties to reach mutual agreement as to certain terms. If the Management
Committee is unable to amicably resolve the Dispute during the ten (10) day
period, then the Management Committee will consider in good faith the
possibility of retaining a third party mediator to facilitate resolution of the
Dispute. In the event the Management Committee elects not to retain a mediator,
the Dispute will be subject to the resolution mechanisms described below.
"Management Committee" shall mean a committee made up of a senior executive from
each of the Parties for the purpose of resolving Disputes under this Section and
generally overseeing the relationship between the Parties contemplated by this
Agreement. Neither Party shall seek, nor shall be entitled to seek, binding
outside resolution of the Dispute unless and until the Parties have been unable
to amicably resolve the dispute as set forth in this paragraph (a) and then,
only in compliance with the procedures set forth in this Section.
(b) Except for Disputes relating to issues of (i) proprietary rights,
including but not limited to intellectual property and confidentiality, and (ii)
any provision of this Agreement which expressly or implicitly provides for the
Parties to reach mutual agreement as to certain terms (which shall be resolved
by the Parties solely and exclusively through amicable resolution as set forth
in paragraph (a), any Dispute not resolved by amicable resolution as set forth
in paragraph (a) shall be governed exclusively and finally by arbitration. Such
arbitration shall be conducted by the American Arbitration Association ("AAA")
in Washington, D.C. and shall be initiated and conducted in accordance with the
Commercial Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures shall
not apply in order to promote the efficient arbitration of Disputes where the
nature of the Dispute, including without limitation the amount in controversy,
does not justify the application of such procedures.
Exhibit B - Page 8
<PAGE>
(c) The arbitration panel shall consist of three arbitrators. Each
Party shall name an arbitrator within ten (10) days after the delivery of the
Demand. The two arbitrators named by the Parties may have prior relationships
with the naming Party, which in a judicial setting would be considered a
conflict of interest. The third arbitrator, selected by the first two, shall be
a neutral participant, with no prior working relationship with either Party. If
the two arbitrators are unable to select a third arbitrator within ten (10)
days, a third neutral arbitrator will be appointed by the AAA from the panel of
commercial arbitrators of any of the AAA Large and Complex Resolution Programs.
If a vacancy in the arbitration panel occurs after the hearings have commenced,
the remaining arbitrator or arbitrators may not continue with the hearing and
determination of the controversy, unless the Parties agree otherwise.
(d) The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and not state
law, shall govern the arbitrability of all Disputes. The arbitrators shall allow
such discovery as is appropriate to the purposes of arbitration in accomplishing
a fair, speedy and cost-effective resolution of the Disputes. The arbitrators
shall reference the Federal Rules of Civil Procedure then in effect in setting
the scope and timing of discovery. The Federal Rules of Evidence shall apply
in toto. The arbitrators may enter a default decision against any Party who
- -------
fails to participate in the arbitration proceedings.
(e) The arbitrators shall have the authority to award compensatory
damages only. Any award by the arbitrators shall be accompanied by a written
opinion setting forth the findings of fact and conclusions of law relied upon in
reaching the decision. The award rendered by the arbitrators shall be final,
binding and non-appealable, and judgment upon such award may be entered by any
court of competent jurisdiction. The Parties agree that the existence, conduct
and content of any arbitration shall be kept confidential and no Party shall
disclose to any person any information about such arbitration, except as may be
required by law or by any governmental authority or for financial reporting
purposes in each Party's financial statements.
(f) Each Party shall pay the fees of its own attorneys, expenses of
witnesses and all other expenses and costs in connection with the presentation
of such Party's case (collectively, "Attorneys' Fees"). The remaining costs of
the arbitration, including without limitation, fees of the arbitrators, costs of
records or transcripts and administrative fees (collectively, "Arbitration
Costs") shall be born equally by the parties. Notwithstanding the foregoing, the
arbitrators may modify the allocation of Arbitration Costs and award Attorneys'
Fees in those cases where fairness dictates a different allocation of
Arbitration Costs between the Parties and an award of Attorneys' Fees to the
prevailing Party as determined by the arbitrators.
(g) Any Dispute that is not subject to final resolution by the
Management Committee or to arbitration under this Section or law (collectively,
"Non-Arbitration Claims") shall be brought in a court of competent jurisdiction
in the State of New York. Each Party irrevocably consents to the exclusive
jurisdiction of the courts of the State of New York and the federal courts
situated in the State of New York, over any and all Non-Arbitration Claims and
any and all actions to enforce such claims or to recover damages or other relief
in connection with such claims or to enforce a judgment rendered in an
arbitration proceeding.
VIII. MISCELLANEOUS
8.1 Auditing Rights. Each Party shall maintain complete, clear and accurate
---------------
records of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, AOL shall have the right, at its expense, to
conduct a reasonable and necessary copying and inspection of portions of the
Records of Company that are directly related to amounts payable to AOL pursuant
to this Agreement, which right may, at AOL's option, be exercised by directing
an independent certified public accounting firm to conduct such inspection. For
the sole purpose of ensuring compliance with this Agreement, Company shall have
the right, at its expense, to direct an independent certified public accounting
firm subject to strict confidentiality restrictions to conduct a reasonable and
necessary copying and inspection of portions of the Records of AOL that are
directly related to amounts payable to Company pursuant to this Agreement. Any
such audit may be conducted after twenty (20) business days prior written
notice, subject to the following. Such audits shall not be made more frequently
than once every twelve months. No such audit of AOL shall occur during the
period beginning on June 1 and ending October 1. No such audit of Company shall
occur during the period beginning on December 1 and ending April 1. In lieu of
providing access to its Records as described above, AOL shall be entitled to
provide Company with a report from an independent certified public accounting
firm confirming the information to be derived from such Records.
8.2 Excuse. Neither Party shall be liable for, or be considered in breach of
------
or default under this Agreement on account of, any delay or failure to perform
as required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.
Exhibit B - Page 9
<PAGE>
8.3 Independent Contractors. The Parties to this Agreement are independent
-----------------------
contractors. Neither Party is an agent, representative or partner of the other
Party. Neither Party shall have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement shall not be interpreted or
construed to create an association, agency, joint venture or partnership between
the Parties or to impose any liability attributable to such a relationship upon
either Party.
8.4 Notice. Any notice, approval, request, authorization, direction or other
------
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname "AOLNotice" in
the case of AOL) or by confirmed facsimile; (ii) on the delivery date if
delivered personally to the Party to whom the same is directed; (iii) one
business day after deposit with a commercial overnight carrier, with written
verification of receipt; or (iv) five business days after the mailing date,
whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no. 703-
265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of Company, except as otherwise specified herein, the notice address shall be
the address for Company set forth in the first paragraph of this Agreement, with
the other relevant notice information, including the recipient for notice and,
as applicable, such recipient's fax number or AOL e-mail address, to be as
reasonably identified by AOL.
8.5 No Waiver. The failure of either Party to insist upon or enforce strict
---------
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
8.6 Return of Information. Upon the expiration or termination of this
---------------------
Agreement, each Party shall, upon the written request of the other Party, return
or destroy (at the option of the Party receiving the request) all confidential
information, documents, manuals and other materials specified by the other
Party.
8.7 Survival. Sections IV, V, VI, VII and VIII of this Exhibit C, shall
--------
survive the completion, expiration, termination or cancellation of this
Agreement. In addition, all payment terms of this Agreement and any provision
which, by its nature, must survive the completion, expiration, termination or
cancellation of this Agreement, shall survive the completion, expiration,
termination or cancellation of this Agreement.
8.8 Entire Agreement. This Agreement sets forth the entire agreement and
----------------
supersedes any and all prior agreements of the Parties with respect to the
transactions set forth herein. Neither Party shall be bound by, and each Party
specifically objects to, any term, condition or other provision which is
different from or in addition to the provisions of this Agreement (whether or
not it would materially alter this Agreement) and which is proffered by the
other Party in any correspondence or other document, unless the Party to be
bound thereby specifically agrees to such provision in writing.
8.9 Amendment. No change, amendment or modification of any provision of this
---------
Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
8.10 Further Assurances. Each Party shall take such action (including, but not
------------------
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by the other Party for the implementation or continuing
performance of this Agreement.
8.11 Assignment. Company shall not assign this Agreement or any right,
----------
interest or benefit under this Agreement without the prior written consent of
AOL. Assumption of this Agreement by any successor to Company (including,
without limitation, by way of merger or consolidation) shall be subject to AOL's
prior written approval. Subject to the foregoing, this Agreement shall be fully
binding upon, inure to the benefit of and be enforceable by the Parties hereto
and their respective successors and assigns.
8.12 Subcontractors. To the extent Company utilizes consultants or
---------------
subcontractors to perform a material portion of its obligations under this
Agreement, such consultants and/or subcontractors shall be subject to AOL's
prior written approval and Company shall provide AOL with direct contact
information for the employees of such consultants and/or subcontractors who are
responsible for performing such obligations, which employees shall be available
during business hours for consultation with AOL.
8.13 Construction; Severability. In the event that any provision of this
--------------------------
Agreement conflicts with the law under which this Agreement is to be construed
or if any such provision is held invalid by a court with jurisdiction over the
Parties to this Agreement, (i) such provision shall be deemed to be restated to
reflect as nearly as possible the original intentions of the Parties in
accordance with applicable law, and (ii) the remaining terms, provisions,
covenants and
Exhibit B - Page 10
<PAGE>
restrictions of this Agreement shall remain in full force and effect.
8.14 Remedies. Except where otherwise specified, the rights and remedies
--------
granted to a Party under this Agreement are cumulative and in addition to, and
not in lieu of, any other rights or remedies which the Party may possess at law
or in equity.
8.15 Applicable Law. This Agreement shall be interpreted, construed and
--------------
enforced in all respects in accordance with the laws of the State of New York
except for its conflicts of laws principles.
8.16 Export Controls. Both parties shall adhere to all applicable laws,
---------------
regulations and rules relating to the export of technical data and shall not
export or re-export any technical data, any products received from the other
Party or the direct product of such technical data to any proscribed country
listed in such applicable laws, regulations and rules unless properly
authorized.
8.17 Headings. The captions and headings used in this Agreement are inserted
--------
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
8.18 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and all of which together shall constitute one
and the same document.
Exhibit B - Page 11
<PAGE>
EXHIBIT C
---------
Operating Standards
-------------------
1. Performance Standards. Company will operate and manage the AOL PMR
Service and the PMR Service so that they each will continue to be competitive at
all times (in terms of, among other things, features, functionality, and breadth
and depth of services) with the top * * * then-current market leaders in the
United States, in aggregate personal medical records services, as determined by
each of the following methods: (a) a cross-section of third party reviewers who
are recognized authorities in the field; and (b) with respect to all material
quality averages in such field, including each of: (i) pricing of Products; (ii)
performance in technical and functional terms, including range and speed of
features and functionality and performance; (iii) scope and selection of
Products; (iii) quality of Products; (iv) customer service and fulfillment; (v)
accuracy and timeliness of Content, including regularity and thoroughness of
updating of Content (including, in particular, time sensitive Content); and (vi)
ease of use. In addition, the PMR Service will be competitive in all material
respects with those services offered by competitors of the PMR Service,
including the performance and availability of similar sites based on similar
technology. For each of the above, Company shall not be responsible for any
failure to remain competitive under such criteria where such failure is
attributable to requirements of, or features or functionality requested by, AOL
under this Agreement (not in any event relating to scalability - it being
understood that Company is required to assure performance on a fully scalable
basis). Company will perform its management obligations hereunder in a timely
and professional manner and in accordance with the terms of this Agreement.
Company will ensure that the PMR Service is current and well-organized at all
times. Company will cause the PMR Service to operate in substantial conformance
with any specifications therefore agreed upon by the Parties for the duration of
the Term, including the initial specifications agreed to pursuant to the
Development Plan.
2. Added Features. After the initial development of the PMR Service and the
--------------
AOL PMR Service, Company will offer to add to the PMR Service and AOL PMR
Service all features and functionality, data and other Content directly related
to, or part of, a personal medical records service: (a) which is available on
the Dr. Koop Site or any other Company Internet Site or (b) is provided by
Company to any third party for use on any other Interactive Site; and/or (c)
otherwise so that the PMR Service complies with these Operating Standards. Such
additional features and functionality and Content described will be made
available to the PMR Service and the AOL PMR Service promptly and no later than
concurrently with the release of such features and functionality by Company for
any alternative use.
3. Hosting; Capacity. Company will or be responsible for all computer
-----------------
hardware (e.g., servers, routers, network devices, switches and associated
hardware) in an amount reasonably necessary to meet anticipated traffic demands,
adequate power supply (including generator back-up) and HVAC, adequate
insurance, adequate service contracts and all necessary equipment racks, floor
space, network cabling and power distribution to support the PMR Service and the
AOL PMR Service. Company is fully responsible for the maintenance and the
day-to-day operation of the PMR Service and AOL PMR Service implementations.
Company will provide AOL with a detailed Network diagram. In addition, Company
will provide AOL with detailed information regarding separate file downloads
available from the PMR Service and the AOL PMR Service, which files are of a
large enough size that they could materially impact the AOL technical network,
if any, including file size, type and download/installation procedures.
4. Speed; Accessibility. Company will ensure that the performance and
--------------------
availability of the PMR Service and of the AOL PMR Service is each monitored on
a * * * basis. Company will use commercially reasonable efforts to ensure that:
(a) the functionality and features within the AOL PMR Service are optimized for
the client software then in use by AOL Customers; and (b) the AOL PMR Service is
designed and populated in a manner that minimizes delays when AOL Customers
attempt to access such site. At a minimum, Company will ensure that AOL PMR
Service data transfer initiates within fewer than * * * on average.
5. Performance Testing. Prior to launch of any promotions described herein,
-------------------
Company will permit AOL to conduct, in a coordinated fashion with Company,
performance and/or load testing of the AOL PMR Service until AOL is reasonably
satisfied that launch can occur, to include but not be limited to the following:
(a) AOL Compatibility Testing to ensure that the Company's product
meets the compatibility standards specified in this Exhibit;
(b) Network Bandwidth Load Testing as specified in this Exhibit;
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit C - Page 1
<PAGE>
(c) Network/Web Site Architecture as specified in this Exhibit; and
(d) Encryption Methodology
6. Service Level Response. Company agrees to use commercial best efforts to
----------------------
provide the following service levels in response to problems with or
improvements to the PMR Service and the AOL PMR Service:
(a) For material functions of software that are or have become
substantially inoperable (e.g., inability to access website or conduct
transactions), Company will respond within * * * and provide a bug fix or
workaround within * * * after the first report of such error.
(b) For functions of the software that are impaired or otherwise fail
to operate in accordance with agreed upon specifications (e.g., search engine),
Company will provide a bug fix or workaround within * * * after the first report
of such error.
(c) For errors disabling only certain non-essential functions (e.g.,
broken Links or non-critical applications), Company will provide a bug fix or
workaround within * * * after the first report of such error.
(d) For all other errors, Company will address these requests on a
case-by-case basis as soon as reasonably feasible.
7. Monitoring. The parties will mutually develop detailed escalation
----------
procedures for Company (e.g., contact names and notification mechanisms such as
email, phone, page, etc.) and for notification of AOL by Company of any
scheduled or unscheduled downtimes. In the event of any performance malfunction
or other emergency related to the PMR Service or the AOL PMR Service, Company
will keep AOL reasonably informed regarding such malfunction or emergency and
Company's efforts to remedy the situation and will comply with AOL's reasonable
response requirements. The parties will develop in consultation with each other
a process to monitor performance and member behavior with respect to access,
capacity, security and related issues both during normal operations and during
special promotions/events. Such process will require that Company keep AOL
reasonably informed regarding the results of such monitoring.
8. Telecommunications. The Parties will agree on a plan for Company to
------------------
provide encryption methodology to secure data between the Parties' data centers.
The network between Company and the Internet will be configured such that no
single component failure will significantly impact AOL Customers. The network
between Company and the Internet will be sized such that no single line runs at
more than * * * average utilization for a 5-minute peak in a daily period.
9. Security Review. Company and AOL will work together to perform an initial
---------------
security review of, and to perform tests of, the Company system, network, and
service security in order to evaluate the security risks and provide
recommendations to Company, including periodic follow-up reviews as reasonably
required by Company or AOL. Company will use commercially reasonable best
efforts to fix any security risks or breaches of security as may be identified
by AOL's Operations Security. Specific services to be performed on behalf of
AOL's Operations Security team will be as determined by AOL in its reasonable
discretion.
10. Technical Performance. Company will perform the following technical
---------------------
obligations (and any reasonable updates thereto from time to time by AOL):
. Company will design the PMR Service to support the following
browsers and platforms: MSIE 3.0 (Windows 3.1, Win95 and 98 & Mac);
MSIE 3.0 (Mac); MSIE 4.0 (Win 3.1, Win95 & 98 and Mac); MSIE 5.0
(Win 3.1, Win 95 & 98 and Mac) Netscape 3.0 (Win 3.1, Win95 & 98 &
Mac); Netscape 4.0 (Win 3.1, Win95 & 98 & Mac); Netscape 5.0 (Win
3.1, Win 95 & 98 & Mac); AOL 3.0 - 16bit and 32bit on PC; AOL 3.0
on Mac; AOL 4.0 on PC and Mac; and make commercially reasonable
efforts to support all other AOL browsers listed at:
"http://webmaster.info.aol.com."
. Company will configure the server from which it serves the site to
examine the HTTP User-Agent field in order to identify the "AOL
Member-Agents" listed at: "http://webmaster.
info.aol.com/Brow2Text.html."
. Company will design its site to support HTTP 1.0 or a backward
compatible later protocol as defined in RFC 1945 (available at
"http://ds.internic.net/rfc/rfc1945.text") and to adhere to AOL's
parameters for refreshing cached information listed at
http://webmaster.info.aol.com/CacheText.html.
--------------------------------------------
11. AOL Internet Services Partner Support. AOL will provide Company with
-------------------------------------
access to the standard online resources, standards and guidelines documentation,
technical phone support, monitoring and after-hours assistance that AOL makes
generally available to similarly situated web-based partners. AOL support will
not, in any case, be involved with content creation on behalf of Company or
support for
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit C - Page 2
<PAGE>
any technologies, databases, software or other applications which are not
supported by AOL or are related to any Company area other than the PMR Service.
Support to be provided by AOL is contingent on Company providing to AOL demo
account information (where applicable), a detailed description of the PMR
Service' software, hardware and network architecture and access to the PMR
Service for purposes of such performance and load testing as AOL elects to
conduct. Company will remain responsible to ensure that the PMR Service
satisfies the specified access and performance requirements as outlined in this
Exhibit.
12. Subcontracting. Company may subcontract with others to services required
--------------
of Company hereunder, subject to AOL's consent, not to be unreasonably withheld
or delayed. Company will remain primarily responsible for the performance of
such third parties in conformance with the requirements of this Agreement.
Without limiting the foregoing, Company will be fully responsible for the
performance and scalability of its subcontractors' platforms, as well as the
interconnectivity between Company and those subcontractors (e.g., OFX Adapter
Layer). Company will use commercially reasonable efforts to have the PMR
Service provide AOL a mechanism for AOL to interact with such third parties on
operational and other issues relating to the PMR Service. In addition, if AOL
believes any such third party is not performing as required by this Agreement,
Company will cause the correction of such performance, or, if requested by AOL,
the termination of the relationship as it relates to the PMR Service. Company
will be responsible for negotiations and account management with Third Party
Service Providers.
13. Obligation. Except as otherwise expressly set forth in this Agreement, as
----------
between the parties Company will be responsible for all aspects of the
performance of the PMR Service, including security (such as SSL encryption) and
compliance of the PMR Service with all specifications.
14. Alternative Sites. Company will maintain the AOL PMR Service as a separate
-----------------
site from any other site so that all users are AOL PMR Users. Company will not
take or omit to take any action in its provision of the AOL PMR Service that
would direct users to, or enhance or promote the possibility that users of the
AOL PMR Service would enter or use, another service or Product competitive with
or similar to the PMR Service or any Product thereon, including any Company
Internet Site. Without limiting the foregoing, Company will not direct
promotions to AOL PMR Users or third parties that promote any other such service
or Product.
15. Problem Resolution. Company agrees to use commercially reasonable efforts
------------------
to provide the following service levels in response to problems with the PMR
Service:
. For material functions of the PMR Service that have become inoperable,
Company will use its best efforts to provide a bug fix or workaround
within * * * after Company's receipt of the first report of such
error.
. For other functions of the PMR Service that are impaired or otherwise
fail to operate in accordance with agreed upon specifications, Company
will provide a bug fix or workaround within * * * after the first
report of such error.
. For all other problems with the functionality or performance of the
PMR Service, Company will use commercially reasonable efforts to fix
such problems within * * * after the first report of such problems, or
if not reasonably practicable, as soon as reasonably feasible.
For any problem that is not, or reasonably cannot be, resolved within the above
time frames, Company shall provide AOL with prompt notice of Company's inability
to timely remedy such problem.
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit C - Page 3
<PAGE>
Exhibit D
---------
General Requirements for Customer Service in Connection with PMR Service
------------------------------------------------------------------------
1. Delineation of Responsibilities
-------------------------------
a) Company will provide front line email customer service support for AOL
Customers, identified or branded with the name of the AOL Property used
by the AOL Customer. Any customer email service requests related to the
PMR Service that are received by AOL will be routed to Company.
b) AOL will provide front line telephone customer service support for AOL
Customers, and Company will provide second line telephone service support
(i.e., telephone support to AOL's customer service personnel
2. Service Level Agreements
------------------------
Company will use commercially reasonable efforts to meet the following service
level agreements and will notify AOL if there is any substantial deviation from
these agreements by Company or any of its associated content providers as
described in Exhibit G, Section 1 a) above.
CALLS- Require * * * of calls answered in 2 minutes
EMAIL- Require * * * turn-around time on emails
HOURS- Require telephone support hours to be * * *. Weekend support will be
made available based on assessment of demand
QUALITY SUPPORT- Reasonable standards are met with results from monitoring TS
Rep calls/emails (Quality Assurance Team) and results from customer satisfaction
surveys (Voice of the Customer).
REPORTING- Need weekly and monthly reporting on calls offered/handled, ASA,
emails handled & response time, case summary & detail reports
3. Reporting and Monitoring
------------------------
Company will provide AOL access to all customer service reports and statistics
needed to allow AOL to monitor customer service levels supported by Company and
its associated content providers. This includes providing AOL with access to
Company customer service logs as well as the logs of content providers who are
also providing customer service support for the PMR Service.
AOL and Company will negotiate in good faith establishing such additional
support procedures as may be required to provide AOL Customers with first class,
competitive customer support for the PMR Service.
- --------------------
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Exhibit D - Page 1
<PAGE>
EXHIBIT 10.52
DRKOOP.COM, INC.
REGISTRATION RIGHTS AGREEMENT
(As of July 1, 1999)
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of July 1,
1999, by and among DRKOOP.COM, INC. (the "Company"), a Delaware corporation, and
America Online, Inc. ("AOL"), a Delaware corporation.
RECITALS
A. The Company and AOL have entered into (i) an Interactive Services
Agreement, (ii) a Development and Services Agreement, and (iii) certain
investment transactions involving the issuance of common stock.
B. The Company has agreed to provide AOL the registration rights set
forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. The following terms, when capitalized herein, shall have
the following meanings.
1.1 "AOL SHARES" means the shares of the Company's Common Stock which
AOL acquires from the Company in a non-registered transaction, whether
directly or upon conversion of any security, warrant or instrument acquired
from the Company in a non-registered transaction.
1.2 "BUSINESS DAYS" means any day that is not a day on which banking
institutions in the city of Austin, Texas are authorized by law, regulation
or executive order to close; and Saturdays and Sundays shall not be
considered "Business Days."
1.3 "COMMISSION" means the Securities and Exchange Commission.
1.4 "COMMON STOCK" means the common stock, par value $.001 per share,
of the Company.
1.5 "DEMAND NOTICE" means a written notice delivered to the Company
pursuant to Section 2 below demanding that the Company effect a Demand
Registration.
1.6 "DEMAND REGISTRATION" means a registration by the Company of all
or a part of the Registrable Securities under the 1933 Act pursuant to a
Demand Notice delivered in accordance with Section 2.1 of this Agreement.
1.7 "DEMANDING REGISTRABLE SECURITIES HOLDER" means the Registrable
Securities Holder(s) who has delivered a Demand Notice pursuant to Section
2.1 of this Agreement.
<PAGE>
1.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
1.9 "EXISTING REGISTRATION RIGHTS AGREEMENT" means the Company's
Amended and Restated Registration Rights Agreement dated January 29, 1999.
1.10 "INDEMNIFIED PARTY" means each party entitled to indemnification
pursuant to Section 7.
1.11 "INDEMNIFYING PARTY" means each party required to provide
indemnification pursuant to Section 7.
1.12 "NON-DEMANDING REGISTRABLE SECURITIES HOLDER" means a
Registrable Securities Holder(s) other than the Demanding Registrable
Securities Holder.
1.12 "OTHER STOCKHOLDERS" means collectively, officers or directors
of the Company who own Common Stock, or holders of Common Stock other than
the Registrable Securities Holders or their assignees, who are entitled, by
contract with the Company, to have their Common Stock included in a
registration of the Company's securities.
1.13 "PARTICIPATING REGISTRABLE SECURITIES HOLDER" means Registrable
Securities Holder that is participating in the registration of Common Stock
pursuant to this Agreement.
1.14 "PERSON" means any individual, corporation, partnership, limited
partnership, limited liability company or other business entity.
1.15 "PIGGYBACK NOTICE" means a written notice delivered by the
Company to the Registrable Securities Holders stating that the Company
intends to conduct a Piggyback Registration, which notice shall include a
list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state
securities laws.
1.16 "PIGGYBACK REGISTRATION" means any registration by the Company
of any of its Common Stock under the 1933 Act for sale in an underwritten
public offering, other than (a) a Demand Registration or (b) a registration
on Form S-8 or Form S-4, or any other form which in the future may be
approved by the SEC in lieu of such forms for the same purposes.
1.17 "REGISTRABLE SECURITIES" means (a) the AOL Shares, and (b) any
securities issued or issuable in respect of or in exchange for any of the
AOL Shares by way of a stock dividend or stock split or in connection with
a combination of AOL Shares, recapitalization, reclassification, merger,
consolidation, or exchange offer. For purposes of this Agreement, a
security ceases to be a Registrable Security (i) when it has been
effectively registered under the 1933 Act and disposed of in a public
market transaction pursuant to the registration statement, (ii) when it has
been sold pursuant to Rule 144 (or any successor provision) under the 1933
Act, (iii) when it has been otherwise transferred and a new certificate
therefor, not bearing a legend restricting further transfer, has been
delivered by the Company following the Company's receipt of a reasonably
satisfactory opinion of counsel that the issuance and delivery of such a
certificate is legal and proper under this Agreement and applicable law or
(iv) when it is no longer outstanding.
2
<PAGE>
1.18 "REGISTRABLE SECURITIES HOLDER" means the holder(s) of any
Registrable Securities that assumes in writing the obligations of a
Registrable Securities Holder under this Agreement.
1.19 "REGISTRATION EXPENSES" means all expenses, other than Selling
Expenses, incurred in connection with any registration of securities
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of independent auditors and counsel for
the Company, blue sky fees and expenses, the fees and disbursements of one
counsel to the Registrable Securities Holders in connection with the
registration of the Registrable Securities incident to or required by any
such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
1.20 "1933 ACT" means the Securities Act of 1933, as amended.
1.21 "SELLING EXPENSES" means all underwriting discounts and selling
commissions incurred in connection with any registration of securities.
2. DEMAND REGISTRATION.
2.1 DEMAND FOR REGISTRATION. If the Company shall receive from a
Registrable Securities Holder under this Agreement or the Existing
Registration Rights Agreement a Demand Notice, then, subject to Sections
2.2, the Company will, as soon as practicable, provide notice of such
Demand Notice to each Registrable Securities Holder under this Agreement or
the Existing Registration Rights Agreement and use its reasonable best
efforts to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the 1933
Act) as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of the Registrable Securities as are
identified in the Demand Notice and written notices provided to the Company
and the Demanding Registrable Securities Holder by the Non-Demanding
Registrable Securities Holders (if any) within 15 days of receipt of the
Company's notice of a Demand Notice.
2.2 EXCEPTIONS TO OBLIGATION. Notwithstanding the provisions of
Section 2.1, the Company's obligation to effect, or to take any action to
effect, any registration demanded pursuant to that Section shall be subject
to the following:
(a) The Company shall not be obligated to effect, or take any action
to effect, any registration in any particular jurisdiction in
which the Company would be required to execute a general consent
to service of process in effecting such registration,
qualification or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be
required by the 1933 Act or applicable roles or regulations
thereunder.
(b) Except as provided in Section 2.5 and 2.6, the Company shall not
be obligated to effect, or take any action to effect, any
registration after the Company has effected two such
registrations for AOL pursuant to Section 2.1, provided that such
registrations have been declared or ordered effective and no stop
order has been
3
<PAGE>
entered with respect to such registration statements which have
not been lifted or discontinued.
(c) If prior to the receipt by the Company of the Demand Notice from
a Demanding Registrable Securities Holder referred to above, the
Company has given written notice to the Registrable Securities
Holders of the Company's intent to register in a proposed public
offering of the Company's Common Stock for it's own account under
the 1933 Act (other than a registration relating solely to
employee benefit plans or Rule 145 transactions), then, provided
thereafter the Company files the registration statement with the
Commission within 60 days after the Company has given notice of
its intent to register and provided the offering is declared or
becomes effective within 60 days after the initial filing of the
registration statement, the following shall apply:
(i) If all Registrable Securities held by a Registrable
Securities Holder are registered and sold in that public
offering as a consequence of the piggyback registration
rights arising under Section 4 below, then the right of
such Registrable Securities Holder under this Agreement to
demand registration of the Registrable Securities pursuant
to this Section 2.1 shall be extinguished.
(ii) If all Registrable Securities of a Registrable Securities
Holder are not registered and sold in that public
offering, then such Registrable Securities Holder may not
make its request under this Section 2, prior to the
earlier of (A) one hundred twenty (120) days after the
date the Company sent out the first notice of the intent
to register (provided the registration statement has not
become effective) or (B) six months after the effective
date of the registration statement.
(iii) The Company may not give any written notice of intent to
register as provided in this Section 2.2(c) prior to one
hundred eighty (180) days after it has previously given
any such notice which has led to a completed offering of
Common Stock.
(d) The Company shall not be obligated to effect, or take any action
to effect, any registration if (i) the Company delivers to the
Demanding Registrable Securities Holder, within twenty (20) days
after its receipt of a Demand Notice, an opinion (reasonably
acceptable to the Participating Registrable Securities Holders
and their counsel) of outside counsel qualified in Federal
securities law issues to the effect that all Registrable
Securities can be sold or disposed of in a single public
transaction without registration under the 1933 Act and that the
resale of such securities to any purchaser does not require
registration under the 1933 Act and (ii) the Company agrees to
remove all restrictive legends on the certificates evidencing the
Registrable Securities. The Company agrees to indemnify the
Participating Registrable Securities Holders against and to hold
them harmless from all damages, losses and liabilities (including
liability for rescission), costs and expenses (including
reasonable attorneys' fees) based upon or arising out of the
failure to comply with Section 5 of the 1933 Act as a consequence
of the Registrable Securities Holders proceeding in accordance
with such outside counsel's opinion.
4
<PAGE>
(e) The Company may delay filing a registration statement for a
period of not more than ninety (90) days after the date of
receipt of the request from a Demanding Registrable Securities
Holder if a majority of the directors then comprising the
Company's Board of Directors (including a majority of the
independent Directors) determine that compelling corporate
requirements necessitate the postponement.
(f) The Company shall, in any event, not be obligated to effect any
registration unless the anticipated aggregate offering proceeds,
net of underwriting discounts and commissions, are expected to
exceed $5,000,000.
(g) Any registration under this Agreement shall be for resale only;
the Company shall have no obligation to attempt to register the
original issuances of securities subject to options, warrants or
other derivative securities.
(h) In the event the Company is obligated to register shares
hereunder pursuant to a Demand Registration, each holder of
Registrable Securities shall have piggyback rights in such
registration.
2.3 EFFECTING REGISTRATION. Subject to the foregoing Section 2.2 and
Section 13.1, the Company shall use its reasonable best efforts to file a
registration statement covering the Registrable Securities identified in a
Demand Notice as soon as practicable after receipt of the Demand Notice,
and shall use reasonable best efforts to do all of the things required
pursuant to Section 5 below.
2.4 UNDERWRITING.
(a) If the Demanding Registrable Securities Holder intends to
distribute the Registrable Securities covered by the Demand
Notice by means of an underwriting, it shall so advise the
Company in the Demand Notice. The lead underwriter shall be
chosen by the Demanding Registrable Securities Holder, which
underwriter shall be acceptable to the Company in the exercise of
its reasonable judgment.
(b) If the Non-Demanding Registrable Securities Holders under this
Agreement and the Existing Registration Rights Agreement (if any)
wish to include shares of Common Stock held by it in the
underwritten offering, it shall notify the Demanding Registrable
Securities Holder in writing within thirty (30) days after
receiving such Registrable Securities Holder's Demand Notice of
the number of shares it wishes to include in the registration and
the Demanding Registrable Securities Holder shall include such
shares in the underwriting. If the Company wishes to include, in
the underwritten registration, Common Stock to be sold for the
account of the Company it shall notify the Demanding Registrable
Securities Holder in writing within thirty (30) days after the
Company has received the Demand Notice of the number of shares
the Company wishes to include in the registration. If any Other
Stockholders of the Company wish to include shares of Common
Stock held by them in the underwritten offering, they shall
notify the Demanding Registrable Securities Holder in writing
within thirty (30) days after the Company has received the
Registrable Securities Holder's Demand Notice. In such event, (i)
the Company shall offer to include the shares of the
Participating Registrable Securities Holder and the Non-Demanding
Registrable Securities Holders under this Agreement and the
Existing Registration Rights Agreement (if any) in the
underwriting and shall condition such
5
<PAGE>
offer on their acceptance of the further applicable provisions of
this Agreement, and (ii) the Company shall (together with the
Registrable Securities Holders and the Other Stockholders
proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such
underwriting by the Demanding Registrable Securities Holders as
set forth above.
(c) Notwithstanding any other provision of this Section 2.4, and
subject to Section 4 of the Existing Registration Rights
Agreement if the underwriter advises the Registrable Securities
Holders in writing that marketing factors require a limitation on
the number of shares to be underwritten,
(i) Common Stock held by Other Stockholders shall be excluded
from such registration to the extent so required by such
limitation in proportion, as nearly as practicable, to the
respective amounts of securities which each such Other
Stockholder and Participating Registrable Securities
Holder has a contractual right to be included;
(ii) If a limitation of the number of shares is still required,
the number of shares of Common Stock which the Company has
requested to be included in the registration and
underwriting shall be reduced or eliminated, as required;
(iii) If a limitation on the number of shares is still required,
Common Stock held by the Demanding Registrable Securities
Holders and the Participating Registrable Securities
Holder shall be excluded from such registration to the
extent so required by such limitation in proportion, as
nearly as practicable, to the respective amounts of
Registrable Securities which each such Registrable
Securities Holder holds. No securities excluded from the
underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any
Other Stockholder or the Participating Securities Holder
has requested inclusion in such registration as provided
above disapproves of the terms of the underwriting, such
Other Stockholder or Participating Securities Holder may
elect to withdraw therefrom by written notice to the
Company, the underwriter and the Demanding Registrable
Securities Holder. The securities so withdrawn shall also
be withdrawn from registration.
(d) If the Registrable Securities being registered pursuant to this
Section 2 are not to be distributed by means of an underwriting,
then the provisions of Section 3 shall apply.
2.5 EXCHANGE ACT REGISTRATION AND FORM S-3. Within thirty days after
the effectiveness of the registration statement pursuant to which the
Company first registers Common Stock under the 1933 Act, the Company shall
register its Common Stock under Section 12 of the Exchange Act and use its
reasonable best efforts to maintain that Exchange Act registration. After
the Company has qualified for the use of Form S-3, then (i) the Company
shall use Form S-3 for any 7 registration demanded by a Demanding
Registrable Securities Holder pursuant to Section 2.1 and (ii) Section
2.2(b) shall not be applicable; provided, that the Registrable Securities
Holders shall not be entitled to require the Company to register
Registrable Securities on a Form S-3 which has been declared effective,
pursuant to a Demand Notice delivered under Section 2.1, more than once in
any twelve month period.
6
<PAGE>
2.6 WITHDRAWAL. A Demanding Registrable Securities Holder may
withdraw a Demand Notice prior to the effective date of the registration
statement if a material adverse change has occurred in the condition,
business or prospects of the Company and its subsidiaries from that known
to the Demanding Registrable Securities Holder at the time of delivery of
its Demand Notice. In such event, the Demanding Registrable Securities
Holder's right to demand registration pursuant to Section 2.1 shall be
reinstated.
3. SELLING RESTRICTIONS. The following provisions shall apply if the
registration demanded pursuant to Section 2.1 is not an underwritten
registration:
3.1 NOTICE TO COMPANY. The Demanding Registrable Securities Holder
shall notify the Company, at least two (2) Business Days prior to any
disposition of Registrable Securities pursuant to the registration
statement, of its intent to dispose of such Registrable Securities. Each
Other Stockholder and Participating Registrable Securities Holder whose
shares shall have been registered shall provide a similar notice to the
Company with respect to any shares which such Other Stockholder or
Participating Registrable Securities Holder intends to dispose of pursuant
to the registration statement. Such notice shall be in writing, by
facsimile or by an actual telephone conversation with either the Company's
Chief Financial Officer, General Counsel or Director of Investor Relations,
at the address, facsimile number or the phone number, as the case may be,
of the Company, all as set forth in Section 12 below. The Company will
exert reasonable efforts to respond to such notice by the next Business
Day, but in any event, the Company shall respond no later than the second
Business Day following the date of receipt. Such response shall consist of
one of the following: (a) an oral or written confirmation that the Company
knows of no reason why the Demanding Registrable Securities Holder, the
Participating Registrable Securities Holder or the Other Stockholder should
not proceed with the proposed sale or disposition; or (b) a notification
that the proposed disposition must be delayed for a period of up to thirty
(30) days as provided in Section 3.2 below; or (c) a confirmation from
either the Chief Financial Officer or the General Counsel of the Company
that the Company requires a limited time, not to exceed three (3) Business
Days following the receipt of the Company's receipt of the notice, within
which to determine which of the foregoing responses is appropriate under
the circumstances. (d) The failure by the Company to respond by the end of
the second Business Day (or the end of the third Business Day thereafter if
a confirmation pursuant to Section 3.1 (c) has been delivered) shall be
deemed to waive any objection to the proposed sale or disposition.
3.2 RESTRICTION ON SALE. Following the effectiveness of a non-
underwritten registration, the Company may restrict disposition of
Registrable Securities or Common Stock, in which event the holders will not
dispose of those securities for the period designated by the Company, but
not exceeding thirty days; provided that: (a) the Company shall have
delivered a notice in writing to the Demanding Registrable Securities
Holder(s), the Participating Registrable Securities Holder and such Other
Stockholders stating that a delay in the disposition of Registrable
Securities or other shares is necessary because the Company, in its
reasonable judgment, exercised in good faith, has determined that such
sales would require public disclosure by the Company of material nonpublic
information that the Company deems advisable not to disclose at that time;
and (b) the Company shall exert commercially reasonable efforts to amend
the registration statement or amend or supplement the prospectus relating
thereto, if necessary, and to take all other actions necessary to allow the
proposed disposition to take place as promptly as practicable after the
conditions referred to therein have ceased to exist. The Company agrees to
use all commercially reasonable efforts to keep the registration statement,
as amended pursuant to
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this Section 3.2, effective for an additional period of time equal to the
period during which sales were restricted pursuant to this Section 3.2.
3.3 DISCONTINUANCE OF SALE. Each Registrable Securities Holder and
each Other Stockholder whose shares are included in any registration
contemplated hereunder shall agree as a condition to the inclusion of their
shares, that upon receipt of any notice from the Company specified in
Section 5.4(a) below, such Person shall forthwith discontinue all sales and
distributions of Registrable Securities pursuant to the then-current
prospectus until such Person receives copies of a supplemental or amended
prospectus as contemplated by Section 3.2, or until such Person is advised
in writing by the Company that the use of the prospectus may be resumed,
and, if so directed by the Company, such Person will deliver to the Company
all copies then in the possession of such Shareholder of the prospectus in
effect with respect to the Registrable Securities or other shares at the
time of such notice. The Company shall promptly take all such action as may
be necessary or appropriate, including, without limitation, the filing of
an amendment to the registration statement and/or the filing of an amended
prospectus or a prospectus supplement, to limit the duration of any
discontinuance with respect to the sale and distribution of Registrable
Securities pursuant to this Section 3.3, and shall keep the registration
statement, as amended, effective for an additional period of time equal to
the period during which sales were required to be discontinued.
4. PIGGYBACK REGISTRATION.
4.1 INCLUSION IN OFFERING. If at any time during the period
commencing on the date of this Agreement and ending on the third
anniversary of the closing date of its initial public offering of its
equity securities under the 1933 Act, the Company shall determine to
conduct a Piggyback Registration either for its own account or the account
of a security holder or holders (other than a Registrable Securities
Holder), the Company will use its reasonable best efforts to: (a) promptly
deliver a Piggyback Notice to each Non-Demanding Registrable Securities
Holder; and (b) include in such registration (and any related qualification
under blue sky laws or other compliance) and in any underwriting involved
therein all of the Registrable Securities specified in a written request or
requests made by a Participating Registrable Securities Holder within
fifteen (15) business days after receipt of the Piggyback Notice from the
Company.
4.2 UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Participating Registrable Securities Holders in
the Piggyback Notice. In such event the right of a Registrable Securities
Holder to registration pursuant to this Section 4 shall be conditioned upon
its participation in such underwriting and the inclusion of the
Participating Registrable Securities in the underwriting. The Registrable
Securities Holder shall (together with the Company and any Other
Stockholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for the underwriting by the Company. If a
Participating Registrable Securities Holder or any Other Stockholder
disapproves of the terms of any such underwriting, such Person may elect to
withdraw therefrom by written notice to the Company and the underwriter.
Any Registrable Securities or other securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and the
allocation (if any) pursuant to the following sections shall be adjusted
accordingly. Any such withdrawal shall be without prejudice to the right of
a Registrable Securities Holder to include Registrable Securities in future
offerings pursuant to this Section 4.
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4.3 PRIORITY IN PRIMARY REGISTRATIONS. If a Piggyback Registration is
an underwritten offering on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number
of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will, subject to Section 4 of
the Existing Registration Rights Agreement, include securities in such
registration in the following order of priority: (i) there shall first be
included all securities which the Company proposes to sell; (ii) subject to
Section 13.1, to the extent additional shares may be included, there shall
next be included all Registrable Securities requested to be included in
such registration by the Participating Registrable Securities Holders pro
rata based on the respective number of shares of Common Stock held by each
Participating Registrable Securities Holder and (iii) to the extent
additional shares may be included, there shall next be included the Common
Stock requested to be included in such registration by Other Stockholders,
pro rata based on the respective number of shares of Common Stock held by
each Other Stockholder.
4.4 PRIORITY IN SECONDARY REGISTRATIONS. If a Piggyback Registration
is an underwritten secondary offering on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering
without adversely affecting the marketability of the offering, the Company
will, subject to Section 4 of the Existing Registration Rights Agreement,
include securities in such registration in the following order of priority:
(i) subject to Section 13.1, there shall first be included Common Stock
requested to be included in such registration by Other Stockholders and any
Participating Registrable Securities Holders, pro-rata, based on their
respective number of shares of Common Stock, and (ii) to the extent
additional shares may be included, there shall be included additional the
Company securities which the Company has requested to be included in such
registration.
4.5 WITHDRAWAL OR DELAY OF REGISTRATION. The provisions of Sections
4.1 through 4.4 notwithstanding, if, at any time after delivering a
Piggyback Notice and prior to the effective date of the registration
statement for such Piggyback Registration the Company shall determine for
any reason not to register or to delay registration of the securities
covered thereby, the Company may, at its election, give written notice of
such determination the Participating Registrable Securities Holders and,
thereupon (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation, if any, to
pay Registration Expenses in connection therewith), without prejudice,
however, to the right of the Participating Registrable Securities Holders
to include Registrable Securities in a subsequent registration and (ii) in
the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities, for the same period as the
delay in registering the other securities covered by the registration
statement.
5. REGISTRATION PROCEDURES. In the case of any Demand Registration or
Piggyback Registration effected by the Company, upon request the Company will
keep the Registrable Securities Holders advised in writing as to the initiation
of each registration and as to the completion thereof. At its expense, the
Company will use its reasonable best efforts to:
5.1 REGISTRATION STATEMENT. Prepare and file with the Securities and
Exchange Commission such amendments and supplements to the registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement
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effective for a period of one hundred twenty (120) days or until the
Participating Registrable Securities Holders have completed the
distribution described in the registration statement relating thereto
(which period shall be extended as contemplated in Section 3.2(b) or
Section 3.3), whichever first occurs, and comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement during such period.
5.2 BLUE SKY QUALIFICATION. Subject to Section 2.2(a) above, to
register and qualify the Registrable Securities included in the
registration under the securities or blue sky laws of such states and the
District of Columbia the Demanding Registrable Securities Holder reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Participating Registrable Securities
Holders to consummate the disposition in such states and the District of
Columbia of the Registrable Securities so included.
5.3 FURNISH PROSPECTUSES. Furnish the number of prospectuses
(including preliminary prospectuses conforming to the requirements of the
1933 Act and rules and regulations thereunder) and other documents incident
thereto as The Registrable Securities Holders from time to time may
reasonably request.
5.4 NOTIFICATION. (a) Notify the Participating Registrable
Securities Holders, at any time when a prospectus relating to Registrable
Securities covered by a registration statement is required to be delivered
under the 1933 Act, of the happening of any event; as a result of which the
prospectus included in such registration statement includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of circumstances then existing. (b) Notify the
Participating Registrable Securities Holders and the managing underwriters,
if any, promptly, and (if requested by any such person) confirm such advice
in writing, (i) when the registration statement, the prospectus or any
prospectus supplement or post-effective amendment, has been filed, and,
with respect to the registration statement or any post-effective amendment,
when the same has become effective; (ii) of the issuance by the Commission
of any stop order suspending the effectiveness of a registration statement
or of any order preventing or suspending the use of any preliminary
prospectus or the initiation of any proceedings for that purpose; the
Company shall promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain a withdrawal of any stop order
should one be issued; and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of a registration statement of any Registrable
Securities for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose.
5.5 OPINIONS AND COMFORT LETTERS. To the extent requested, furnish
to the underwriter, in an underwritten offering, or to the Registrable
Securities Holders, in a non-underwritten offering, (i) a signed opinion of
the Company's counsel, and (ii) "comfort" letters signed by the Company's
independent public accountants who have examined and reported on the
Company's financial statements included in the registration statement, to
the extent permitted by the American Institute of Certified Public
Accountants, coveting the same matters with respect to the registration
statement (and prospectus included therein) and with respect to the events
subsequent to the date of the financial statements, as are customarily
covered in opinions of counsel and in accountants' "comfort" letters
delivered to the underwriters in underwritten public offerings of
securities.
5.6 EXCHANGE OR NASDAQ LISTING. Use reasonable efforts to cause all
Registrable Securities included in the registration to be listed or
admitted for trading on such
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exchanges or markets (including but not limited to the NASDAQ Stock Market,
if applicable) as the Common Stock is otherwise listed or admitted for
trading.
5.7 EARNINGS STATEMENT. Otherwise use all reasonable efforts to
comply with all applicable roles and regulations of the Securities and
Exchange Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the Company's first
full calendar quarter after the effective date of the Registration
Statement, which earning statement shall satisfy the provisions of Section
11(a) of the 1933 Act and Rule 158 thereunder.
6. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses
shall be borne by the holders of the securities so registered (including
the Registrable Securities Holders, Other Stockholders and the Company, to
the extent securities are offered for its account) pro rata on the basis of
the gross sales proceeds received by each in the offering.
7. INDEMNIFICATION.
7.1 COMPANY INDEMNIFICATION. The Company shall indemnify and hold
harmless, to the fullest extent permitted by law, each seller of
Registrable Securities, any underwriter for such registration and each
person or entity, if any, controlling such seller or underwriter within the
meaning of the 1933 Act or the Exchange Act, against all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation and legal expenses) to which such seller, underwriter or
controlling person or entity, as the case may be, may become subject under
the 1933 Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) arise out of or are based upon any of the following: (a)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement, any prospectus or any amendments
or supplements thereto; (b) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; or (c) any violation or alleged violation by the
Company, in connection with such registration, of the 1933 Act, the
Exchange Act, any state securities law or any role or regulation
promulgated under the 1933 Act, the Exchange Act or any state securities
law; provided, however, that the Company shall not be liable in any such
case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon any untrue statement or omission
made in reliance upon and in conformity with written information furnished
for use in connection with such registration by any such seller,
underwriter or controlling person or entity.
7.2 INDEMNIFICATION BY REGISTRABLE SECURITIES HOLDERS. Each
Registrable Securities Holder shall indemnify and hold harmless, to the
fullest extent permitted by law, the Company, its officers, directors,
employees, representatives and agents, each Person who controls (within the
meaning of the 1933 Act) the Company, any underwriter, each other
Registrable Securities Holder and each Other Stockholder whose shares have
been included in any registration in which Registrable Securities have been
included, against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal expenses) resulting
from such Registrable Security Holder's (i) untrue or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any amendment or supplement thereto, and (ii) omission or
alleged omission of a material fact required to be stated
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therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent
that such untrue statement or alleged untrue statement or omission or
alleged omission is made in reliance upon and in conformity with written
information furnished to the Company by such Registrable Securities Holder
expressly for 13 use therein, or (iii) if such offering is not an
underwritten offering, from such Registrable Securities Holder's failure to
deliver a copy of the registration statement, prospectus or any amendment
or supplement thereto after the Company has furnished such Registrable
Securities Holder with a sufficient number of copies of the same; provided,
however, the obligation of a Registrable Security Holder to indemnify will
be several, not joint and several among the Registrable Securities Holders,
and in no event shall a Registrable Securities Holder's aggregate
indemnification obligation under this Section 7.2 exceed the net proceeds
from the offering received by such Registrable Securities Holder.
7.3 NOTICE OF CLAIM. Each Indemnified Party shall give notice to
each Indemnifying Party promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who will conduct the defense of such claim or
litigation at its expense, is approved by the Indemnified Party (whose
approval will not be unreasonably withheld or delayed); and provided,
further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
except to the extent that its defense of the claim or litigation involved
is prejudiced by such failure. The Indemnified party may participate in
such defense at such party's expense. No Indemnifying Party, in the defense
of any such claim or litigation, except with the consent of each
Indemnified Party, shall consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect of any claim or litigation, and no
Indemnified Party will consent to entry of any judgment or settle any claim
or litigation without the prior written consent of the Indemnifying Party.
Each Indemnified Party shall furnish such information regarding himself,
herself or itself and the claim in question as the Indemnifying Party may
reasonably request and as shall be reasonably required in connection with
the defense of such claim and litigation resulting therefrom.
7.4 CONTRIBUTION. If for any reason the indemnification provided for
in this Section 7 from an Indemnifying Party, although otherwise applicable
by its terms, is determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party hereunder, then the Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by the Indemnified Parties as a result of such
losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of such Indemnifying Party and
the Indemnified Parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and the Indemnified Parties shall be determined by reference, among
other things, to whether any action in question, including any untrue or
alleged untrue statement of a material fact, has been made by, or relates
to information supplied by, such Indemnifying Party or the Indemnified
Parties, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding. Notwithstanding the foregoing, in no event
shall the amount contributed by a Registrable Securities Holder exceed
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under this Section 7.4 exceed the net proceeds from the offering received
by such Registrable Securities Holder.
7.5 FROM OTHER STOCKHOLDERS. The Company agrees that, to the extent
that it shall grant to Other Stockholders the right to have the Company's
securities held by them included in any registration of the Company's
securities, or to require the Company to register their securities, it
shall require as a condition to such grant that such Other Stockholders
agree to indemnify the Company and the Registrable Securities Holders, and
the officers, directors, employees, representatives and agents of each as
well as each Person who controls (within the meaning of the 1933 Act) each,
with respect to any registration of their securities, on terms
substantially identical to that provided by the Registrable Securities
Holders in Section 7.2.
8. LOCK UP AGREEMENTS. In consideration for the Company agreeing to its
obligations under this Agreement, in connection with any initial public offering
(whether or not a Registrable Securities Holder is participating in such
registration), upon the written request of the Company and the underwriters
managing any underwritten offering of the Company's securities, Registrable
Securities Holders agree not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed ninety (90) days from the effective date of such
registration) as the Company and the underwriters may specify, so long as the
Registrable Securities Holders and all executives, officers and directors of the
Company are bound by a comparable obligation provided, however, that nothing
herein shall prevent the Registrable Securities Holders from making a
distribution of Registrable Securities to its shareholders that is otherwise in
compliance with applicable securities laws, so long as such distributees agree
to be so bound.
9. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Registrable Securities Holders the benefits of Rule 144 and any other rule or
regulations of the Securities and Exchange Commission that may at any time
permit a holder to sell securities of the Company to the public without
registration, the Company agrees to use its reasonable best efforts to do all of
the following at any time after it shall become subject to the reporting
requirements of Sections 13 and 14 of the Exchange Act:
9.1 PUBLIC INFORMATION. Make and keep public information available as
contemplated in Rule 144, at all times.
9.2 SEC REPORTS. File with the Securities and Exchange Commission all
reports and other documents required of the Company under the 1933 Act and
the Exchange Act.
9.3 RULE 144 STATEMENT. Furnish to the Registrable Securities
Holders, so long as each of them holds any Registrable Securities,
forthwith upon request, a written statement by the Company that it as to
whether or not it has complied with the reporting requirements of Rule 144,
the 1933 Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so
filed with the Securities and Exchange Commission by the Company as may be
reasonably requested in availing any holder, under any rule or regulation
of the Securities and Exchange Commission, of the right to sell any such
Registrable Securities without registration.
10. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The right to cause the
Company to register Registrable Securities in a Demand Registration granted
under Section 2, the right to
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include Registrable Securities in a Piggyback Registration granted under Section
4 and the other rights granted to a Registrable Securities Holders hereunder may
be transferred or assigned by such Registrable Securities Holder to one or more
transferees or assignees of the Registrable Securities Holder, provided that the
Company is given written notice by such Registrable Securities Holder at the
time of or within a reasonable time after said transfer or assignment, stating
the name and address of each transferee or assignee and identifying the number
of shares of Registrable Securities with respect to which such registration
rights are being transferred or assigned, and provided further that the
transferee or assignee of such rights assumes in writing the obligations of the
Registrable Securities Holder under this Agreement. Notwithstanding the
foregoing, the Company shall have no obligation to recognize any assignment of
Registrable Securities by a Registrable Securities Holder, nor to cause
Registrable Securities to be transferred on its books or records, unless such
transfer is made in accordance with the registration or qualification
requirements of the 1933 Act and all applicable blue sky or other state
securities laws or pursuant to available exemptions therefrom (as evidenced by
an opinion of counsel satisfactory in form and substance to counsel for the
Company).
11. INFORMATION FROM REGISTRABLE SECURITIES HOLDERS. Each Registrable
Securities Holder shall furnish to the Company such information regarding such
Registrable Securities Holder, the Registrable Securities and the distribution
proposed by such Registrable Securities Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
12. COVENANTS OF THE COMPANY.
(a) For four (4) years from the date hereof, the Company shall
provide AOL with copies of all notices, minutes, information and other
materials (collectively, the "Materials") of or for meetings of the
Company's Board of Directors that the Company provides to its directors
generally, at or about the same time as such materials are delivered to the
directors, and shall allow an AOL designee to attend all meetings of the
Board of Directors in a non-voting, observer capacity as a representative
of AOL (the "Representative"); provided, however, that the Company shall
not be required to provide AOL with Materials, and the Representative may
be excluded from access to any meeting, or any portion thereof, if the
Chairman or the President of the Company or a majority of the Board of
Directors of the Company reasonably determines that such access or
disclosure is not in the Company's interest, including, without limitation,
if (a) such provision of Materials or such access would adversely affect
the attorney-client privilege between the Company and its counsel; (b) the
Company's interest in the trade secrets and other intellectual property
embodied by such Materials or to be disclosed in such meeting conflicts or
would potentially conflict with similar rights claimed by, or business
interests of, AOL; or (c) disclosure of confidential information of third
parties in confidentiality to such third parties, provided that any such
exclusion from access or disclosure is applied similarly to all other
observer representatives of any other stockholder of the Company. The
initial observer shall be David Gang, but from time to time, AOL may
appoint another senior executive of AOL to act as a replacement
Representative upon the written consent of the Company, not to be
unreasonably withheld. Each such observer shall, upon request, confirm to
the Company in writing that all Materials and other information (written or
oral) received as an observer will be maintained in confidence. Upon
request by AOL, the Company will terminate delivery of Materials to AOL.
The foregoing shall not apply to board committees (e.g., an Executive
Committee) formed by the board by delegation.
(b) AOL shall enjoy the rights set forth in Section 12(a) for the
period provided for therein for so long as AOL owns, or has the opportunity
to earn warrants that upon exercise
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would yield, capital stock of the Company representing at least three
percent (3%) of the outstanding voting stock of the Company on a Fully
Diluted Basis (as defined below) (the "Minimum Interest"). Such rights
shall terminate at such time as AOL does not own, or have the opportunity
to own, the Minimum Interest, but shall be renewed at such time that AOL
reacquires the Minimum Interest or the opportunity thereto, and shall
continue (subject to Section 12(a)) for and during such subsequent
period(s) as AOL maintains, or has the opportunity to maintain, the Minimum
Interest. "Fully Diluted Basis" means assuming and taking into account, as
of the date of the calculation, (i) all outstanding shares of Common Stock
and all outstanding shares of preferred stock of the Company which are not
convertible into Common Stock (if any), (ii) all shares of Common Stock
into which all outstanding shares of preferred stock of the Company can
then be converted, (iii) any other security convertible into or
exchangeable for, directly or indirectly, Common Stock or any security
convertible into Common Stock, (iv) the exercise of all outstanding
options, warrants and similar rights granted by the Company (except for the
warrants to purchase Common Stock acquired by AOL pursuant to the three
Warrant Agreements of even date herewith), and (v) the exercise of all
options, warrants and rights that could be granted by the Company pursuant
to any then existing stock option or similar agreement, plan or arrangement
of the Company, and the exercise of options to purchase shares of Common
Stock to be granted under stock option plans to be implemented by the
Company after the date of this Agreement.
13. MISCELLANEOUS.
13.1 NO INCONSISTENT AGREEMENT; COORDINATION WITH EXISTING
REGISTRATION RIGHTS AGREEMENT. The rights granted to the Registrable
Securities Holders in this Agreement are subordinate to the rights granted
under the Existing Registration Rights Agreement, and any conflict will be
resolved in favor of the holders of the Registrable Securities thereunder.
The Company will not hereafter enter into any agreement with respect to its
securities which violates the rights granted to the Registrable Securities
Holders in this Agreement.
13.2 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and of the holders of a majority of the
Registrable Securities.
13.3 SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and permitted assigns.
13.4 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
13.5 REMEDIES. The parties hereto agree and acknowledge that money
damages may not be any adequate remedy for any breach of the provisions of
this Agreement and that any party to this Agreement may apply to any court
of law or equity of competent jurisdiction (without posting bond or other
security) for specific performance and for other injunctive or equitable
relief in order to enforce or prevent violation Of the provisions of this
Agreement.
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13.6 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.7 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
13.8 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the state of Delaware without regard to choice of law
principles which would require the application of the laws of any other
jurisdiction.
13.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements,
representations, warranties, statements, promises, information,
arrangement, and understandings, whether oral or written, express or
implied, with respect to the subject matter hereof.
13.10 NOTICES. Any and all notices and other communications hereunder
shall be in writing addressed to the parties at the addresses specified
below or such other addresses as either party may direct by notice given in
accordance with this section, and shall be delivered in one of the
following manners' (i) by personal delivery, in which case notice shall be
deemed to have been duly given when delivered; (ii) by certified mail,
return receipt requested, with postage prepaid, in which case notice shall
be deemed to have been duly given on the date indicated on the return
receipt; (iii) by reputable delivery service (including, by way of example
and not limitation, Federal Express, UPS and DHL) which makes a record of
the date and time of delivery, in which case notice shall be deemed to have
been duly given on the date indicated on 17 the delivery service's record
of delivery, or (iv) by fax transmission to the fax numbers given below,
with confirmation of good receipt and confirmed by letter to the addresses
set forth below, in which case notice shall be deemed to have been duly
given on the date indicated in the confirmation of fax transmission (or the
next Business Day if such date is not a Business Day or the transmission is
made after business hours):
if to the Company:
drkoop.com, Inc.
8920 Business Park Drive, Suite 200
Austin, Texas 78759
Attention: Donald W. Hackett, President & CEO
Fax: (512) 726-5130
if to AOL:
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166
Attention: General Counsel
Fax: (703) 265-2208
13.11 LEGEND. Each certificate representing shares of Common Stock
that are subject to this Agreement shall bear a legend substantially in the
following:
16
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT RELATING THE ISPOSITION OF SECURITIES AND
(3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
THESE SECURITIES ARE ALSO SUBJECT TO THE PROVISIONS OF A REGISTRATION
RIGHTS AGREEMENT DATED AS OF JULY 1, 1999 AND A COMPLETE AND CORRECT
COPY OF THIS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE CORPORATION AND WILL BE FURNISHED UPON WRITTEN REQUEST
AND WITHOUT CHARGE.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
AMERICA ONLINE, INC. DR.KOOP.COM, INC.
By:
------------------------------------- -----------------------------------
Its: Donald W. Hackett, President and
------------------------------------ CEO
18
<PAGE>
Exhibit 10.53
-------------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
WARRANT TO PURCHASE
1,570,932 SHARES OF COMMON STOCK
of
drkoop.com, Inc.
a Delaware corporation
Issued
July 1, 1999
THIS CERTIFIES THAT, for value received, America Online, Inc. (as the
context requires, "AOL" or the "Warrantholder") is entitled to purchase, on the
terms hereof, one million five hundred seventy thousand nine hundred thirty-two
(1,570,932) shares (subject to adjustment as set forth herein, "Warrant Stock"),
of common stock, par value $.001 per share ("Common Stock") of drkoop.com, Inc.,
a Delaware corporation (the "Company"), at a purchase price and upon the terms
and conditions as set forth herein.
1. EXERCISE OF WARRANT.
The terms and conditions upon which this Warrant may be exercised and the
shares of Common Stock covered hereby that may be purchased, are as follows:
1.1. Exercise.
--------
(a) This Warrant is being issued pursuant to an Interactive Services
Agreement, dated as of the date hereof (as same may be amended, the "ISA"),
between the Company and AOL. All terms used but not defined herein shall
have the meanings set forth in the ISA. This Warrant may be exercised, in
whole or in part, with respect to all of the Warrant Stock, at any time or
from time to time on or after June 30, 2000.
(b) Notwithstanding the foregoing, this Warrant may be exercised, in
whole or in part, for all shares of Warrant Stock, subject to adjustment as
set forth herein, as exist immediately prior to (A) recommendation of a
Liquidity Event by the Board of Directors of the Company to its
Stockholders, or (B) the consummation of a Liquidity Event, whichever is
earliest to occur. As used herein, the term "Liquidity Event" shall mean
--------
(i) a merger, consolidation, business combination or other transaction (a
"Merger Transaction") in which the Company is not the surviving entity
(provided that a Merger Transaction in which the Stockholders of the
Company immediately prior to such Merger Transaction hold at least a
majority of the total voting power of all classes of voting stock of the
Company upon consummation of such Merger Transaction shall not constitute a
"Liquidity Event"); (ii) sale,
<PAGE>
spin-off or other transfer of all or substantially all of the Company's
assets to an unrelated third party; (iii) a liquidation or dissolution of
the Company; or (iv) within any period of twelve (12) consecutive months,
any "person" or "group" (each as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) who or which was not
an "Affiliate" (as defined in the Exchange Act) of the Company at the
beginning of such period, becomes the "beneficial owner" (as defined in
Rule 13 d-3 under the Exchange Act) of more than thirty percent (30%) of
the total voting power of all classes of voting stock of the Company.
(c) Notwithstanding the foregoing, this Warrant may not be exercised
under any circumstances after 5:00 p.m., Austin, Texas time on June 30,
2008 (the "Termination Date"), after which time this Warrant shall
terminate and shall be void and of no further force of effect.
1.2. Exercise Price. The purchase price for the shares of Common Stock to
--------------
be issued upon exercise of this Warrant shall be Fifteen Dollars and Ninety-Four
Cents ($15.94) per share, subject to adjustment as set forth herein (the
"Exercise Price").
1.3. Method of Exercise. The exercise of the purchase rights evidenced by
------------------
this Warrant shall be effected by (a) the surrender of this Warrant, together
with a duly executed copy of the form of Election to Purchase attached hereto,
to the Company at its principal office and (b) the delivery of the Exercise
Price multiplied by the number of shares for which the purchase rights hereunder
are being exercised, payable (x) by certified check, corporate check of America
Online, Inc., or wire transfer of immediately available funds payable to the
Company's order or (y) on a net basis, such that, without the exchange of any
funds, the Warrantholder receives that number of shares otherwise issuable (or
other consideration payable) upon exercise of this Warrant less that number of
shares of Warrant Stock having an aggregate fair market value (as defined below)
at the time of exercise (i.e., the date a duly executed Election to Purchase is
delivered to the Company) equal to the aggregate Exercise Price that would
otherwise have been paid by the Warrantholder for the shares of the Warrant
Stock issuable. In connection with such exercise the holder shall, if requested
by the Company, include confirmation of the accuracy of the representations set
forth in Section 12 and otherwise as reasonably requested by the Company to
evidence compliance with any applicable securities laws as of the date of
exercise. For purposes of the foregoing, "fair market value" of the Warrant
Stock on any date shall be the average of the Quoted Prices of the Common Stock
of the Company for 20 consecutive trading days ending the trading day prior to
such date (if, during such 30-day period, there is a day in which no trades are
reported, such date shall be discarded and the 20-day period extended). The
"Quoted Price" of the Common Stock as reported by Nasdaq or, if the principal
trading market for the Common Stock is then a securities exchange, the last
reported sales price of the Common Stock on such exchange which shall be
consolidated trading if applicable to such exchange, or if neither so reported
or listed, the last reported bid price of the Common Stock. In the absence of
quotation or listing, such determination as to "Quoted Price" shall be made in
good faith by the Board of Directors of the Company after taking into
consideration all factors it deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of the Company in private
transactions negotiated at arm's length.
1.4. Issuance of Shares. In the event that the purchase rights evidenced
------------------
by this Warrant are exercised in whole or in part in accordance with the terms
of this Warrant, a certificate or certificates for the purchased shares shall be
issued to the Warrantholder as soon as practicable. The Warrant Stock shall be
stamped or imprinted with a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
NO SALE OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY AND WITHOUT AN
2
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Confidential
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT."
In the event the purchase rights evidenced by this Warrant are exercised in
part, the Company will also issue to the Warrantholder a new warrant within a
reasonable time representing the unexercised purchase rights.
1.5 Exercise of Warrants on Termination Date. If as of the Termination
----------------------------------------
Date the Warrants are in the money based on the cash or other property to be
received, such exercise shall take place automatically with respect to all then
outstanding and exercisable (but not exercised) Warrants (the "Termination Date
Exercise"), on a net exercise basis, immediately prior to the Termination Date;
provided, however, that the Company may condition such exercise on the delivery
by the Warrantholder of a duly completed Election to Purchase and the reasonable
satisfaction of the Company that all applicable securities laws have been
complied with, which the Company shall give notice to the Warrantholder of
within ten (10) days prior to the Termination Date. No such Termination Date
Exercise shall take place if such issuance would not comply with applicable
securities laws, whereupon the Termination Date shall occur as scheduled.
2. CERTAIN ADJUSTMENTS.
-------------------
2.1. Stock Dividends. If at any time while this Warrant remains
---------------
outstanding and unexpired, the Company pays a dividend or makes a distribution
with respect to the Common Stock payable in shares of Common Stock, then the
Exercise Price shall be adjusted, as of the record date of stockholders
established for such purpose (or if no such record is taken, as at the date of
such payment or distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or distribution by a
fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(B) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution. The Warrantholder
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of shares of Common Stock (calculated to the nearest
whole share) obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of shares of Common Stock issuable upon
the exercise hereof immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. The
provisions of this Section 2.1 shall not apply under any of the circumstances
for which an adjustment is provided under Sections 2.2, 2.3 or 2.4.
2.2. Mergers, Consolidations or Sale of Assets. If at any time while this
-----------------------------------------
Warrant remains outstanding and unexpired, there shall be a capital
reorganization of the shares of the Company's capital stock (other than a
combination, reclassification, exchange or subdivision otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation in which the Company is not the surviving corporation (collectively,
a "Corporate Transaction"), then lawful provision shall be made so that such
successor corporation or entity shall assume this Warrant such that the
Warrantholder shall thereafter be entitled to receive, upon exercise of this
Warrant, during the period specified in this Warrant and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such Corporate
Transaction to which a holder of the securities deliverable upon exercise of
this Warrant would have been entitled under the provisions of the agreement in
such Corporate Transaction if this Warrant had been exercised immediately prior
to such Corporate Transaction. Appropriate adjustment (as determined in good
faith
3
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Confidential
by the Company's Board of Directors after taking into consideration all
factors it deems appropriate, including, without limitation, recent sale and
offer prices of the capital stock of the Company in private transactions
negotiated at arm's length) shall be made in the application of the provisions
of this Warrant with respect to the rights and interests of the Warrantholder
after the Corporate Transaction to the end that the provisions of this Warrant
(including adjustment of the Exercise Price then in effect and the number of
shares of Common Stock issuable under this Warrant) shall be applicable after
the Corporate Transaction, as near as reasonably may be, in relation to any
shares or other property deliverable after the Corporate Transaction upon
exercise of this Warrant. The provisions of this Section 2.2 shall similarly
apply to successive reorganizations, consolidations or mergers.
2.3. Reclassification. If the Company at any time shall, by subdivision,
----------------
combination or reclassification or securities or otherwise, change any of the
securities issuable under this Warrant into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as a result of such change with respect to the securities issuable
under this Warrant immediately prior to such subdivision, combination,
reclassification or other change.
2.4. Subdivision or Combination of Shares. If at any time while this
------------------------------------
Warrant remains outstanding and unexpired, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then the Exercise Price shall be proportionately increased in the case of
a combination of such shares, or shall be proportionately decreased in the case
of a subdivision of such shares, and the number of shares of Common Stock
issuable upon exercise of the Warrant shall thereafter be adjusted to equal the
product obtained by multiplying the number of shares of Common Stock issuable
under this Warrant immediately prior to such Exercise Price adjustment by a
fraction (A) the numerator of which shall be the Exercise Price immediately
prior to such adjustment, and (B) the denominator of which shall be the Exercise
Price immediately after such adjustment.
2.5. Liquidating Dividends, Etc. If the Company at any time while the
---------------------------
Warrant remains outstanding and unexpired makes a distribution of its assets to
the holders of its Common Stock as a dividend in liquidation or by way of return
of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
Sections 2.1 through 2.4), the holder of this Warrant shall be entitled to
receive upon the exercise hereof, in addition to the shares of Common Stock
receivable upon such exercise, and without payment of any consideration other
than the Exercise Price, an amount in cash equal to the value of such
distribution per share of Common Stock multiplied by the number of shares of
Common Stock which, on the record date for such distribution, are issuable upon
exercise of this Warrant (with no further adjustment being made following any
event which causes a subsequent adjustment in the number of shares of Common
Stock issuable upon the exercise hereof), and an appropriate provision therefor
should be made a part of any such distribution. The value of a distribution
which is paid in other than cash shall be determined in good faith by the Board
of Directors.
2.6. Notice of Adjustments. Whenever any of the Exercise Price or the
---------------------
number of securities purchasable under the terms of this Warrant at that
Exercise Price shall be adjusted pursuant to Section 2 hereof, the Company shall
promptly notify the Warrantholder in writing of such adjustment, setting forth
in reasonable detail the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares of Common Stock or other securities issuable at that
Exercise Price after giving effect to such adjustment. Such notice shall be
mailed (by first class and postage prepaid) to the registered Warrantholder. In
the event of:
4
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Confidential
(a) The taking by the Company of a record of the holders of any class
of securities of the Company for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right for which no
adjustment is required by the operation of this Section 2,
(b) Any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to any other person or any
consolidation or merger involving the Company for which no adjustment is
required by the operation of this Section 2, or
(c) Any voluntary or involuntary dissolution, liquidation, or
winding-up of the Company,
the Company will mail (by first class and postage prepaid) to the Warrantholder,
at its last address at least ten (10) days prior to the earliest date specified
therein as described below, a notice specifying:
(i) The date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and
(ii) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation
or winding-up is expected to become effective and the record date for
determining shareholders entitled to vote thereon.
Failure to give any notice required under this Section 2.6, or any defect
in such notice, shall not affect the legality or validity of the underlying
corporate action taken or transaction entered into by the Company.
3. FRACTIONAL SHARES.
-----------------
No fractional shares shall be issued in connection with any exercise of
this Warrant. In lieu of the issuance of such fractional share, the Company
shall make a cash payment equal to the then fair market value of such fractional
share as determined under Section 1.3.
4. RESERVATION OF COMMON STOCK.
---------------------------
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of this Warrant, a sufficient number of shares of Common
Stock to effect the exercise of the entire Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of the entire Warrant, in addition to such other remedies as
shall be available to the holder of this Warrant, the Company will use its
reasonable efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
5. PRIVILEGE OF STOCK OWNERSHIP.
----------------------------
Other than as set forth herein, prior to the exercise of this Warrant and
the issuance to the Warrantholder of certificates representing the resulting
shares of Common Stock, and except as
5
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Confidential
otherwise provided herein, the Warrantholder shall not be entitled, by virtue of
holding this Warrant, to any rights of a Stockholder of the Company, including
(without limitation) the right to vote, receive dividends or other distributions
or be notified of Stockholder meetings, and such holder shall not be entitled to
any notice or other communication concerning the business or affairs of the
Company, except as required by law.
6. LIMITATION OF LIABILITY.
-----------------------
No provision hereof, in the absence of affirmative action by the holder
hereof to purchase the securities issuable under this Warrant, and no mere
enumeration herein of the rights of privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price or as a Stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. TRANSFERS AND EXCHANGES.
-----------------------
This Warrant may be transferred or assigned in whole or in part at any time
or from time to time on or after December 8, 1999, provided such transfer
complies with all applicable federal and state securities laws and the
requirements of any legend on this Warrant.
8. PAYMENT OF TAXES.
----------------
The Company shall pay all stamp or similar issue or transfer taxes payable
in respect of the issue or delivery of the securities issuable under this
Warrant. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of the securities issuable under this Warrant in any name
other than that of the Warrantholder, and in such case, the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Company's satisfaction
that no such tax or other charge is due.
9. NO IMPAIRMENT OF RIGHTS.
-----------------------
The Company hereby agrees that it will not, through the amendment of its
Certificate of Incorporation or otherwise, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate in order to protect the rights
of the Warrantholder against impairment.
6
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Confidential
10. SUCCESSORS AND ASSIGNS.
----------------------
The terms and provisions of this Warrant shall be binding upon the Company
and the Warrantholder and their respective successors and assigns.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
-------------------------------------------------
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and in case of loss,
theft or destruction, upon receipt of an indemnity or security reasonably
satisfactory to the Company, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new warrant of
like tenor and dated as of such cancellation, in lieu of this Warrant.
12. SECURITIES LAW MATTERS.
----------------------
Warrantholder represents to the Company as follows:
(a) the Warrants and Common Stock to be acquired by Warrantholder
pursuant hereto will be acquired for its own account and not with a view to, or
intention of, distribution thereof in violation of the Securities Act of 1933
(the "Securities Act") or any applicable state securities laws, and such
securities will not be disposed of in contravention of the Securities Act or any
applicable state securities laws;
(b) the Warrantholder understands that (a) the Warrants and Common
Stock issuable on exercise have not been registered under the Securities Act,
nor qualified under the securities laws of any other jurisdiction, (b) such
securities cannot be resold unless they subsequently are registered under the
Securities Act and qualified under applicable state securities laws, unless the
Company determines that exemptions from such registration and qualification
requirements are available, and (c) this Warrant does not grant the
Warrantholder any right to require such registration or qualification;
(c) Warrantholder is familiar with the term "accredited investor" as
defined in Rule 501 under the Securities Act and investor is an "accredited
investor" within the meaning of such term in Rule 501 under the Securities Act;
(d) Warrantholder is sophisticated in financial matters and the
market for Internet companies and is able to evaluate the risks and benefits of
the investment in the Warrants and Common Stock issuable on exercise;
(e) Warrantholder is able to bear the economic risk of its investment
in the Warrants and the Common Stock issuable on exercise for an indefinite
period of time; and
(f) Warrantholder has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of securities and
has had full access to such other information concerning the Company as investor
has requested.
7
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13. SATURDAYS, SUNDAYS, HOLIDAYS.
----------------------------
If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a legal holiday.
14. GOVERNING LAW.
--------------
This Warrant shall be construed, interpreted, and the rights of the Company
and the Warrantholder determined in accordance with the internal laws of the
State of Delaware, without regard to the conflict of laws provision thereof.
15. BENEFITS OF THIS WARRANT.
-------------------------
Nothing in this Warrant shall be construed to give any person other than
the Company and the registered Warrantholder any legal or equitable right,
remedy or claim.
16. COUNTERPARTS.
-------------
This Warrant may be exercised in counterpart with each constitution; an
original and together constituting but one and the same Warrant.
(signature page follows)
8
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Confidential
IT WITNESS WHEREOF, drkoop.com, Inc. has caused this Warrant to be duly
executed and delivered to the Warrantholder identified below on the date first
set forth above.
drkoop.com, Inc.
By:
-----------------------------------
Donald W. Hackett
Chief Executive Officer
Dated: July 1, 1999
Acknowledged and Accepted:
- --------------------------
America Online, Inc.
By:
-----------------------------------
Name:
Title:
Address for Notice:
22000 AOL Way
Dulles, VA 20166
Attention: General Counsel
9
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Confidential
ELECTION TO PURCHASE
--------------------
drkoop.com, Inc.
________________
________________
Ladies and Gentlemen:
The undersigned hereby elects to purchase, pursuant to the provisions of
the Warrant dated July 1, 1999 held by the undersigned, _________ shares of the
Common Stock of drkoop.com, Inc., a Delaware corporation.
Payment of the per share purchase price required under such Warrant
[accompanies this Election to Purchase.][shall be made pursuant to the net
exercise provision contained in Section 1.3 of the Warrant.]
The undersigned hereby confirms the representations made in Section 12 of
the Warrant are true and correct as of the date of this Election to Purchase.
Dated: ___________________, 200_
-----------------------------------
Print Name of Warrantholder
By
-----------------------------------
Address:
-----------------------------------
-----------------------------------
10
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EXHIBIT 10.54
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
PERFORMANCE WARRANT TO PURCHASE
1,570,932 SHARES OF COMMON STOCK
of
drkoop.com, Inc.
a Delaware corporation
Issued
July 1, 1999
THIS CERTIFIES THAT, for value received, America Online, Inc. (as the
context requires, "AOL" or the "Warrantholder") is entitled to purchase, on the
terms hereof, up to one million five hundred seventy thousand nine hundred
thirty-two (1,570,932) shares (subject to adjustment as set forth herein,
"Warrant Stock"), of common stock, par value $.001 per share ("Common Stock") of
drkoop.com, Inc., a Delaware corporation (the "Company"), at a purchase price
and upon the terms and conditions as set forth herein at a purchase price and
upon the terms and conditions as set forth herein.
1 EXERCISE OF WARRANT.
The terms and conditions upon which this Warrant may be exercised and the
shares of Common Stock covered hereby that may be purchased, are as follows:
1.1 Exercise.
(1) This Warrant is being issued pursuant to an Interactive
Services Agreement, dated as of the date hereof (as same may be amended, the
"ISA"), between the Company and AOL. All terms used but not defined herein
shall have the meanings set forth in the ISA. This Warrant may be exercised, in
whole or in part, with respect to all of the Warrant Stock, at such times as
shall be determined in accordance with Sections 1.1(a)(i) through (iv) below:
(2) upon the first anniversary of the date of issuance of
this Warrant (the "Issuance Date"), 392,733 shares of Warrant Stock shall vest
and become immediately exercisable if, but only if, during the immediately
preceding 12 months (the "First
____________________
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designed at * * *. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
Confidential
Year") (A) no less than * * * Page Views (as such term is defined in the ISA)
were attributable to AOL in accordance with the terms of the ISA, or (B) no less
than * * * Page Views were accomplished by the Company, of which no less than *
* * Page Views were attributable to AOL in accordance with the terms of the ISA
(as the case may be, the "First Threshold");
(3) upon the second anniversary of the Issuance Date,
392,733 shares of Warrant Stock shall vest and become immediately exercisable
if, but only if, during the immediately preceding 12 months (the "Second Year")
(A) no less than * * * Page Views were attributable to AOL in accordance with
the terms of the ISA, or (B) no less than * * * Page Views were accomplished by
--
the Company, of which no less than * * * Page Views were attributable to AOL in
accordance with the terms of the ISA (as the case may be, the "Second
Threshold");
(4) upon the third anniversary of the Issuance Date,
392,733 shares of Warrant Stock shall vest and become immediately exercisable
if, but only if, during the immediately preceding 12 months (the "Third Year")
(A) no less than * * * Page Views were attributable to AOL in accordance with
the terms of the ISA, or (B) no less than * * * Page Views were accomplished by
--
the Company, of which no less than * * * Page Views were attributable to AOL in
accordance with the terms of the ISA (as the case may be, the "Third
Threshold"); and
(5) upon the fourth anniversary of the Issuance Date,
392,733 shares of Warrant Stock shall vest and become immediately exercisable
if, but only if, during the immediately preceding 12 months (the "Fourth Year";
collectively with the First Year, the Second Year, and the Third Year, "Years";
each of the Years separately, a "Year") (A) no less than * * * Page Views were
attributable to AOL in accordance with the terms of the ISA, or (B) no less
--
than * * * Page Views were accomplished by the Company, of which no less than *
* * Page Views were attributable to AOL in accordance with the terms of the ISA
(as the case may be, the "Final Threshold"; collectively with the First
Threshold, the Second Threshold, and the Third Threshold, the "Thresholds"; each
of the Thresholds separately, a "Threshold").
Whether a Threshold has been met during its respective Year shall be
assessed independently and not cumulatively with respect to prior
Thresholds or Years, such that if a Threshold has not been met during its
respective Year, the shares of Warrant Stock subject to vesting hereunder
with respect to such Year shall not otherwise be eligible to vest hereunder
in subsequent Years or under any other circumstances. Notwithstanding the
foregoing, in the event the Company has not accomplished Site and Content
Preparation in compliance with the seventy-five (75) day period set forth
in Section 7.7 (Site and Content Preparation) of the ISA (subject to any
extension that may be granted in accordance therewith due to a failure of
AOL to perform its obligations thereunder), then the First Threshold
targets set forth above shall be reduced on a pro rata basis by multiplying
each such Threshold by a fraction (A) the numerator of which shall be the
number of days after such seventy-five (75) day period until which the
Company accomplishes Site and Content Preparation, and (B) the denominator
of which shall be the number 365.
____________________
* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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(6) (b) Notwithstanding the foregoing, in the event of the
Company's "Change of Control" to a "Named Entity" (as such terms are defined in
the ISA, a "Prohibited Event") this Warrant may be exercised, in whole or in
part, with respect to all vested shares of Warrant Stock and such number of
unvested shares of Warrant Stock as equal the total number of shares of Warrant
Stock that would have vested hereunder had all relevant Thresholds been met
during the then current Year as well as all remaining Years, measured as of
immediately prior to the consummation of the Prohibited Event.
(c) Notwithstanding the foregoing, in the event AOL elects to
terminate the ISA in accordance with its terms upon the Company's material
breach of its provisions, this Warrant may be exercised, in whole or in
part, with respect to all vested shares of Warrant Stock and such number of
unvested shares of Warrant Stock as equal the total number of shares of
Warrant Stock that would have vested hereunder had all relevant Thresholds
been met during the then current Year as well as the next consecutive Year.
(d) Notwithstanding the foregoing, for any Warrant Share to vest
hereunder, the ISA (or, if the ISA is superceded, replaced or extended by a
substantially similar agreement between the Company and AOL, then such
other agreement) must have been in full force and effect within six (6)
months of the vesting date thereof.
(7) (e) Notwithstanding the foregoing, this Warrant may
not be exercised under any circumstances prior to June 30, 2000 or after 5:00
p.m., Austin, Texas time on June 30, 2008 (the "Termination Date"), after which
time this Warrant shall terminate and shall be void and of no further force of
effect.
1.2 Exercise Price. The purchase price for the shares of Common Stock to
--------------
be issued upon exercise of this Warrant shall be $20.00 per share, subject to
adjustment as set forth herein (the "Exercise Price").
1.3 Method of Exercise. The exercise of the purchase rights evidenced by
------------------
this Warrant shall be effected by (a) the surrender of this Warrant, together
with a duly executed copy of the form of Election to Purchase attached hereto,
to the Company at its principal office and (b) the delivery of the Exercise
Price multiplied by the number of shares for which the purchase rights hereunder
are being exercised, payable (x) by certified check, corporate check of America
Online, Inc., or wire transfer of immediately available funds payable to the
Company's order or (y) on a net basis, such that, without the exchange of any
funds, the Warrantholder receives that number of shares otherwise issuable (or
other consideration payable) upon exercise of this Warrant less that number of
shares of Warrant Stock having an aggregate fair market value (as defined below)
at the time of exercise (i.e., the date a duly executed Election to Purchase is
delivered to the Company) equal to the aggregate Exercise Price that would
otherwise have been paid by the Warrantholder for the shares of the Warrant
Stock issuable. In connection with such exercise the holder shall, if requested
by the Company, include confirmation of the accuracy of the representations set
forth in Section 12 and otherwise as reasonably requested by the Company to
evidence compliance with any applicable securities laws as of the date of
exercise. For purposes of the foregoing, "fair market value" of the Warrant
Stock on any date shall be the average of the Quoted Prices of the Common Stock
of the Company for 20 consecutive trading days ending the trading day prior to
such date (if, during such 30-day period, there is a day in which no trades are
reported, such date shall be discarded and the 20-day period extended). The
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"Quoted Price" of the Common Stock as reported by Nasdaq or, if the principal
trading market for the Common Stock is then a securities exchange, the last
reported sales price of the Common Stock on such exchange which shall be
consolidated trading if applicable to such exchange, or if neither so reported
or listed, the last reported bid price of the Common Stock. In the absence of
quotation or listing, such determination as to "Quoted Price" shall be made in
good faith by the Board of Directors of the Company after taking into
consideration all factors it deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of the Company in private
transactions negotiated at arm's length.
1.4 Issuance of Shares. In the event that the purchase rights evidenced
------------------
by this Warrant are exercised in whole or in part in accordance with the terms
of this Warrant, a certificate or certificates for the purchased shares shall be
issued to the Warrantholder as soon as practicable. The Warrant Stock shall be
stamped or imprinted with a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
NO SALE OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY AND WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT."
In the event the purchase rights evidenced by this Warrant are exercised in
part, the Company will also issue to the Warrantholder a new warrant within a
reasonable time representing the unexercised purchase rights.
1.5 Exercise of Warrants on Termination Date. If as of the
----------------------------------------
Termination Date the Warrants are in the money based on the cash or other
property to be received, such exercise shall take place automatically with
respect to all then outstanding and exercisable (but not exercised) Warrants
(the "Termination Date Exercise"), on a net exercise basis, immediately prior to
the Termination Date; provided, however, that the Company may condition such
exercise on the delivery by the Warrantholder of a duly completed Election to
Purchase and the reasonable satisfaction of the Company that all applicable
securities laws have been complied with, which the Company shall give notice to
the Warrantholder of within ten (10) days prior to the Termination Date. No
such Termination Date Exercise shall take place if such issuance would not
comply with applicable securities laws, whereupon the Termination Date shall
occur as scheduled.
2 CERTAIN ADJUSTMENTS.
2.1 Stock Dividends. If at any time while this Warrant remains
outstanding and unexpired, the Company pays a dividend or makes a distribution
with respect to the Common Stock payable in shares of Common Stock, then the
Exercise Price shall be adjusted, as of the record date of stockholders
established for such purpose (or if no such record is taken, as at the date of
such payment or distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or distribution by a
fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(B) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution. The
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Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Common Stock (calculated
to the nearest whole share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon the exercise hereof immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment. The provisions of this Section 2.1 shall not apply under any of the
circumstances for which an adjustment is provided under Sections 2.2, 2.3 or
2.4.
2.2 Mergers, Consolidations or Sale of Assets. If at any time while this
-----------------------------------------
Warrant remains outstanding and unexpired, there shall be a capital
reorganization of the shares of the Company's capital stock (other than a
combination, reclassification, exchange or subdivision otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation in which the Company is not the surviving corporation(collectively,
a "Corporate Transaction"), then lawful provision shall be made so that such
successor corporation or entity shall assume this Warrant such that the
Warrantholder shall thereafter be entitled to receive, upon exercise of this
Warrant, during the period specified in this Warrant and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such Corporate
Transaction to which a holder of the securities deliverable upon exercise of
this Warrant would have been entitled under the provisions of the agreement in
such Corporate Transaction if this Warrant had been exercised immediately prior
to such Corporate Transaction. Appropriate adjustment (as determined in good
faith by the Company's Board of Directors after taking into consideration all
factors it deems appropriate, including, without limitation, recent sale and
offer prices of the capital stock of the Company in private transactions
negotiated at arm's length) shall be made in the application of the provisions
of this Warrant with respect to the rights and interests of the Warrantholder
after the Corporate Transaction to the end that the provisions of this Warrant
(including adjustment of the Exercise Price then in effect and the number of
shares of Common Stock issuable under this Warrant) shall be applicable after
the Corporate Transaction, as near as reasonably may be, in relation to any
shares or other property deliverable after the Corporate Transaction upon
exercise of this Warrant. The provisions of this Section 2.2 shall similarly
apply to successive reorganizations, consolidations or mergers.
2.3 Reclassification. If the Company at any time shall, by subdivision,
----------------
combination or reclassification or securities or otherwise, change any of the
securities issuable under this Warrant into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as a result of such change with respect to the securities issuable
under this Warrant immediately prior to such subdivision, combination,
reclassification or other change.
2.4 Subdivision or Combination of Shares. If at any time while this
------------------------------------
Warrant remains outstanding and unexpired, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then the Exercise Price shall be proportionately increased in the case of
a combination of such shares, or shall be proportionately decreased in the case
of a subdivision of such shares, and the number of shares of Common Stock
issuable upon exercise of the Warrant shall thereafter be adjusted to equal the
product obtained by multiplying the number of shares of Common Stock issuable
under this Warrant
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immediately prior to such Exercise Price adjustment by a fraction (A) the
numerator of which shall be the Exercise Price immediately prior to such
adjustment, and (B) the denominator of which shall be the Exercise Price
immediately after such adjustment.
2.5 Liquidating Dividends, Etc. If the Company at any time while the
--------------------------
Warrant remains outstanding and unexpired makes a distribution of its assets to
the holders of its Common Stock as a dividend in liquidation or by way of return
of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
Sections 2.1 through 2.4), the holder of this Warrant shall be entitled to
receive upon the exercise hereof, in addition to the shares of Common Stock
receivable upon such exercise, and without payment of any consideration other
than the Exercise Price, an amount in cash equal to the value of such
distribution per share of Common Stock multiplied by the number of shares of
Common Stock which, on the record date for such distribution, are issuable upon
exercise of this Warrant (with no further adjustment being made following any
event which causes a subsequent adjustment in the number of shares of Common
Stock issuable upon the exercise hereof), and an appropriate provision therefor
should be made a part of any such distribution. The value of a distribution
which is paid in other than cash shall be determined in good faith by the Board
of Directors.
2.6 Notice of Adjustments. Whenever any of the Exercise Price or the
---------------------
number of securities purchasable under the terms of this Warrant at that
Exercise Price shall be adjusted pursuant to Section 2 hereof, the Company shall
promptly notify the Warrantholder in writing of such adjustment, setting forth
in reasonable detail the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares of Common Stock or other securities issuable at that
Exercise Price after giving effect to such adjustment. Such notice shall be
mailed (by first class and postage prepaid) to the registered Warrantholder. In
the event of:
(a) The taking by the Company of a record of the holders of any class
of securities of the Company for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right for which no
adjustment is required by the operation of this Section 2,
(b) Any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to any other person or any
consolidation or merger involving the Company for which no adjustment is
required by the operation of this Section 2, or
(c) Any voluntary or involuntary dissolution, liquidation, or
winding-up of the Company,
the Company will mail (by first class and postage prepaid) to the Warrantholder,
at its last address at least ten (10) days prior to the earliest date specified
therein as described below, a notice specifying:
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(1) (i) The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and
(2) (ii) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
shareholders entitled to vote thereon.
Failure to give any notice required under this Section 2.6, or any defect
in such notice, shall not affect the legality or validity of the underlying
corporate action taken or transaction entered into by the Company.
3 FRACTIONAL SHARES.
No fractional shares shall be issued in connection with any exercise of
this Warrant. In lieu of the issuance of such fractional share, the Company
shall make a cash payment equal to the then fair market value of such fractional
share as determined under Section 1.3.
4 RESERVATION OF COMMON STOCK.
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of this Warrant, a sufficient number of shares of Common
Stock to effect the exercise of the entire Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of the entire Warrant, in addition to such other remedies as
shall be available to the holder of this Warrant, the Company will use its
reasonable efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
5 PRIVILEGE OF STOCK OWNERSHIP.
Other than as set forth herein, prior to the exercise of this Warrant and
the issuance to the Warrantholder of certificates representing the resulting
shares of Common Stock, and except as otherwise provided herein, the
Warrantholder shall not be entitled, by virtue of holding this Warrant, to any
rights of a Stockholder of the Company, including (without limitation) the right
to vote, receive dividends or other distributions or be notified of Stockholder
meetings, and such holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company, except as
required by law.
6 LIMITATION OF LIABILITY.
No provision hereof, in the absence of affirmative action by the holder
hereof to purchase the securities issuable under this Warrant, and no mere
enumeration herein of the rights of privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price or as a Stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
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7 TRANSFERS AND EXCHANGES.
This Warrant may be transferred or assigned with respect to any vested
shares of Warrant Stock, in whole or in part, at any time or from time to time,
on or after December 8, 1999, provided such transfer complies with all
applicable federal and state securities laws and the requirements of any legend
on this Warrant. Other than by merger or operation of law, this Warrant may not
under any circumstances be transferred or assigned with respect to any unvested
shares of Warrant Stock.
8 PAYMENT OF TAXES.
The Company shall pay all stamp or similar issue or transfer taxes payable
in respect of the issue or delivery of the securities issuable under this
Warrant. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of the securities issuable under this Warrant in any name
other than that of the Warrantholder, and in such case, the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Company's satisfaction
that no such tax or other charge is due.
9 NO IMPAIRMENT OF RIGHTS.
10 The Company hereby agrees that it will not, through the amendment of
its Certificate of Incorporation or otherwise, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order to
protect the rights of the Warrantholder against impairment.
11 successors and assigns.
The terms and provisions of this Warrant shall be binding upon the Company
and the Warrantholder and their respective successors and assigns.
12 LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and in case of loss,
theft or destruction, upon receipt of an indemnity or security reasonably
satisfactory to the Company, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new warrant of
like tenor and dated as of such cancellation, in lieu of this Warrant.
13 SECURITIES LAW MATTERS.
Warrantholder represents to the Company as follows:
(a) the Warrants and Common Stock to be acquired by Warrantholder
pursuant hereto will be acquired for its own account and not with a view to, or
intention of, distribution thereof in violation of the Securities Act of 1933
(the "Securities Act") or any
8
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applicable state securities laws, and such securities will not be disposed of in
contravention of the Securities Act or any applicable state securities laws ;
(b) the Warrantholder understands that (a) the Warrants and Common
Stock issuable on exercise have not been registered under the Securities Act,
nor qualified under the securities laws of any other jurisdiction, (b) such
securities cannot be resold unless they subsequently are registered under the
Securities Act and qualified under applicable state securities laws, unless the
Company determines that exemptions from such registration and qualification
requirements are available, and (c) this Warrant does not grant the
Warrantholder any right to require such registration or qualification;
(c) Warrantholder is familiar with the term "accredited investor" as
defined in Rule 501 under the Securities Act and investor is an "accredited
investor" within the meaning of such term in Rule 501 under the Securities Act;
(d) Warrantholder is sophisticated in financial matters and the
market for Internet companies and is able to evaluate the risks and benefits of
the investment in the Warrants and Common Stock issuable on exercise;
(e) Warrantholder is able to bear the economic risk of its investment
in the Warrants and the Common Stock issuable on exercise for an indefinite
period of time; and
(f) Warrantholder has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of securities and
has had full access to such other information concerning the Company as investor
has requested.
14 Saturdays, Sundays, holidays.
If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a legal holiday.
15 14. GOVERNING LAW.
This Warrant shall be construed, interpreted, and the rights of the Company
and the Warrantholder determined in accordance with the internal laws of the
State of Delaware, without regard to the conflict of laws provision thereof.
16 15. BENEFITS OF THIS WARRANT.
Nothing in this Warrant shall be construed to give any person other than
the Company and the registered Warrantholder any legal or equitable right,
remedy or claim.
17 16. COUNTERPARTS.
This Warrant may be exercised in counterpart with each constitution; an
original and together constituting but one and the same Warrant.
(signature page follows)
9
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Confidential
IT WITNESS WHEREOF, drkoop.com, Inc. has caused this Warrant to be duly
executed and delivered to the Warrantholder identified below on the date first
set forth above.
drkoop.com, Inc.
By:
------------------------------
Donald W. Hackett
Chief Executive Officer
Dated: July 1, 1999
Acknowledged and Accepted:
- --------------------------
America Online, Inc.
By:
----------------
Name:
Title:
Address for Notice:
22000 AOL Way
Dulles, VA 20166
Attention: General Counsel
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ELECTION TO PURCHASE
--------------------
drkoop.com, Inc.
________________
________________
Ladies and Gentlemen:
The undersigned hereby elects to purchase, pursuant to the provisions of
the Warrant dated July 1, 1999 held by the undersigned, _________ shares of the
Common Stock of drkoop.com, Inc., a Delaware corporation.
Payment of the per share purchase price required under such Warrant
[accompanies this Election to Purchase.][shall be made pursuant to the net
exercise provision contained in Section 1.3 of the Warrant.]
The undersigned hereby confirms the representations made in Section 12 of
the Warrant are true and correct as of the date of this Election to Purchase.
Dated: ___________________, 200_
---------------------------
Print Name of Warrantholder
By
-------------------------
Address: ---------------------------
---------------------------
11
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Exhibit 10.55
-------------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
PERFORMANCE WARRANT TO PURCHASE
2,749,131 SHARES OF COMMON STOCK
of
drkoop.com, Inc.
a Delaware corporation
Issued
July 1, 1999
THIS CERTIFIES THAT, for value received, America Online, Inc. (as the
context requires, "AOL" or the "Warrantholder") is entitled to purchase, on the
terms hereof, , up to two million seven hundred forty-nine thousand one hundred
thirty-one (2,749,131) shares (subject to adjustment as set forth herein,
"Warrant Stock"), of common stock, par value $.001 per share ("Common Stock") of
drkoop.com, Inc., a Delaware corporation (the "Company"), at a purchase price
and upon the terms and conditions as set forth herein.
1 EXERCISE OF WARRANT.
The terms and conditions upon which this Warrant may be exercised and the
shares of Common Stock covered hereby that may be purchased, are as follows:
1.1 Exercise / Exercise Price.
(1) This Warrant is being issued pursuant to an
Interactive Services Agreement, dated as of the date hereof (as same may be
amended, the "ISA"), between the Company and AOL. All terms used but not defined
herein shall have the meanings set forth in the ISA. This Warrant may be
exercised, in whole or in part, with respect to all of the Warrant Stock, at
such times and at such purchase price as shall be determined in accordance with
Sections 1.1(a)(i) through (iv) below:
(2) 392,733 shares, subject to adjustment, of Warrant
Stock shall vest and become immediately exercisable on or after June 30, 2000
if, but only if, the first
- ------------------------------
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designed at * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
<PAGE>
Confidential
threshold ("First Threshold") of * * * PMR
Activations (as such term is defined in the ISA) is accomplished in accordance
with the ISA, issuable hereunder upon exercise at a per share purchase price
equal to 80% of the fair market value (as defined herein) thereof as measured on
the date the First Threshold was passed (subject to adjustment as set forth
herein, the "First Exercise Price");
(3) 392,733 shares, subject to adjustment, of Warrant
Stock shall vest and become immediately exercisable on or after June 30, 2001
if, but only if, the second threshold ("Second Threshold") of * * * PMR
Activations is accomplished in accordance with the ISA, issuable hereunder upon
exercise at a per share purchase price equal to 75% of the fair market value
thereof as measured on the date the Second Threshold was passed (subject to
adjustment as set forth herein, the "Second Exercise Price");
(4) 785,466 shares, subject to adjustment, of Warrant
Stock shall vest and become immediately exercisable time on or after June 30,
2002 if, but only if, the third threshold ("Third Threshold") of * * * PMR
Activations is accomplished in accordance with the ISA, issuable hereunder upon
exercise at a per share purchase price equal to 70% of the fair market value
thereof as measured on the date the Third Threshold was passed (subject to
adjustment as set forth herein, the "Third Exercise Price"); and
(5) 1,178,199 shares, subject to adjustment, of
Warrant Stock shall vest and become immediately exercisable time on or after
June 30, 2003 if, but only if, the fourth threshold ("Final Threshold";
collectively with the First Threshold, the Second Threshold, and the Third
Threshold, the "Thresholds"; each of the Thresholds separately, a "Threshold")
of * * * PMR Activations is accomplished in accordance with the ISA, issuable
hereunder upon exercise at a per share purchase price equal to 65% of the fair
market value thereof as measured on the date the Final Threshold was passed
(subject to adjustment as set forth herein, the "Final Exercise Price";
collectively with the First Exercise Price, the Second Exercise Price, and the
Third Exercise Price, the "Exercise Price").
(6) (b) Notwithstanding the foregoing, in the event
of the Company's "Change of Control" to a "Named Entity" (as such terms are
defined in the ISA, a "Prohibited Event") this Warrant may be exercised, in
whole or in part, with respect to all vested shares of Warrant Stock and such
number of unvested shares of Warrant Stock as equal the total number of shares
of Warrant Stock that would have vested hereunder had all relevant Thresholds
been met, with the Exercise Price determined with reference to the fair market
value measured as of immediately prior to the consummation of the Prohibited
Event.
(c) Notwithstanding the foregoing, for any Warrant Share to vest
hereunder, the ISA (or, if the ISA is superceded, replaced or extended by a
substantially similar agreement between the Company and AOL, then such
other agreement) must have been in full force and effect within six (6)
months of the vesting date thereof.
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* * * Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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(7) (d) Notwithstanding the foregoing, this Warrant
may not be exercised under any circumstances prior to June 30, 2000 or after
5:00 p.m., Austin, Texas time on June 30, 2008 (the "Termination Date"), after
which time this Warrant shall terminate and shall be void and of no further
force of effect.
1.2 Intentionally Omitted.
1.3 Method of Exercise. The exercise of the purchase rights evidenced by
------------------
this Warrant shall be effected by (a) the surrender of this Warrant, together
with a duly executed copy of the form of Election to Purchase attached hereto,
to the Company at its principal office and (b) the delivery of the Exercise
Price multiplied by the number of shares for which the purchase rights hereunder
are being exercised, payable (x) by certified check, corporate check of America
Online, Inc., or wire transfer of immediately available funds payable to the
Company's order or (y) on a net basis, such that, without the exchange of any
funds, the Warrantholder receives that number of shares otherwise issuable (or
other consideration payable) upon exercise of this Warrant less that number of
shares of Warrant Stock having an aggregate fair market value (as defined below)
at the time of exercise (i.e., the date a duly executed Election to Purchase is
delivered to the Company) equal to the aggregate Exercise Price that would
otherwise have been paid by the Warrantholder for the shares of the Warrant
Stock issuable. In connection with such exercise the holder shall, if requested
by the Company, include confirmation of the accuracy of the representations set
forth in Section 12 and otherwise as reasonably requested by the Company to
evidence compliance with any applicable securities laws as of the date of
exercise. For purposes of the foregoing, "fair market value" of the Warrant
Stock on any date shall be the average of the Quoted Prices of the Common Stock
of the Company for 20 consecutive trading days ending the trading day prior to
such date (if, during such 30-day period, there is a day in which no trades are
reported, such date shall be discarded and the 20-day period extended). The
"Quoted Price" of the Common Stock as reported by Nasdaq or, if the principal
trading market for the Common Stock is then a securities exchange, the last
reported sales price of the Common Stock on such exchange which shall be
consolidated trading if applicable to such exchange, or if neither so reported
or listed, the last reported bid price of the Common Stock. In the absence of
quotation or listing, such determination as to "Quoted Price" shall be made in
good faith by the Board of Directors of the Company after taking into
consideration all factors it deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of the Company in private
transactions negotiated at arm's length.
1.4 Issuance of Shares. In the event that the purchase rights evidenced by
------------------
this Warrant are exercised in whole or in part in accordance with the terms of
this Warrant, a certificate or certificates for the purchased shares shall be
issued to the Warrantholder as soon as practicable. The Warrant Stock shall be
stamped or imprinted with a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
NO SALE OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY AND WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO
THE
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COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT."
In the event the purchase rights evidenced by this Warrant are exercised in
part, the Company will also issue to the Warrantholder a new warrant within a
reasonable time representing the unexercised purchase rights.
1.5 Exercise of Warrants on Termination Date. If as of the
----------------------------------------
Termination Date the Warrants are in the money based on the cash or other
property to be received, such exercise shall take place automatically with
respect to all then outstanding and exercisable (but not exercised) Warrants
(the "Termination Date Exercise"), on a net exercise basis, immediately prior to
the Termination Date; provided, however, that the Company may condition such
exercise on the delivery by the Warrantholder of a duly completed Election to
Purchase and the reasonable satisfaction of the Company that all applicable
securities laws have been complied with, which the Company shall give notice to
the Warrantholder of within ten (10) days prior to the Termination Date. No
such Termination Date Exercise shall take place if such issuance would not
comply with applicable securities laws, whereupon the Termination Date shall
occur as scheduled.
2 CERTAIN ADJUSTMENTS.
2.1 Stock Dividends. If at any time while this Warrant remains outstanding
---------------
and unexpired, the Company pays a dividend or makes a distribution with respect
to the Common Stock payable in shares of Common Stock, then the Exercise Price
shall be adjusted, as of the record date of stockholders established for such
purpose (or if no such record is taken, as at the date of such payment or
distribution), to that price determined by multiplying the Exercise Price in
effect immediately prior to such payment or distribution by a fraction (A) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (B) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution. The Warrantholder
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of shares of Common Stock (calculated to the nearest
whole share) obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of shares of Common Stock issuable upon
the exercise hereof immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. The
provisions of this Section 2.1 shall not apply under any of the circumstances
for which an adjustment is provided under Sections 2.2, 2.3 or 2.4.
2.2 Mergers, Consolidations or Sale of Assets. If at any time while this
-----------------------------------------
Warrant remains outstanding and unexpired, there shall be a capital
reorganization of the shares of the Company's capital stock (other than a
combination, reclassification, exchange or subdivision otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation in which the Company is not the surviving corporation(collectively,
a "Corporate Transaction"), then lawful provision shall be made so that such
successor corporation or entity shall assume this Warrant such that the
Warrantholder shall thereafter be entitled to receive, upon exercise of this
Warrant, during the period specified in this Warrant and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such Corporate
Transaction to which a holder of the
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securities deliverable upon exercise of this Warrant would have been entitled
under the provisions of the agreement in such Corporate Transaction if this
Warrant had been exercised immediately prior to such Corporate Transaction.
Appropriate adjustment (as determined in good faith by the Company's Board of
Directors after taking into consideration all factors it deems appropriate,
including, without limitation, recent sale and offer prices of the capital stock
of the Company in private transactions negotiated at arm's length) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interests of the Warrantholder after the Corporate Transaction to the end
that the provisions of this Warrant (including adjustment of the Exercise Price
then in effect and the number of shares of Common Stock issuable under this
Warrant) shall be applicable after the Corporate Transaction, as near as
reasonably may be, in relation to any shares or other property deliverable after
the Corporate Transaction upon exercise of this Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reorganizations, consolidations
or mergers.
2.3 Reclassification. If the Company at any time shall, by subdivision,
----------------
combination or reclassification or securities or otherwise, change any of the
securities issuable under this Warrant into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as a result of such change with respect to the securities issuable
under this Warrant immediately prior to such subdivision, combination,
reclassification or other change.
2.4 Subdivision or Combination of Shares. If at any time while this
------------------------------------
Warrant remains outstanding and unexpired, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then the Exercise Price shall be proportionately increased in the case of
a combination of such shares, or shall be proportionately decreased in the case
of a subdivision of such shares, and the number of shares of Common Stock
issuable upon exercise of the Warrant shall thereafter be adjusted to equal the
product obtained by multiplying the number of shares of Common Stock issuable
under this Warrant immediately prior to such Exercise Price adjustment by a
fraction (A) the numerator of which shall be the Exercise Price immediately
prior to such adjustment, and (B) the denominator of which shall be the Exercise
Price immediately after such adjustment.
2.5 Liquidating Dividends, Etc. If the Company at any time while the
--------------------------
Warrant remains outstanding and unexpired makes a distribution of its assets to
the holders of its Common Stock as a dividend in liquidation or by way of return
of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
Sections 2.1 through 2.4), the holder of this Warrant shall be entitled to
receive upon the exercise hereof, in addition to the shares of Common Stock
receivable upon such exercise, and without payment of any consideration other
than the Exercise Price, an amount in cash equal to the value of such
distribution per share of Common Stock multiplied by the number of shares of
Common Stock which, on the record date for such distribution, are issuable upon
exercise of this Warrant (with no further adjustment being made following any
event which causes a subsequent adjustment in the number of shares of Common
Stock issuable upon the exercise hereof), and an appropriate
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provision therefor should be made a part of any such distribution. The value of
a distribution which is paid in other than cash shall be determined in good
faith by the Board of Directors.
2.6 Notice of Adjustments. Whenever any of the Exercise Price or the
---------------------
number of securities purchasable under the terms of this Warrant at that
Exercise Price shall be adjusted pursuant to Section 2 hereof, the Company shall
promptly notify the Warrantholder in writing of such adjustment, setting forth
in reasonable detail the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares of Common Stock or other securities issuable at that
Exercise Price after giving effect to such adjustment. Such notice shall be
mailed (by first class and postage prepaid) to the registered Warrantholder. In
the event of:
(a) The taking by the Company of a record of the holders of any class
of securities of the Company for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right for which no
adjustment is required by the operation of this Section 2,
(b) Any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to any other person or any
consolidation or merger involving the Company for which no adjustment is
required by the operation of this Section 2, or
(c) Any voluntary or involuntary dissolution, liquidation, or
winding-up of the Company,
the Company will mail (by first class and postage prepaid) to the Warrantholder,
at its last address at least ten (10) days prior to the earliest date specified
therein as described below, a notice specifying:
(1) (i) The date on which any such record is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and
(2) (ii) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
shareholders entitled to vote thereon.
Failure to give any notice required under this Section 2.6, or any defect
in such notice, shall not affect the legality or validity of the underlying
corporate action taken or transaction entered into by the Company.
6
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3 FRACTIONAL SHARES.
No fractional shares shall be issued in connection with any exercise of
this Warrant. In lieu of the issuance of such fractional share, the Company
shall make a cash payment equal to the then fair market value of such fractional
share as determined under Section 1.3.
4 RESERVATION OF COMMON STOCK.
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of this Warrant, a sufficient number of shares of Common
Stock to effect the exercise of the entire Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of the entire Warrant, in addition to such other remedies as
shall be available to the holder of this Warrant, the Company will use its
reasonable efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
5 PRIVILEGE OF STOCK OWNERSHIP.
Other than as set forth herein, prior to the exercise of this Warrant and
the issuance to the Warrantholder of certificates representing the resulting
shares of Common Stock, and except as otherwise provided herein, the
Warrantholder shall not be entitled, by virtue of holding this Warrant, to any
rights of a Stockholder of the Company, including (without limitation) the right
to vote, receive dividends or other distributions or be notified of Stockholder
meetings, and such holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company, except as
required by law.
6 LIMITATION OF LIABILITY.
No provision hereof, in the absence of affirmative action by the holder
hereof to purchase the securities issuable under this Warrant, and no mere
enumeration herein of the rights of privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price or as a Stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7 TRANSFERS AND EXCHANGES.
This Warrant may be transferred or assigned with respect to any vested
shares of Warrant Stock, in whole or in part, at any time or from time to time,
on or after December 8, 1999, provided such transfer complies with all
applicable federal and state securities laws and the requirements of any legend
on this Warrant. Other than by merger or operation of law, this Warrant may not
under any circumstances be transferred or assigned with respect to any unvested
shares of Warrant Stock.
8 PAYMENT OF TAXES.
The Company shall pay all stamp or similar issue or transfer taxes payable
in respect of the issue or delivery of the securities issuable under this
Warrant. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of the securities issuable under this Warrant in any name
other than that of the Warrantholder, and in such case, the Company shall not be
required to issue or deliver any stock
7
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certificate until such tax or other charge has been paid or it has been
established to the Company's satisfaction that no such tax or other charge is
due.
9 NO IMPAIRMENT OF RIGHTS.
10 The Company hereby agrees that it will not, through the amendment of its
Certificate of Incorporation or otherwise, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate in order to protect the rights
of the Warrantholder against impairment.
11 SUCCESSORS AND ASSIGNS.
The terms and provisions of this Warrant shall be binding upon the Company
and the Warrantholder and their respective successors and assigns.
12 LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and in case of loss,
theft or destruction, upon receipt of an indemnity or security reasonably
satisfactory to the Company, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new warrant of
like tenor and dated as of such cancellation, in lieu of this Warrant.
13 SECURITIES LAW MATTERS.
Warrantholder represents to the Company as follows:
(a) the Warrants and Common Stock to be acquired by Warrantholder
pursuant hereto will be acquired for its own account and not with a view to, or
intention of, distribution thereof in violation of the Securities Act of 1933
(the "Securities Act") or any applicable state securities laws, and such
securities will not be disposed of in contravention of the Securities Act or any
applicable state securities laws;
(b) the Warrantholder understands that (a) the Warrants and Common
Stock issuable on exercise have not been registered under the Securities Act,
nor qualified under the securities laws of any other jurisdiction, (b) such
securities cannot be resold unless they subsequently are registered under the
Securities Act and qualified under applicable state securities laws, unless the
Company determines that exemptions from such registration and qualification
requirements are available, and (c) this Warrant does not grant the
Warrantholder any right to require such registration or qualification;
8
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(c) Warrantholder is familiar with the term "accredited investor" as
defined in Rule 501 under the Securities Act and investor is an "accredited
investor" within the meaning of such term in Rule 501 under the Securities Act;
(d) Warrantholder is sophisticated in financial matters and the
market for Internet companies and is able to evaluate the risks and benefits of
the investment in the Warrants and Common Stock issuable on exercise;
(e) Warrantholder is able to bear the economic risk of its investment
in the Warrants and the Common Stock issuable on exercise for an indefinite
period of time; and
(f) Warrantholder has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of securities and
has had full access to such other information concerning the Company as investor
has requested.
14 SATURDAYS, SUNDAYS, HOLIDAYS.
If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a legal holiday.
15 14. GOVERNING LAW.
This Warrant shall be construed, interpreted, and the rights of the Company
and the Warrantholder determined in accordance with the internal laws of the
State of Delaware, without regard to the conflict of laws provision thereof.
16 15. BENEFITS OF THIS WARRANT.
Nothing in this Warrant shall be construed to give any person other than
the Company and the registered Warrantholder any legal or equitable right,
remedy or claim.
17 16. COUNTERPARTS.
This Warrant may be exercised in counterpart with each constitution; an
original and together constituting but one and the same Warrant.
(signature page follows)
9
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IT WITNESS WHEREOF, drkoop.com, Inc. has caused this Warrant to be duly
executed and delivered to the Warrantholder identified below on the date first
set forth above.
drkoop.com, Inc.
By:
-------------------------------
Donald W. Hackett
Chief Executive Officer
Dated: July 1, 1999
Acknowledged and Accepted:
- --------------------------
America Online, Inc.
By:
------------------------------
Name:
Title:
Address for Notice:
22000 AOL Way
Dulles, VA 20166
Attention: General Counsel
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ELECTION TO PURCHASE
--------------------
drkoop.com, Inc.
- ----------------
- ----------------
Ladies and Gentlemen:
The undersigned hereby elects to purchase, pursuant to the provisions of
the Warrant dated July 1, 1999 held by the undersigned, _________ shares of the
Common Stock of drkoop.com, Inc., a Delaware corporation.
Payment of the per share purchase price required under such Warrant
[accompanies this Election to Purchase.][shall be made pursuant to the net
exercise provision contained in Section 1.3 of the Warrant.]
The undersigned hereby confirms the representations made in Section 12 of
the Warrant are true and correct as of the date of this Election to Purchase.
Dated: ___________________, 200_
---------------------------
Print Name of Warrantholder
By
-------------------------
Address:
---------------------------
---------------------------
11
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EXHIBIT 10.56
INDEX TO OFFICE LEASE
PLAZA 7000, LTD. (Lessor) and
DRKOOP.COM, INC. (Lessee)
<TABLE>
<CAPTION>
SECTION TITLE Lease Page
<S> <C>
1.1 The Leased Premises.............................................................................. 3
1.2 Use.............................................................................................. 3
1.3 Usable Area...................................................................................... 3
1.4 Rentable Area.................................................................................... 3
2.1 Base Rent and Additional Rents................................................................... 4
3.1 Date and Place of Payment........................................................................ 4
3.2 Late Payments.................................................................................... 4
3.3 Security Deposit................................................................................. 4
4.1 Term, Possession, and Anniversary................................................................ 5
4.2 Acknowledgement of Lease......................................................................... 5
4.3 Delivery of Possession........................................................................... 5
5.1 Tenant Finish-Out................................................................................ 5
6.1 Quiet Possession................................................................................. 5
7.1 Utilities and Services by Lessor................................................................. 5
7.2 Utilities and Services by Lessee................................................................. 6
7.3 Interruption of Utilities or Services............................................................ 6
7.4 Extra Electricity................................................................................ 6
7.5 Extra Heating or Air Conditioning................................................................ 7
8.1 Maintenance and Repairs by Lessor................................................................ 7
8.2 Maintenance and Repairs by Lessee................................................................ 7
8.3 Telecommunications............................................................................... 7
9.1 Access, Keys, Locks, and Security................................................................ 8
9.2 Parking.......................................................................................... 8
10.1 Occupancy, Nuisance, and Hazards................................................................. 9
11.1 Taxes............................................................................................ 9
12.1 Insurance........................................................................................ 9
12.2 Waiver of Subrogation............................................................................ 9
12.3 Hold Harmless.................................................................................... 10
13.1 Alterations by Lessee............................................................................ 10
13.2 Americans With Disabilities Act.................................................................. 10
14.1 Removal of Property by Lessee.................................................................... 11
15.1 Subletting and Assignment........................................................................ 11
16.1 Destruction by Fire or Other Casualty............................................................ 12
17.1 Condemnation..................................................................................... 12
18.1 Default by Lessor................................................................................ 12
19.1 Default by Lessee................................................................................ 12
20.1 Lien for Rent.................................................................................... 14
21.1 Attorney's Fees, Interest, and Other Expenses.................................................... 14
22.1 Nonwaiver........................................................................................ 14
23.1 Building Rules................................................................................... 14
24.1 Transfer of Ownership by Lessor.................................................................. 14
25.1 Mortgages........................................................................................ 14
26.1 Surrender of Premises............................................................................ 15
27.1 Holding Over..................................................................................... 15
28.1 Signs and Building Name.......................................................................... 15
28.2 Relocation of Lessee............................................................................. 15
29.1 Notices.......................................................................................... 15
</TABLE>
Page 1
<PAGE>
<TABLE>
<S> <C>
30.1 Estoppel Certificates............................................................................ 16
31.1 Successors....................................................................................... 16
31.2 Leasing Agent Commissions........................................................................ 16
32.1 Building Operating Expense....................................................................... 16
33.1 Representations and Warranties by Lessor......................................................... 16
34.1 Representations and Warranties by Lessee......................................................... 16
35.1 Place of Performance............................................................................. 16
36.1 Miscellaneous.................................................................................... 17
37.1 Special Conditions............................................................................... 17
38.1 Exhibit List..................................................................................... 17
39.1 Lease Dates and Authority to Sign................................................................ 17
EXHIBIT "A": Floor Plan of Lessee's Office Space................................................ 20
EXHIBIT "B": Legal Description of Office Building............................................... 21
EXHIBIT "C": Building Operating Expense Pass-Through Calculations............................... 22
EXHIBIT "D": Acknowledgement of Lease........................................................... 24
EXHIBIT "E": Work Letter........................................................................ 26
EXHIBIT "F-1": Office Building Parking Rules...................................................... 30
EXHIBIT "F-2": Office Building Rules.............................................................. 31
EXHIBIT "G": Estoppel Certificate............................................................... 34
EXHIBIT "H": Office Lease Guaranty.............................................................. 36
EXHIBIT "I": Certificate of Corporate Resolution Authorizing Lease or Guaranty.................. 37
EXHIBIT "J": Special Conditions................................................................. 39
EXHIBIT "J-1": Approved Plans and Specifications for Exterior Building Signage.................... 42
EXHIBIT "J-2": Schematic Drawing of Must-Take Expansion Space..................................... 43
EXHIBIT "K": Hazardous Substances............................................................... 44
EXHIBIT "L": Acknowledgment of Receipt of Agency Disclosure..................................... 45
EXHIBIT "M": Renewal Option..................................................................... 47
EXHIBIT "N": Right of First Offer............................................................... 49
EXHIBIT "O" Satellite Dish/Antenna............................................................. 50
</TABLE>
Page 2
<PAGE>
OFFICE LEASE
PLAZA 7000
----------
This is a Lease Agreement made and entered into between Lessor Name Specified in
------------------------
Basic Lease Information #2, as "Lessor", and Lessee Name Specified in Basic
- -------------------------- ------------------------------
Lease Information #5, as "Lessee", whether one or more.
- --------------------
1.1 The Leased Premises.
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor the "Leased
Premises" which consists of "Lessee's Office Space" and "Common Areas" as
defined below.
(a) Lessee's Office Space. "Lessee's Office Space", to which Lessee shall have
exclusive use rights, consists of suite(s) Specified in Basic Lease
------------------------
Information #3, representing the office space outlined and shaded on the floor
- --------------
plan contained in Exhibit "A". Such space is located in the building on a tract
-----------
of land, legally described by lot and block or metes and bounds in Exhibit "B".
-----------
The street address of the building is Specified in Basic Lease Information #1.
---------------------------------------
(b) Common Areas. The "common area", to which Lessee shall have non-exclusive
use rights, consists of (1) the interior common area located in the above
described building, i.e., areas normally accessible to tenants such as the
hallways, stairwells, elevators, lobby, restrooms, and snack bar areas, and (2)
the exterior common area located outside the building on the above described
land, i.e., loading areas, sidewalks, driveways, parking garage, parking areas,
and other open areas (if any), subject to paragraph 9.2 on parking.
1.2 Use.
Lessee's Office Space may be used only for general office purposes and other
uses incident thereto. In no event may the Lessee's office space, or any
portion thereof, be used or leased for an "executive suites" or "serviced
------------------ ---------
business center" operation. The name of Lessee's business is Specified in Basic
- ---------------- ------------------
Lease Information #5.
- --------------------
1.3 Usable Area.
Lessee's approximate "usable area" is Specified in Basic Lease Information #4
---------------------------------------
and is subject to verification by Lessee's architect. It is the office space
outlined and shaded in Exhibit "A". Such area is measured from the interior of
-----------
the exterior walls and the exterior glass lines of the building to the middle of
the remaining perimeter walls of the office space, in accordance with applicable
BOMA standards. Prior to taking occupancy of the Leased Premises Lessee shall
have the right to have a registered architect verify the measurement of Lessee's
Office Space and the rentable and useable square footage associated therewith.
In the event that it is determined by such remeasurement that the Leased
Premises is less than the area stated in Basic Lease Information #4, and the
--------------------------
results of such remeasurement are agreed to by Lessor's architect [such
agreement not to be unreasonably withheld and in any event to be based on the
applicable BOMA standard (currently ANSI version Z65-1, 1996)], the rent payable
hereunder shall be appropriately adjusted during the term and extended term
hereof. Any such adjustment must be made and agreed to by Lessor and Lessee, if
at all, prior to Lessee taking occupancy of the Leased Premises. Upon taking
occupancy of the Leased Premises, Lessee shall be required to stipulate and
agree to the rentable area of the Leased Premises by executing Exhibit "D"
-----------
attached hereto which will constitute the irrevocable waiver by Lessee of any
challenge to the measured size of the Leased Premises.
1.4 Rentable Area.
Lessee's approximate "rentable area" is Specified in Basic Lease Information #4.
---------------------------------------
It consists of Lessee's "usable area" as defined above, plus Lessee's prorata
share of the building common areas as set forth in Basic Lease Information #4.
-----------------------------
Building common areas are defined as all corridors, restrooms, common vending
machine areas, building equipment rooms, telephone closets, janitor closets,
enclosed lobby, entrance areas, and other public areas in the building,
excluding elevator shafts, stairwells, vertical chases, and enclosed parking
areas.
2.1 Base Rent and Additional Rents.
Page 3
<PAGE>
Lessee shall pay to Lessor a "base rent" Specified in Basic Lease Information #7
---------------------------------------
per calendar year, which amounts to the sum(s) Specified in Basic Lease
------------------------
Information #7 per calendar month. Such base rent is equivalent to the sums
- --------------
Specified in Basic Lease Information #7 per square foot per year for Lessee's
- ---------------------------------------
rentable area. The base rent is subject to adjustment as provided in paragraph
32.1. Additional rent (representing Lessee's prorata share of building
operating expenses over the expense stop Specified in Basic Lease Information #8
---------------------------------------
shall be paid in accordance with paragraph 32.1. Building operating expenses up
to such expense stop amount shall be paid by Lessor.
3.1 Date and Place of Payment.
The monthly rent and one-twelfth of Lessee's share of estimated building
operating expenses under paragraph 32.1 shall be due on the first day of each
calendar month without demand. Partial months shall be prorated. All rent and
other sums are due in the county where the building is located at the address
designated by Lessor from time to time. All sums due by Lessee are without
right of setoff or deduction. Monies mailed are considered timely paid only if
received by Lessor by the due date; however rents postmarked one or more days
before due date and received after the due date shall be considered as timely
received by Lessor. Rent and late payment charges shall be paid without notice
or demand. All other sums shall be due upon delivery of written notice in
accordance with paragraph 29.1.
3.2 Late Payments.
If any rent payment or other sum due by Lessee to Lessor is received and
accepted by Lessor later than five (5) days after its due date, Lessee shall pay
a late charge of 5% of such rent payment or other sum. Late charges shall be
considered liquidated damages for Lessor's time, inconvenience and overhead
(except for attorneys fees and litigation costs) in collecting late rent.
Lessor's acceptance of late rent or other sum shall not constitute permission
for Lessee to pay the rent or other sum late thereafter and shall not constitute
a waiver of Lessor's remedies for subsequent late payments. Late payment
charges are due immediately upon notice or demand. All payments shall be by
check or money order on a local bank, not cash. For each returned check, Lessee
shall pay all applicable bank charges incurred by Lessor plus $50.00. Payments
of any kind received by Lessor on behalf of Lessee may be applied at Lessor's
option to nonrent items that Lessee is then obligated to pay hereunder, then to
rent. Payment of rent by Lessee shall be an independent covenant. If Lessee
has not timely paid rentals and other sums due on two or more occasions, or if a
check from Lessee is returned for insufficient funds or no account, Lessor may
for the next 12 months require that all rent and other sums due be paid by
cashier's check, certified check, or money order, without prior notice.
3.3 Security Deposit.
At the time of execution of this lease, Lessee shall deposit with Lessor cash in
the sum Specified in Basic Lease Information #10 to secure performance of
----------------------------------------
Lessee's obligations under this lease. Lessor shall have a lien on the security
deposit for that purpose. If Lessee fails to pay rent or other sums when due
under this lease, Lessor may apply any cash security deposit toward amounts due
and unpaid by Lessee. In lieu of a cash security deposit, Lessee may furnish
Lessor at time of execution of this lease an irrevocable letter of credit in the
sum Specified in Basic Lease Information #10-c on a financial institution in
------------------------------------------
Austin, Texas. The issuing bank must be reasonably acceptable to Lessor and the
letter of credit must be negotiable in Austin, Texas. The Letter of Credit
shall name Lessor as the Beneficiary thereof. The Letter of Credit shall
provide that Lessor may draw all or a portion of the entire face amount of the
Letter of Credit upon the presentation of the original of the Letter of Credit
together with a sworn affidavit by Lessor (or an officer of Lessor) stating that
Lessee has failed to pay base rent, additional rent or other sums due hereunder
when due and as a result thereof is in default hereunder and that all cure
periods relating to such default have expired. Notwithstanding the foregoing,
Lessor shall only be entitled to draw against the Letter of Credit the amount
required to pay all rent or other sums which is/are then due and owing at the
time of such draw unless within twelve (12) months after any such draw another
event of default occurs pursuant to which Lessor is entitled to draw against the
Letter of Credit, in which case Lessor may draw the entire amount of the Letter
of Credit. Further, Landlord shall not be entitled to draw against the Letter
of Credit unless the amount of the default is at least $3,000.00. The Letter of
Credit shall also provide that it may be drawn in full by Lessor in the same
manner if at any time prior to the expiration of this Lease the Letter of Credit
is within thirty (30) days of expiring and a replacement or extension thereof
has not been furnished to Lessor. The Letter of Credit, including, without
limitation, the form thereof, and all extensions and renewals thereof, shall
otherwise be reasonably acceptable to Lessor in all respects. This Section
3.3 is subject in all respects to the special conditions set forth in paragraph
10 of Exhibit "J" attached hereto.
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If Lessee furnishes a letter of credit in lieu of a cash security deposit,
Lessee covenants to continuously keep the Letter of Credit in full force and
effect and failure to do so shall constitute an Event of Default hereunder. The
Letter of Credit shall be assignable
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and transferrable to Lessor's mortgage lender and to a purchaser of the
Property. In the event Lessor ever draws on the Letter of Credit, Lessor may
thereafter retain all proceeds thereof in the form of cash in the same manner as
if such funds had been originally deposited with Lessor as a cash security
deposit; provided, however, that Lessor will accept a replacement Letter of
Credit and will refund to Lessee all unapplied portions of the proceeds of the
negotiated Letter of Credit after a period of six (6) months elapses during
which Lessee is not late in the payment of rent or other charges due hereunder
and during which Lessee is not otherwise in default. Lessee shall immediately
restore the security deposit to the amount then required to be maintained under
the Lease after any portion of it is applied to amounts due and unpaid by
Lessee.
4.1 Term, Possession, and Anniversary.
The initial lease term shall be for eighty-five (85) calendar months from the
"Commencement Date", plus the remainder of the last month. The "Commencement
Date" of this lease shall be the earlier of (a) the date Lessee opens for
business in Lessee's Office Space, or (b) five (5) days after Lessor delivers
possession of Lessee's Office Space to Lessee and the Interior Improvements are
substantially complete.
4.2 Acknowledgement of Lease.
Upon commencement of this lease, Lessor and Lessee shall execute a recordable
acknowledgment of this lease which is attached as Exhibit "D" and which will
-----------
confirm the Commencement Date, ending date, annual anniversary date of the
lease, and rentable square footage in Lessee's Office Space.
4.3 Delivery of Possession.
Lessor shall deliver keys and/or access cards or codes and possession of
Lessee's Office Space to Lessee on the lease Commencement Date stated in
paragraph 4.1 unless otherwise agreed in writing by the parties. Lessee shall
not be liable for rent until Lessor delivers possession of the Leased Premises
to Lessee. If there is a delay in delivery of possession, rent shall be abated
until Lessee's Office Space is ready for occupancy; and neither Lessor nor
Lessor's agents shall otherwise be liable for any damages; and the lease shall
not terminate. Construction of Interior Improvements (as such term is defined
in Exhibit "E" attached hereto) shall, comply with the approved Interior
-----------
Improvements Plans; provided, however, that Lessor's approval of the Interior
Improvement Plans (as such term is defined on Exhibit "E" attached hereto) shall
-----------
create or impose no liability or responsibility on Lessor for their
completeness, design sufficiency or compliance with all applicable laws, rules
and regulations of governmental agencies or authorities.
5.1 Tenant Finish-Out.
(Check one):
________ (a) Lessor shall provide no tenant finish-out or improvements
since Lessee has taken Lessee's Office Space "as is".
X (b) Lessor shall perform any special construction described in
--------
Exhibit "E". Costs of tenant finish-out or special
construction shall be paid for pursuant to such exhibit.
6.1 Quiet Possession.
If Lessee is current and in compliance with all of Lessee's obligations under
this lease, Lessee shall be entitled to peaceful and quiet possession and
enjoyment of Lessee's Office Space, subject to the terms and conditions of this
lease. Lessee shall have access to the building parking garage, if applicable
and common parking areas at all times, subject to parking fees and the rules
referred to in paragraphs 9.2 and 23.1. Lessor shall make diligent efforts to
have all other tenants in the building comply with building rules. Otherwise,
failure of other tenants to comply with such rules shall not be considered a
default by Lessor. Construction noise or vibrations shall not be considered a
default by Lessor provided, however, that Lessor shall make commercially
reasonable efforts to minimize construction noise and construction vibrations
during standard business hours.
7.1 Utilities and Services by Lessor.
Except where otherwise stated in this lease, Lessor shall pay for and furnish in
a timely and diligent manner to Lessee the following utilities (subject to
Lessee being required to pay for same directly to the utility provider) and
services and no others, subject to paragraph 32.1 regarding Lessee's payment of
Lessee's prorata share of building operating expenses.
(a) air conditioning and heating as reasonably required for comfortable use and
occupancy under normal office conditions from 7:00 a.m. to 7:00 p.m. on
Monday through Friday, and from 8:00 a.m. to 1:00 p.m. on Saturday, but not
on
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Sunday, New Year's Day, Memorial Day, July 4th, Labor Day, Thanksgiving
or Christmas so long as these times and dates comply with present and
future governmental laws, rules and regulations to which that Lessor is
required to adhere, including utilities such as electricity, gas, and water
necessary for operation of same;
(b) water and wastewater services for common areas;
(c) janitorial and cleaning services for the building five days a week
consistent with the maintenance of a "Class A" office building in the
Austin, Texas area;
(d) electricity for standard office equipment and lighting;
(e) trash collection services (dumpster or garbage cans);
(f) pest control services as needed in the reasonable judgment of Lessor;
(g) landscaping and parking lot maintenance services;
(h) repair and maintenance services pursuant to paragraph 8.1;
(i) replacement of fluorescent light bulbs and ballasts in building standard
lighting fixtures and, upon the request of Lessee from time to time,
replacement of Lessee supplied light bulbs in nonstandard light fixtures
(but not moveable lamps); and
(j) elevator service, if there is an elevator in the building.
Lessor is not responsible for the safety or security of Lessee or any of
Lessee's employees or invitees, nor is Lessor responsible for providing any
security personnel or patrols to protect the person or property of Lessee or any
of Lessee's employees or invitees. Should Lessor engage any security personnel
or patrols at any time during the term of this Lease, such personnel and patrols
shall be for the protection of Lessor's property only.
7.2 Utilities and Services by Lessee.
Subject to Section 7.4, if applicable, Lessee shall pay for all utilities and
services not expressly furnished by Lessor under paragraph 7.1. Lessee shall
pay for all electricity consumed through any individual electrical meter(s) or
submeter(s) serving Lessee's Office Space. Costs of such utilities are not
considered building operating expenses to be allocated among all tenants under
paragraph 32.1. Service through individual electrical meters which exclusively
serve Lessee's Office Space shall be in the name of Lessee. Lessor reserves the
right to submeter electricity and/or water. Any electricity or water
submetering shall be billed to and paid by Lessee at Lessor's average cost per
KWH or gallon, and no more. If the water bill from the utility company includes
wastewater charges, Lessee's liability for water submetering shall include
corresponding wastewater costs (if any).
7.3 Interruption of Utilities or Services.
Except as otherwise provided in this Section 7.3, temporary interruption or
malfunction of utilities, services, and/or telephones shall not render Lessor
liable for damages, rent abatements, or release of any Lessee obligation.
Lessor shall use diligent efforts to have such utilities and services restored
as soon as reasonably possible. Anything in the Lease to the contrary
notwithstanding, if at any time the Leased Premises shall be untenantable or
Lessee is unable to conduct its full and ordinary operations at the Leased
Premises for a period of five (5) or more consecutive days because of any
interruption or malfunction of utilities, services, and/or telephones (which
interruptions are not specific to Lessee's telephone system), rent shall be
abated commencing on the sixth (6th) day of such interruption or malfunction
until full restoration of utilities, services and/or telephones, as the case may
be. In the event any such interruption or malfunction shall continue for a
period of thirty (30) or more consecutive days or forty-five (45) or more days
in any calendar year, Lessee shall have the right to terminate this Lease within
ten (10) days after the expiration of such thirty or forty-five day period, as
applicable, but not thereafter, upon written notice to Lessor.
7.4 Extra Electricity.
There shall be no extra electricity charges for typewriters, facsimile machines,
word processors, personal computers, computer servers, dictating equipment,
adding machines, desk top calculators, lamps, or other standard 110 volt office
equipment, and 220 volt copiers. However, Lessee shall pay Lessor monthly, as
billed, for charges which are separately metered or which Lessor may reasonably
compute for electricity utilized by Lessee for the following purposes: x-ray
machines, hotplates, electric heaters, 220 volt equipment other than 220 volt
copiers, computers (other than desktop, personal or word processor computers and
computer servers), or other electrical service not standard for the building.
7.5 Extra Heating or Air Conditioning.
If Lessee requests air conditioning or heating after the hours as set forth in
paragraph 7.1(a), Lessor may charge Lessee the extra hourly fee specified in
------------
Basic Lease Information #12c for after-hour air conditioning or heating.
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8.1 Maintenance and Repairs by Lessor.
Lessor shall operate and maintain the building in which the Leased Premises are
located and all facilities relating thereto in a "Class A" manner consistent
with the appearance and operation and maintenance standards of other Class "A"
suburban office buildings in the Austin, Texas area. Lessor shall repair and/or
replace, as needed, the following items as a building expense under paragraph
32.1, so long as they are building standard items: light bulbs, ballasts, and
fixtures; plumbing; hardware; appliances; doors; and wall and window coverings.
Lessor shall use diligence to provide for the reasonable cleaning, maintenance,
and repair of common areas, reconnection of interrupted utilities or services,
subject to any reimbursement obligations of Lessee under paragraph 8.2. Lessor
shall also maintain and keep in good repair the roof, outside walls, foundation,
exterior window and exterior door frames and structural portions of the building
and all electrical, mechanical and HVAC systems servicing the common areas and
the Leased Premises. Lessor shall also maintain the exterior areas of the
building, including the landscaping, walkways and parking areas in a neat and
clean condition. Lessor may rekey at any time. Lessor may temporarily close
any part of the common facilities if reasonably necessary for repairs or
construction provided that Lessee at all times has continuous and uninterrupted
use of the Leased Premises. Repairs and maintenance shall be in accordance with
applicable governmental requirements and shall be completed in a good and
workmanlike fashion.
8.2 Maintenance and Repairs by Lessee.
Lessee shall promptly reimburse Lessor for the cost of repairing or replacing
non-building standard items inside Lessee's office space and the cost of
repairing or replacing damage which is caused inside Lessee's office space by
Lessee, Lessee's agents, employees, family, or licensees, invitees, visitors, or
customers or outside Lessee's office space by Lessee or Lessee's employee's,
agents, or contractors; provided however, that before any such repairs or
replacements are made by Lessor, Lessor shall first give Lessee written notice
of the necessity for any such repairs or replacements and allow Lessee thirty
(30) days from such notice for the Lessee to make such repairs and replacements.
Lessor shall have the right of approval of all repairmen or maintenance
personnel, which approval shall not be unreasonable withheld. Lessee shall not
damage or allow other persons listed above to damage any portion of the Leased
Premises. Lessee shall pay for replacement of all non-building standard light
bulbs and for unstopping any drains or water closets in Lessee's office. If
Lessee or Lessee's workmen or contractors are permitted to repair, alter, or
modify Lessee's office space, Lessee shall warrant that no mechanic or
materialman's lien shall be filed against the Leased Premises and that all such
contractors shall provide evidence of liability insurance as required by Lessor.
All such work shall be in accordance with applicable governmental requirements.
In the event a mechanics or materialman's lien is filed, Lessee agrees to obtain
a release of such lien within ten (10) days after Lessee receives notice of the
filing of the same or to provide a bond within such ten (10) day period
indemnifying Lessor and the building against such lien in accordance with the
applicable provisions of Chapter 53 of Subchapter H, Texas Property Code.
Lessee's failure to remove any such mechanics or materialman's liens within such
ten (10) day period will constitute an event of default hereunder
notwithstanding any provisions for notice or opportunity to cure contained in
this lease to the contrary.
8.3 Telecommunications.
All telecommunications equipment necessary to serve Lessee shall be located in
Lessee's office space and paid for by Lessee, or, at Lessor's option and at
Lessee's expense, in a lockable enclosure in a common area location designated
by Lessor. Lessee may not require Lessor to install or allow others to install
telecommunication lines or equipment elsewhere in the building. Lessee
expressly waives any rights to require same under any circumstances. Lessee
shall have access at all times to Lessee's telecommunications equipment that is
located outside the Lessee's office space.
9.1 Access, Keys, Locks, and Security.
(a) Access. Lessee shall have access to Lessee's office space at all times.
Lessor shall have access to Lessee's office space at reasonable times for
reasonable business purposes upon prior notice to Lessee except notice shall not
be necessary in the event of an emergency threatening life or property or the
lawful exercise of Lessor's remedies in case of default by Lessee. Lessor may
show Lessee's office space ninety (90) days before the lease expiration date or
the date Lessee gives notice to vacate, whichever is earlier
(b) Keys. Lessor shall furnish Lessee up to two hundred (200) keys or access
codes or cards for Lessee's office space, up to two hundred (200) keys or access
codes or cards for the main exterior entry doors of the building if such door is
locked after hours, and two (2) keys or access codes or cards to Lessee's
mailbox in the building. At Lessee's request additional or
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replacement keys or access codes or cards shall be furnished for a $10.00
refundable deposit. Lessor shall not be liable for risk of loss resulting from
Lessee's keys, access codes, or cards being stolen, lost or used by unauthorized
persons. Lessor reserves the right to rekey or change locks for security reasons
if new keys are timely furnished to Lessee.
(c) Locks. Lessee may not add locks, change locks, or rekey locks without
written permission of Lessor. Locks may be changed at Lessee's request and
expense. If locks to the office space are changed, Lessor may specify kind and
brand of locks, placement, installation, master key compatibility, etc. If
Lessee or any of Lessee's employees lock themselves out of Lessee's suite, said
person must call a fellow-employee to gain access. Neither Lessor nor the
management company personnel are authorized to unlock a door after hours except
for emergency or cleaning purposes.
(d) Security. Lessor shall have no duty to provide any security services of
any kind unless expressly provided in this lease. Lessor shall not be liable to
Lessee or Lessee's employees, family, customers, invitees, contractors, or
agents for injury, damage, or loss to person or property caused by criminal
conduct of other persons, including theft, burglary, assault, vandalism or other
crimes other than injury, damage or loss caused by Landlord's gross negligence,
willfull actions or breach of this Lease. Lessee shall lock its office space
doors when the last person leaves such office space for the day.
Any security services which are provided by Lessor shall be for the
protection of Lessor's property only.
9.2 Parking.
(a) All parking for the building is contained in the surface parking lot and
the parking structure adjacent to the building. Lessee, Lessee's employees,
visitors, invitees, and customers shall only be entitled to use the number of
parking spaces at any time as are allocated to the Leased Premises as designated
in Basic Lease Information #9. All parking is unreserved unless otherwise
--------------------------
designated. If applicable, Lessee and Lessee's employees and customers shall
have exclusive right to park in any reserved parking spaces leased to Lessee
pursuant to a separate written agreement. Otherwise, none of Lessee, Lessee's
employees, visitors or customers may park in reserved parking spaces. Any
reserved parking spaces leased to Lessee shall be governed the terms and
conditions of such separate, signed written agreement.
(b) Lessor shall have sole control over the parking of all vehicles (including
but not limited to cars, trucks, recreational vehicles, trailers, bicycles and
motorcycles) and shall designate parking areas and building service areas.
Parking rules are contained in the attached Exhibit "F-1". If vehicles are
-------------
parked in violation of Lessor's parking rules or in violation of state statutes,
Lessor may exercise vehicle removal remedies under Article 6701g-2 of the Texas
Civil Statutes upon compliance with statutory notice.
(c) Lessee hereby acknowledges that Lessee is allocated only the amount of
parking set forth in Basic Lease Information #9 attached to this Lease. The
--------------------------
foregoing shall not be construed to prohibit Lessee from occupying Lessee's
office space at a density of more than one person per 250 rentable square feet,
however, Lessee shall at all times be and remain responsible for compliance with
all laws, codes, statutes, rules and regulations of all governmental authorities
with jurisdiction over the Leased Premises relating to maximum density of
occupancy of the Leased Premises and Lessee shall not be entitled to exceed its
hereinabove parking ratio. In the event the use of the parking facilities by
Lessee or Lessee's employees at any time exceeds the allocation set forth in
Basic Lease Information #9, Lessor shall have the right to require Lessee to
- --------------------------
make alternate provisions off-site, at Lessee's sole cost and expense, for
all of such excess parking.
10.1 Occupancy, Nuisance, and Hazards.
Lessee's office space shall be occupied only by Lessee or Lessee's employees and
shall not be left entirely vacant or used exclusively for storage. Lessee and
Lessee's agents, employees, family, licensees, invitees, visitors, and
contractors shall comply with all federal, state, and local laws relating to
occupancy or to criminal conduct while such persons are on the Leased Premises.
Lessee and the persons listed above shall not (1) use, occupy, or permit the use
or occupancy of the Leased Premises or any purpose which is directly or
indirectly forbidden by such laws or which may be dangerous to life or property,
(2) permit any public or private nuisance, (3) disturb the quiet enjoyment of
other tenants, (4) do anything which might emit offensive odors or fumes, (5)
make undue noise or vibrations, (6) permit anything which would cancel insurance
coverage or increase the insurance rate on the building or contents, or (7)
otherwise damage the Leased Premises.
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11.1 Taxes.
Lessor shall be responsible for payment of all taxes and assessments against the
building subject to Lessee's obligation to pay Lessor for Lessee's share
thereof, on a prorata square foot basis, as additional rent pursuant to
paragraph 32.1. Lessee shall timely pay all taxes assessed against Lessee's
furniture, equipment, fixtures, or other personal property in Lessee's office
space.
12.1 Insurance.
Lessor and Lessee shall comply with the respective insurance obligations as set
forth below:
(a) Lessor. Lessor shall maintain (1) fire and extended coverage insurance,
including vandalism and malicious mischief, on the office building, and (2)
comprehensive general liability insurance. The amounts shall be as required by
Lessor's mortgagee or as Lessor may deem reasonably appropriate, whichever is
greater. Lessor shall have no responsibility to maintain fire and extended
coverage insurance on Lessee's contents. The portion of Lessor's insurance
premiums reasonably due to Lessee's acts or omissions or Lessee's special use,
improvements, or tenant finish-out (over and above Lessee's normal use as
contemplated in paragraph 1.1(a)) shall be paid for by Lessee.
(b) Lessee. Lessee shall provide Lessee's own public liability insurance for
its operations on the Leased Premises in an amount equal to the minimum "primary
coverage" amount required by Lessor's insurance carrier as a condition for
purchasing umbrella liability insurance by Lessor. In no event shall such
coverage be less than $1,000,000. Upon written notice by Lessor to Lessee, such
dollar amount of Lessee's liability policy shall be increased by the amount of
any increase required by Lessee's carrier for "primary coverage" under an
umbrella liability policy. Lessee is encouraged to maintain fire and extended
coverage insurance (including theft, vandalism and malicious mischief) on the
contents in Lessee's office space, including fixtures, furniture, equipment,
supplies, inventory, and other personal property. Such property is not covered
by Lessor's insurance.
(c) Insurance certificates. Lessee shall provide Lessor with a certificate of
Lessee's insurance or a copy thereof as required above within 7 days after
Lessee initially occupies Lessee's office space or any portion thereof. Lessor
and Lessor's managing agent (if any) shall be named as additional insureds on
Lessee's liability insurance policy. Upon written request by Lessor, changes in
the name of Lessor or Lessor's managing agent shall be reflected on such
certificate.
(d) Notice from Lessee's Insurance Carrier. All policies of insurance to be
provided by Lessee shall contain a provision (to the extent legally permitted)
that the insurance company shall give Lessor at least 10 days' written notice to
Lessor, in advance of (1) any cancellation or non-renewal of the policy, (2) any
reduction in the policy amount, and (3) any deletion of additional insureds.
12.2 Waiver of Subrogation.
(a) If waiver of subrogation is not contained in the form language of the
insurance policy, Lessor and Lessee may require that the other party's fire,
casualty, or liability insurance policy contain a waiver of subrogation clause.
For purposes of waiver of subrogation, Lessor and Lessee release each other and
their respective officers, directors, employees, and agents from any claims
based on negligence or otherwise, for loss, damage, or injury which occur
hereafter and are insured against under insurance policies carried by Lessor
and/or Lessee. The foregoing shall not apply to losses, damages, or injuries
that are in excess of policy limits or that are not covered due to a deductible
clause in the policy or due to the fact that the insurer has not agreed to waive
its right of subrogation.
(b) Upon written request, Lessor and Lessee shall furnish to each other copies
of the policies of insurance referred to in this lease, including any waivers
of subrogation, or satisfactory evidence of same.
12.3 Hold Harmless.
TO THE EXTENT THAT IT IS NOT COVERED BY LESSOR OR LESSOR'S INSURANCE, LESSEE
SHALL INDEMNIFY LESSOR FOR AND SHALL HOLD LESSOR HARMLESS FROM, ALL FINES,
CLAIMS, LIABILITIES AND SUITS (INCLUDING COSTS AND EXPENSES OF DEFENDING AGAINST
SAME) RESULTING FROM ANY BREACH OR NONPERFORMANCE OF THE LEASE BY LESSEE OR
LESSEE'S AGENTS, EMPLOYEES, FAMILY, LICENSEES, OR INVITEES. TO THE EXTENT THAT
IT IS NOT COVERED BY LESSEE'S INSURANCE, LESSOR SHALL INDEMNIFY LESSEE FOR AND
SHALL HOLD LESSEE HARMLESS FROM ALL FINES, CLAIMS, LIABILITIES AND SUITS
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(INCLUDING COSTS AND EXPENSES OF DEFENDING AGAINST SAME) RESULTING FROM ANY
BREACH OR NONPERFORMANCE OF THE LEASE BY LESSOR OR LESSOR'S AGENTS, EMPLOYEES,
FAMILY, LICENSEES, OR INVITEES. TO THE EXTENT THAT IT IS NOT COVERED BY LESSOR
OR LESSOR'S INSURANCE, LESSOR AND LESSEE SHALL NOT BE LIABLE TO THE OTHER OR THE
OTHER'S AGENTS, EMPLOYEES, OR FAMILY FOR ANY DAMAGE TO PERSONAL PROPERTY
RESULTING FROM ANY ACT, OMISSION, OR NEGLIGENCE OF ANY OTHER TENANT, VISITOR OR
OCCUPANT OF THE OFFICE BUILDING.
13.1 Alterations by Lessee.
Lessee may not make any alterations, improvements, doorlock changes, or other
modifications of any kind to the Leased Premises without Lessor's written
consent, which consent will not be unreasonably withheld so long as alterations,
improvements, changes or modifications are (i) cosmetic, and not structural, and
(ii) not visible from outside the Leased Premises. Consent for governmentally
required changes may not be unreasonably withheld. "Alterations" include but
are not limited to improvements glued, screwed, nailed, or otherwise permanently
attached to the building, structural changes, roof and wall penetrations, and
all plumbing, electrical, and HVAC changes, but shall not include and Lessor's
consent shall not be required for the installation of Lessee's trade fixtures or
for normal interior decorative items at the Leased Premises (attachment of
pictures, picture frames and wall hangings to walls, etc.). Requests for
Lessor's approval shall be in writing and shall be detailed to Lessor's
reasonable satisfaction. The foregoing shall be done only by Lessor's
contractors or employees or by third parties approved by Lessor in writing.
Lessor shall charge a supervision/construction management fee equal to five
percent (5%)of the total cost of any such alterations, improvements, changes or
modifications which will be payable by Lessee prior to the commencement of the
work. Lessee shall pay in advance for any requested alterations, improvements,
lock changes, or other modifications which are approved and performed by Lessor.
If same are performed by Lessee with Lessor's permission, Lessee shall not allow
any liens to be placed against the buildings as a result of such additions or
alterations. If any such alterations, improvements, changes or modifications
are performed by Lessee or by Lessee's contractors and any mechanic's or
materialman's liens are filed against the Property in connection therewith,
Lessee agrees to obtain a release of such lien within ten (10) days after Lessee
receives notice of the filing of the same or to provide a bond within such ten
(10) day period indemnifying Lessor and the building against such lien in
accordance with the applicable provisions of Chapter 53, Subchapter H, Texas
Property Code. Lessee's failure to remove any such mechanic's or materialman's
liens within such ten (10) day period will constitute an event of default
hereunder, notwithstanding any provisions for notice or opportunity to cure
contained elsewhere in this Lease to the contrary. Alterations, improvements,
and modifications done at Lessee's request shall comply with all applicable
laws. Changes in Lessee's alterations or improvements in Lessee's space which
may be later required by governmental action shall also be paid for by Lessee.
13.2 Americans With Disabilities Act.
Lessor shall at all times be responsible for any requirements under the
Americans with Disabilities Act or similar state or local laws as relate to any
common area restrooms, entrance and exit doorways and elevators and to
structural building items that Lessor is required to maintain under the terms of
this lease and as to the restroom facilities installed by Landlord in the Leased
Premises. Lessor agrees to indemnify Lessee for any liability Lessee shall
incur as a result of Lessor's failure to comply with the provisions of this
paragraph. Lessee agrees to cooperate fully with Lessor to enable Lessor to
timely comply with the provisions of this paragraph and to immediately forward
to Lessor any notice Lessee receives regarding complaints, injuries, or claims
by anyone claiming that those items which are the responsibility of Lessor do
not comply with the provisions of the Americans with Disabilities Act. Lessee
shall be responsible for any requirements under such architectural barrier laws
as they relate to the design and use of Lessee's office space (other than the
restroom facilities installed by the Landlord in the Leased Premises),
including, but not limited to, the positioning of Lessee's furnishings within
the office space. Lessee agrees to indemnify Lessor for any liability Lessor
shall incur as a result of Lessee's failure to comply with the provisions of
this paragraph.
14.1 Removal of Property by Lessee.
Lessee shall remove its trade fixtures, furniture equipment, and all other
personal property of Lessee (including kitchen appliances) prior to the end of
the lease term. Lessee shall pay all costs of removal. Lessee shall have no
rights to property remaining on the Leased Premises after the expiration or
termination of this lease or Lessee's right of possession of the Leased Premises
hereunder, howsoever the same may be brought about. Lessee may not remove any
alterations as defined in paragraph 13.1 or improvements such as wall-to-wall
carpeting, built-in book shelves, window coverings, drapes, cabinets, paneling,
counters, kitchen or breakroom built-ins, shelving, wall covering, and anything
else attached to the floor, walls, or ceilings (other than Lessee's furniture,
removable trade fixtures, and equipment). If Lessor requests in writing, Lessee
shall, immediately prior to moving out, remove any alterations, fixtures,
equipment, and other property installed by Lessee. Lessee shall pay for
cleaning or
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repairing damage caused by Lessee's removal of any property.
15.1 Subletting and Assignment.
Lessee may not sublet, assign, pledge, or mortgage this lease and may not grant
licenses, commissions, or other rights of occupancy to all or any portion
thereof or any part of the Leased Premises without Lessor's prior written
approval which shall not be unreasonably withheld. Lessor agrees to approve or
reject any Lessee request to sublet, assign, pledge or mortgage this Lease
within fifteen (15) days of Lessee's written request therefor, and in the event
Lessor does not approve or reject such request in accordance with this paragraph
on or before the end of such 15 day period, Lessor shall be deemed to have
consented to such subletting, assignment, pledge or mortgage. A potential
Sublessee's or Assignee's financial strength, reputation, personnel, and length
of sublease or assignment shall be important factors in Lessor's approval. The
foregoing shall not be construed to prohibit or to require Lessor's consent to
(A) a sale of Lessee's stock in a public offering, or (B) a merger of Lessee
with another entity so long as the surviving entity has a net worth immediately
after such merger at least equal to the greater of (i) Lessee's net worth as of
the Commencement Date, and (ii) Lessee's net worth immediately prior to such
merger. If Lessor gives its approval to any sublease or assignment, Lessor
shall be entitled to (1) 50% of any excess between Lessee's rental per square
foot under the lease and the rental per square foot under the sublease or
assignment, and (2) 50% of the Net Consideration (as hereinafter defined)
received by Lessee in respect of such sublease or assignment or otherwise from
such sublessee or assignee. For purposes hereof, "Net Consideration" means all
sums paid by the sublessee or assignee in consideration of such assignment minus
all customary and reasonable closing expenses (including, without limitation,
customary and reasonable legal and brokerage expenses) incurred in connection
with such sublease or assignment. "Net Consideration" shall include any sums
paid for the purchase or rental of any of Lessee's property, less, in the case
of a sale thereof, the then net fair market value thereof. The foregoing is in
consideration of additional management performed or to be performed by Lessor
under such sublease or assignment.
In addition to the foregoing, Lessor may charge Lessee for Lessee's reasonable
attorney's fees incurred in connection with the review, drafting, negotiating,
consultation and approval of any sublease, assignment, pledge or mortgage of the
Lease. Violation of this lease by sublessees or assignees shall be deemed a
violation by Lessee. Approval by Lessor of any sublease or assignment shall not
release Lessee from any obligation under this lease and shall not constitute
approval for subsequent subletting or assignment. Sublessees or assignees shall
be liable for all of Lessee's obligations under this lease unless otherwise
specified in writing. Upon default by Lessee, any Sublessee shall pay all
sublease rentals and other sums due Lessor, direct to Lessor, to be credited
against sums owed to Lessor by Lessee under this lease. Unless otherwise agreed
in writing, no sublease or assignment shall be valid unless (1) a copy of this
lease is attached thereto, (2) the sublessee or assignee agrees in writing to be
liable for all of Lessee's obligations under this lease, and (3) Lessor's
written approval is attached to the sublease or assignment.
16.1 Destruction by Fire or Other Casualty.
(a) Total destruction, rent abatement, and restoration. If Lessee's office
space is totally damaged by fire or other casualty so that it cannot reasonably
be used by Lessee and if this lease is not terminated as provided in
subparagraph (d) below, there shall be a total abatement of Lessee's rent and
Lessee's obligation to pay office building operating expenses until Lessee's
office space is restored by Lessor and Lessee.
(b) Partial destruction, rent abatement, and restoration. If Lessee's office
space is partially destroyed or damaged by fire or other hazard so that it can
be only partially used by Lessee for the purposes allowed in this lease and if
this lease is not terminated as provided in subparagraph (d) below, there shall
be a partial abatement of Lessee's rent and Lessee's obligation to pay office
building operating expenses which fairly and reasonably corresponds to the time
and extent to which Lessee's office space cannot reasonably be used by Lessee.
(c) Restoration. Lessor's obligation to restore shall be limited to the
condition of the Leased Premises existing prior to the casualty. Subject to the
provisions of paragraph (d) below, Lessor shall proceed with diligence to
restore. During restoration, Lessee shall continue business to the extent
commercially practical in Lessee's reasonable judgment.
(d) Lease termination. If Lessee's office space or the office center is so
badly damaged that restoration and repairs cannot be completed within 6 months
after the fire or casualty, or if Lessor's mortgagee will not make insurance
proceeds available for restoration, then this lease may be terminated as of the
date of the destruction by either Lessor or Lessee by serving written notice
upon the other. Termination notice must be delivered within 30 days after the
casualty.
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17.1 Condemnation.
If the Leased Premises or any material portion thereof, including any portion of
the parking lot is taken by condemnation and if the Leased Premises is thereby
reasonably rendered unusable for Lessee's business use and activities, this
lease shall automatically terminate as of the date title vests in the condemning
authority pursuant to such taking or acquisition; and Lessor and Lessee shall be
relieved of all further obligations under this lease. Lessor shall be entitled
to recover from the condemning authority the full amount of Lessor's interest in
this lease and in the property which is taken in condemnation. Lessee shall be
allowed to recover from the condemning authority, at Lessee's own expense, the
value of Lessee's non-removable trade fixtures, if any, which are taken in
condemnation and Lessee's moving expenses to the extent that such award does not
reduce the award payable to Lessor; but not otherwise. Lessee shall be
responsible for Lessee's own attorney's fees and for proving its own damages.
18.1 Default by Lessor.
Lessee shall be entitled to recover actual damages and/or pursue any other
remedy that may be available at law, in equity, or otherwise (other than
termination of the Lease) if (1) Lessor fails to pay any sum due and owing to
Lessee within 10 days after written demand from Lessee, or (2) Lessor fails to
perform on any other obligation for 10 days after Lessee's written demand for
performance. However, Lessor shall not be in default if Lessor promptly
commences to cure such noncompliance and diligently proceeds in good faith to
cure same after receiving written notice of such default. If Lessor fails to
perform any covenant, term or condition of this lease that Lessor is obligated
to perform and, as a consequence of such nonperformance, Lessee shall recover a
money judgment against Lessor, such judgment shall be satisfied only out of
Lessor's equity in the property. Lessor shall have no liability whatsoever for
any deficiency, and no other property or assets of Lessor shall be subject to
levy, execution or other enforcement procedures as a result of such judgment.
Without limitation upon the foregoing, in the event of a Lessor default, Lessee
may, after the giving of all required notices and the expiration of all
applicable cure periods, take any reasonable action to cure Lessor's default for
the account of Lessor, and any amount paid or expense incurred by Lessee in the
performance of any such matter for the account of Lessor shall be immediately
reimbursed by Lessor to Lessee upon Lessor's receipt of a demand therefor.
19.1 Default by Lessee.
If Lessee defaults, Lessor shall have any or all remedies set forth below.
(a) Definition of default. The occurrence of any of the following shall
constitute a default by Lessee: (1) failure to pay rent or any other sum due by
Lessee under this lease within 10 days after written demand therefor by Lessor;
(2) failure to vacate on or before the last day of the lease term, renewal term,
or extension period; (3) failure to pay rent in advance on a daily basis in the
event of unlawful holdover by Lessee; (4) unauthorized early move-out or notice
of same as set forth below; (5) acquisition of Lessee's interest in the lease by
a third party by judicial or non-judicial process; or (6) failure to comply with
any other provision of the lease (including rules) if such failure to comply is
not cured within ten (10) days after delivery of written notice by Lessor to
Lessee. However, Lessee shall not be in default under subclause (6) above if
Lessee promptly commences to cure such noncompliance within the ten (10) day
period and diligently proceeds in good faith to cure within a reasonable period
of time.
(b) Acceleration after notice of rental delinquency. If Lessee is in default
for nonpayment of rent or other sums due and if Lessee fails to pay same in full
within 30 days after Lessor delivers to Lessee or to Lessee's office space a
written notice of Lessor's intent to accelerate, then all rent for the remainder
of the lease term shall be accelerated, due, and delinquent at the end of such
30 day notice period without further demand or notice. Such acceleration rights
are in consideration of the rentals for the entire term being payable in monthly
installments rather than in one lump sum at the beginning of the lease term. If
Lessee has already vacated the Leased Premises, notice of acceleration may be
delivered to Lessee pursuant to paragraph 29.1. Liability for additional rents
accruing in the future (over and above any base rents) shall not be waived by
such acceleration.
(c) Acceleration upon early move-out. If Lessee is lawfully evicted, or if
Lessee moves out or gives written notice (in person or by an authorized employee
or agent) of intent to move-out prior to the end of the lease term without the
rent being paid in full for the entire remainder of the lease term or renewal or
extension period or without prior written consent of Lessor, all remaining rents
for the remainder of the lease term shall be accelerated immediately and
automatically, without demand or notice. Such accelerated rents shall be due and
delinquent without notice before or after such acceleration. Such acceleration
shall occur even if the rent for the current month has been paid in full.
(d) Termination of possession. If Lessee is in default as defined in
subparagraph (a) above and if Lessee remains in default for
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3 days after Lessor gives notice of such default to Lessee, or if Lessee
abandons the Leased Premises, Lessor may (with or without demand for
performance) terminate Lessee's right of possession by giving one day's written
notice to vacate; and Lessor shall be entitled to immediate possession without
termination of Lessee's obligations under the lease. Lessor's repossession shall
not be considered an election to terminate this lease unless written notice of
such intention to terminate is given to Lessee by Lessor. Repossession may be by
voluntary agreement or by eviction lawsuit. Commencement of an eviction lawsuit
shall not preclude other Lessor remedies under this lease or other laws.
(e) Reletting costs. If Lessee is in default under this lease and if Lessor
terminates Lessee's right of possession without terminating this lease and
Lessee's space is released, Lessee shall pay upon Lessor's demand the following:
(1) all reasonable costs of reletting including reasonable leasing commissions,
rent concessions (whether in the form of assuming or buying out lease remainders
elsewhere, free rent for a period of time, or reduced rental rates), utilities
during the vacancy, advertising costs, administrative overhead, and all costs of
repair, remodeling, or redecorating for replacement tenants in Lessee's office
space, (2) all rent and other indebtedness due from Lessee to Lessor through the
date of termination of Lessee's right of possession, and (3) all rent and other
sums required to be paid by Lessee during the remainder of the entire lease
term, subject to the acceleration paragraphs above.
(f) Mitigation by Lessor. Upon eviction or voluntary vacation of the Leased
Premises by Lessee without the lease being terminated by Lessor, or upon the
acceleration of the rental due hereunder, Lessor shall make reasonable efforts
to relet the Leased Premises . After deduction of reasonable expenses incurred
by Lessor, Lessee shall receive credit for any rentals received by Lessor
through reletting the Leased Premises during the remainder of the lease term or
renewal or extension period. Such deductible expenses may include real estate
commissions, attorney's fees, and all other expenses in connection with
reletting. Lawsuit to collect amounts due by Lessee under this lease may be
brought from time to time on one or more occasions without the necessity of
Lessor's waiting until the expiration of the lease term. If judgment for
accelerated rents is recovered, Lessor shall give credit against such judgment
for subsequent payments made by Lessee and subsequent rentals received by Lessor
from other tenants of Lessee's office space, less lawful deductions and expenses
of reletting.
(g) Termination of lease. Lessor may terminate this lease (as contrasted to
termination of possession rights only) upon default by Lessee or at any time
after Lessor's lawful re-entry or repossession following default by Lessee.
Lessor's agents have authority to terminate the lease only by written notice
given pursuant to paragraph 29.1.
(h) Damages. In addition to other remedies, Lessor may recover actual damages
incurred.
20.1 Landlord's Lien.
In consideration of the Lessee entering into this Lease, Lessor forever waives
and expressly releases any contractual or statutory landlord's lien that the
Lessor may now or at any time have upon the personal property of Lessee at the
Leased Premises, including, without limitation, the landlord's lien provided in
Section 54.021 of the Texas Property Code. From time to time upon request,
Lessor agrees to execute such as may be reasonably necessary to confirm the
foregoing.
21.1 Attorney's Fees, Interest, and Other Expenses.
If Lessee or Lessor is in default and if the nondefaulting party places the
lease in the hands of an attorney in order to enforce lease rights or remedies,
the nondefaulting party may recover reasonable attorney's fees from the
defaulting party even if suit has not been filed. In any lawsuit enforcing
lease rights, the prevailing party shall be entitled to recover reasonable
attorney's fees from the nonprevailing party, plus all out-of-pocket expenses.
Trial shall be to judge only. All delinquent sums due by Lessor or Lessee shall
bear interest at the maximum lawful rate of interest, compounded annually, from
date of default until paid, plus any late payment fees. Late payment fees as
set forth in paragraph 3.2 shall be considered reasonable liquidated damages for
the time, trouble, inconvenience, and administrative overhead expense incurred
by Lessor in collecting late rentals, such elements of damages being uncertain
and difficult to ascertain. Late payment fees shall not be liquidated damages
for attorney's fees or for Lessor's loss of use of such funds during the time of
delinquency.
22.1 Nonwaiver.
The acceptance of monies past due or the failure to complain of any action,
nonaction, delayed payment, or default, whether singular or repetitive, shall
not constitute a waiver of rights or obligations under the lease. Lessor's or
Lessee's waiver of any right
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or any default shall not constitute waiver of other rights, violations,
defaults, or subsequent rights, violations, or defaults under this lease. No act
or omission by Lessor or Lessor's agents shall be deemed an acceptance or
surrender of the Leased Premises , and no agreement by Lessor to accept a
surrender of the Leased Premises shall be valid unless it is in writing and
signed by a duly authorized agent of Lessor.
23.1 Building Rules.
Lessor's rules for the office building are attached as Exhibit "F-2" and are
-------------
subject to reasonable change if the changes are applicable to all tenants of the
office building. Separate parking rules are contained in Exhibit "F-1". Lessee
-------------
agrees to provide a copy of the Office Building Rules (Exhibit "F-2") to each of
-------------
Lessee's employees and licensees.
24.1 Transfer of Ownership by Lessor.
If Lessor transfers ownership of the office building (other than as security for
a mortgage) and if Lessor has delivered to the transferee all of Lessee's
security deposits and any prepaid rents, Lessor shall be released from all
liability under the lease; and such transferee shall become liable as Lessor.
Such right to be released of liability shall accrue to subsequent owners only if
such transfer is in good faith and for consideration.
25.1 Mortgages.
(a) Subordination. Lessee accepts this lease subject and subordinate to any
-------------
mortgage, deed of trust or other lien presently existing or hereafter placed
upon the Leased Premises or the Building, and to any renewals, modifications,
extensions, consolidations or replacements thereof; provided, however, that the
holder of any such mortgage, deed of trust or other lien (hereinafter
"Mortgagee") shall have the right at any time to subordinate such mortgage, deed
of trust or other lien to this lease. Notwithstanding that this lease may be (or
made to be) superior to such mortgage, deed of trust or other lien, the
provisions of such mortgage, deed of trust or other lien relative to the rights
of the Mortgagee with respect to proceeds arising from an eminent domain taking
(including a voluntary conveyance by Lessor) and/or arising from insurance
payable by reason of damage to or destruction of the Building and/or the Leased
Premises shall be prior and superior to any contrary provisions contained herein
with respect to the payment or usage thereof. Lessee agrees upon demand to
execute such further instruments subordinating this lease as Lessor may request.
Failure to deliver such subordination agreement to Lessor within seven (7) days
after a request therefor shall constitute a default hereunder.
(b) Attornment. If any mortgage, deed of trust or security agreement is
----------
enforced by the Mortgagee, the trustee, or the secured party, Lessee shall, upon
request, attorn to the Mortgagee or purchaser at such foreclosure sale, or any
person or party succeeding to the interest of Lessor as a result of such
enforcement, as the case may be, and execute instrument(s) confirming such
attornment. In the event of such enforcement and upon Lessee's attornment as
aforesaid, Lessee will automatically become the tenant of the successor to
Lessor's interest without change in the terms or provisions of this lease;
provided, however, that such successor to Lessor's interest shall not be bound
by (a) any payment of Rent for more than one month in advance (except
prepayments for security deposits, if any), or (b) any amendments or
modifications of this lease made without the prior written consent of such
successor or Mortgagee.
(c) Nondisturbance. In connection with any subordination and attornment
--------------
agreements which Lessee is required to execute as set forth above, Lessee shall
be entitled to a nondisturbance agreement from such mortgagee providing that, so
long as Lessee is not in default hereunder, that Lessee's use and enjoyment of
the Premises shall not be disturbed in the event of a foreclosure or similar
action.
26.1 Surrender of Premises.
When Lessee moves out, Lessee shall surrender Lessee's office space in the same
condition as on the date of lease commencement by Lessee (as changed or improved
from time to time in accordance with this lease), less ordinary wear. Removal
of property from the Leased Premises is subject to paragraph 14.1. Upon
surrender, Lessee shall provide Lessor with all of Lessee's keys, access codes
and cards to the Leased Premises and the combination to all safes and vaults, if
any in the Leased Premises.
27.1 Holding Over.
If Lessee remains in possession of the Leased Premises after the expiration or
mutually-agreed termination date of the lease, without the execution by Lessor
and Lessee of a new lease or a renewal or extension of the lease, then (1)
Lessee shall be deemed
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to be occupying the Leased Premises as a tenant-at-sufferance on a daily basis,
subject to all obligations of the lease, (2) Lessee shall pay rent for the
entire holdover period at the rate equal to the greater of 150% of (i) the
rental rate, in effect immediately prior to such holdover, and (ii) the then
current market rental rate for space in the building, (3) Lessee shall be
subject to all other remedies of Lessor as provided in paragraph 19.1, (4)
Lessee shall indemnify Lessor and/or prospective tenants for damages, including
lost rentals, storage expenses, and attorney's fees, and (5) at Lessor's sole
option, Lessee may extend the lease term for a period of one month at the then
current rental rates for the office building, as reasonably determined by
Lessor, by hand delivering written notice to Lessee or to Lessee's office space
while Lessee is holding over. Holdover rents shall be immediately due on a daily
basis and delinquent without notice or demand; and the prior written notice and
waiting period requirements of this lease shall not be necessary in order for
Lessor to exercise remedies thereunder.
28.1 Signs and Building Name.
Except for standard suite signage and building directory listings, and as
provided in the special provisions set forth upon Exhibit "J" attached hereto,
-----------
there shall be no signs, symbols, or identifying marks on or in the building,
halls, elevators, staircases, entrances, parking areas, landscape areas, doors,
walls, or windows without prior written approval of Lessor. If the lease term
is less than twelve (12) months, the cost of initial suite signage for Lessee's
space and initial directory strips shall be at Lessee's expense. All signs or
lettering shall conform to the sign and lettering criteria established by
Lessor. Unless otherwise stated in the rules, suite signage and building
directory changes shall be done exclusively by Lessor and at Lessee's expense.
Lessor may remove all unapproved signs without prior notice to Lessee and at
Lessee's expense. Lessor may change the name of the building upon six months'
written notice to Lessee.
29.1 Notices.
Whenever written notice is required or permitted under this lease, such notice
shall be in writing and shall be either (a) hand delivered personally to the
party being notified, (b) hand delivered to or inside such party's mailing
address, or (c) delivered at such party's mailing address by certified mail,
return receipt requested, postage prepaid. The mailing address of Lessor shall
be the address to which Lessee normally mails or delivers the monthly rent
unless Lessor notifies Lessee of a different address in writing. The mailing
address of Lessee shall be Lessee's office space under this lease. However, if
Lessee moves out, it shall be Lessee's last address known by Lessor. Hand
delivered notice is required only when expressly required in the lease. Notice
by noncertified mail is sufficient if actually received by the addressee or an
employee or agent of addressee. The term "notice" shall be inclusive of
notices, billings, requests, and demands.
30.1 Estoppel Certificates.
From time to time, upon 10 days' prior written request from Lessor, Lessee shall
execute and deliver to Lessor the estoppel certificate attached as Exhibit "G".
-----------
The form in Exhibit "G" may be changed as reasonably required by a prospective
-----------
purchaser or lender, as amended by Lessee to accurately reflect the state of
facts when the estoppel certificate is executed. If any statement in the
estoppel certificate form is contrary to the facts existing at the time of
execution of such form, Lessee may correct same before signing. Reasonable
modifications in the form may be made as requested by a prospective lienholder
or purchaser. The estoppel certificate may be conclusively relied upon by
Lessor and by any prospective lienholder or purchaser of the Leased Premises.
If Lessee fails to comply with the foregoing by the end of such 10-day period,
it shall be conclusively presumed that (1) this lease is in full force and
effect without any subleases or assignments and is unamended or modified except
for amendments verified by affidavit of Lessor to the prospective lienholder or
purchaser, (2) no rents, security deposits, or other charges have been prepaid,
(3) the statements contained in the estoppel certificate form (Exhibit "G") are
-----------
correct, (4) there are no uncured defaults by Lessor, (5) Lessee has no right of
offset or rescission, and (6) any prospective purchaser or lienholder may
conclusively rely on such silence or noncompliance by Lessee and may
conclusively assume no Lessor defaults within the 120 days following Lessee's
receipt of Lessor's request for an estoppel certificate. If Lessee fails to
execute and return any estoppel certificate requested by Lessor hereunder within
the applicable ten (10) day period, Lessee shall be in default without any
further notice or cure period being required, notwithstanding any contrary
provision in this lease.
31.1 Successors.
This lease shall bind and inure to the benefit of the parties, any guarantors of
this lease, and their respective successors and assigns.
31.2 Leasing Agent Commissions.
No leasing commission shall be due by Lessor to any leasing agent unless in
writing. Commission agreements executed by Lessor shall be binding on
subsequent building owners if the tenant of the lease in question is in
possession at the time of transfer of building
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ownership.
32.1 Building Operating Expense.
In addition to the monthly base rent in paragraph 2.1, Lessee shall pay
additional rent on a monthly basis, equivalent to Lessee's prorata share of
actual building operating expenses as per Exhibit "C". Lessee's responsibility
-----------
for payment of building operating costs shall be subject to the expense stop
referred to in Basic Lease Information #8.
---------------------------
33.1 Representations and Warranties by Lessor.
Lessor warrants that Lessor is the sole owner of the land and improvements
comprising the office building and that Lessor has full right to enter into this
lease. Lessor's duties and warranties are limited to those expressly stated in
this lease and shall not include any implied duties or implied warranties, now
or in the future. No representations or warranties have been made by Lessor
other than those expressly contained in this lease.
34.1 Representations and Warranties by Lessee.
Lessee warrants to Lessor that there are no delinquent taxes due and unpaid by
Lessee. Lessee warrants that Lessee has disclosed in writing to Lessor all
lawsuits pending or threatened against Lessee. Lessee acknowledges that Lessor
has relied on the above information furnished by Lessee to Lessor and that
Lessor would not have entered into this lease otherwise.
35.1 Place of Performance.
Unless otherwise expressly stated in this lease, all obligations under this
lease, including payment of rent and other sums due, shall be performed in the
county where the office building is located, at the address designated from time
to time by Lessor.
36.1 Miscellaneous.
This lease contains the entire agreement of the parties. NO OTHER WRITTEN OR
ORAL PROMISES OR REPRESENTATIONS HAVE BEEN MADE, AND NONE SHALL BE BINDING.
This lease supersedes and replaces any previous lease between the parties on
Lessee's office space, including any renewals or extensions thereunder. Except
for reasonable changes in written rules, this lease shall not be amended or
changed except by written instrument, signed by both Lessor and Lessee.
LESSOR'S AGENTS DO NOT AND WILL NOT HAVE AUTHORITY TO (1) MAKE EXCEPTIONS,
CHANGES OR AMENDMENTS TO THIS LEASE, OR FACTUAL REPRESENTATIONS NOT EXPRESSLY
CONTAINED IN THIS LEASE, (2) WAIVE ANY RIGHT, REQUIREMENT, OR PROVISION OF THIS
LEASE, OR (3) RELEASE LESSEE FROM ALL OR PART OF THIS LEASE, UNLESS SUCH ACTION
IS IN WRITING AND SIGNED BY BOTH PARTIES TO THIS LEASE. Multiple lessees shall
be jointly and severally liable under this lease. Notices, requests, or
agreements to, from, or with one of multiple lessees shall be deemed to be to,
from, or with all such Lessees. Under no circumstances shall Lessor or Lessee
be considered an agent of the other. Nonsubstantial errors in space footage
calculations shall entitle the parties to correct the rental figures in the
lease and adjust rentals previously paid to present Owner accordingly, but not
to terminate the lease. The lease shall not be construed against either party
more or less favorably by reason of who drafted the lease or changes in the
lease. Texas law applies. If any date of performance or exercise of a right
ends on a Saturday, Sunday, or state holiday, such date shall be automatically
extended through the next business day. Time is of the essence; and all
performance dates, time schedules, and conditions precedent to exercising a
right shall be strictly adhered to without delay except where otherwise
expressly provided. If any provision of this lease is invalid under present or
future laws, the remainder of this lease shall not be affected.
37.1 Special Conditions.
Additional provisions of this lease are set forth in Exhibit "J".
-----------
38.1 Exhibit List.
The exhibits attached to this lease are listed below. All exhibits are a part
of this lease except for those which have been lined out or which have been
shown below as omitted.
Exhibit "A" Floor Plan of Lessee's Office Space (paragraph 1.1)
Exhibit "B" Legal Description of Office Building (paragraph 1.1)
Exhibit "C" Building Operating Expense Passthrough Calculations (paragraphs
2.1 and 32.1)
Exhibit "D" Acknowledgment of Lease (paragraph 4.2)
Exhibit "E" Work Letter (paragraph 5.1)
Exhibit "F-1" Parking Rules (paragraphs 9.2 and 23.1)
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Exhibit "F-2" Building Rules (paragraph 23.1)
Exhibit "G" Estoppel Certificate (paragraph 30.1)
Exhibit "H" Lease Guaranty (paragraph 37.1)
Exhibit "I" Corporate Resolution Authorizing Lease or Guaranty (paragraphs
37.1 and 39.1)
Exhibit "J" Special Conditions (paragraph 37.2)
Exhibit "J-1" Approved Plans and Specifications for Exterior Building Signage
Exhibit "J-2" Schematic Drawing of Must-Take Expansion Space
Exhibit "K" Hazardous Substances
Exhibit "L" Acknowledgment of Receipt of Agency Disclosure
Exhibit "M" Renewal Option
Exhibit "N" Right of First Offer
Exhibit "O" Satellite Dish/Antenna
39.1 Lease Dates and Authority to Sign.
The "identification" date of this lease is the 8th day of July 1999 (the same
date as at the top of Basic Lease Information). The "effective date" on which
this lease becomes binding is the date on which the lease has been signed by
Lessor, Lessee, and any guarantors. The names and signatures of all parties are
shown below; and all persons signing have been duly authorized to sign. IF
LESSEE IS A CORPORATION, A CORPORATE RESOLUTION AUTHORIZING LESSEE TO EXECUTE
THIS LEASE IS ATTACHED AS EXHIBIT "I". Corporate seals are unnecessary under
Texas law.
<TABLE>
<CAPTION>
LESSOR LESSEE
<S> <C>
PLAZA 7000, LTD. drkoop.com, Inc.
- ---------------------------------------------------- -----------------------------------------------
Printed name of company or firm (if applicable) Printed name of company or firm (if applicable)
RON POLASEK SUSAN M. GEORGEN-SAAD
- ---------------------------------------------------- ----------------------------------------------------
Printed name of person signing Printed name of person signing
____________________________________________________ ____________________________________________________
Signature Signature
VICE PRESIDENT,7000MANAGEMENT, L.L.C.,
AUTHORIZED MANAGING AGENT FOR
PLAZA 7000, LTD. CHIEF FINANCIAL OFFICER
- ---------------------------------------------------- ____________________________________________________
Title of person signing (if applicable) Title of person signing (if applicable)
____________________________________________________ ____________________________________________________
Date signed (Please initial all pages and exhibits) Date signed (Please initial all pages and exhibits)
</TABLE>
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<PAGE>
LEASING AGENT
THE KUCERA COMPANY
- ------------------------------------------------
Printed name of company or firm (if applicable)
STEVEN G. MCMILLON
- ------------------------------------------------
Printed name of person signing
________________________________________________
Signature
SENIOR VICE PRESIDENT
- ------------------------------------------------
Title of person signing (if applicable)
________________________________________________
Date signed
Page 18
<PAGE>
EXHIBIT "A": FLOOR PLAN OF LESSEE'S OFFICE SPACE
(see paragraph 1.1 of lease)
The parties agree that the floor plan below is a true and correct diagram of
Lessee's office space referred to in paragraph 1.1.
Plaza 7000, Suite 400
38,373 USF / 40,629 RSF
------- -------
Page 19
<PAGE>
EXHIBIT "B": LEGAL DESCRIPTION OF OFFICE BUILDING
by lot, block, subdivision, and county or by metes and bounds description
(see paragraph 1.1 of lease)
Lot 1, Greystone Center III-A, a subdivision in City of Austin, Travis County,
Texas according to the map or plat thereof recorded in Volume 83, Page 203A,
Plat Records of Travis County, Texas.
Page 20
<PAGE>
EXHIBIT "C": BUILDING OPERATING EXPENSE PASS-THROUGH CALCULATIONS
(see paragraphs 2.1 and 32.1 of lease)
(a) "ESTIMATED" PRORATA BUILDING OPERATING EXPENSES. On or before the
beginning of each calendar year, Lessor shall calculate the estimated building
operating expenses for that calendar year, according to the criteria in
subparagraph (c) below. One-twelfth of Lessee's prorata share of estimated
building operating expenses which are in excess of any expense stop shall be due
on the first of each month as additional rent.
(b) YEAR-END ADJUSTMENT FOR OVERPAYMENT OR UNDERPAYMENT BY LESSEE BECAUSE
OF DIFFERENCES BETWEEN "ESTIMATED" AND "ACTUAL" BUILDING OPERATING EXPENSES.
Within ninety (90) days after the end of each calendar year of the lease term
and any renewal or extension periods, Lessor shall determine the actual building
operating expenses for that calendar year. If it is then determined that actual
building operating expenses were less than estimated expenses and that Lessee's
monthly payments of estimated expenses over Lessee's expense stop figure were
too much, Lessor shall promptly credit to Lessee the excess amount paid by
Lessee to be applied against monthly installments of base rent next falling due
in the direct order of maturity or in the event the lease term is then expired
and Lessee has vacated the Leased Premises, Lessor shall promptly refund to
Lessee the excess amount in cash. If it is determined that actual building
operating expenses were more than estimated expenses and that Lessee's monthly
payments of estimated expenses over Lessee's expense stop figure were
insufficient, Lessor shall invoice Lessee for the amount of Lessee's
underpayment. Payment thereof shall be due upon delivery of invoice to Lessee.
Payment may be made prior to or with the next scheduled rental payment, but not
later. The foregoing calculations and adjustments may also be made one or more
times during the calendar year, at Lessor's option.
(c) DEFINITION OF BUILDING OPERATING EXPENSES. Building operating expenses
for each calendar year shall include the following costs and expenses for
Lessor's operation of Plaza 7000 in accordance with this Lease: all ad valorem
taxes, assessments and related government charges becoming due on the building
and on-site personal property used solely in the operation of the building in
such period; utilities; insurance premiums for fire, extended coverage,
vandalism, and liability on the building and personal property and otherwise in
connection with the building landscape expenses; janitorial expenses; window
cleaning; supplies; painting, repairs to the roof that are not capital
improvements, window replacement, and other maintenance expenses; licenses;
permits; maintenance salaries, bonuses (which salaries and bonuses are not in
excess of market salaries and bonuses then being paid in connection with
comparable suburban office buildings in Austin, Texas); and payroll taxes,
common area utilities, reasonable management office overhead and management fees
not to exceed market management fees for comparable buildings in the suburban
office market in Austin, Texas; and all other managerial, administrative and
operating expenses which are reasonably related to the operation of the building
and utilities serving same. No such category shall include more than 12 months'
worth of expenses. Building operating expenses shall also include the following
improvements if amortized over the useful life of such improvements as
reasonably determined by Landlord together with interest at 10% per annum on the
unamortized cost: (i) improvements that in Lessor's reasonable judgment will
reduce operating expenses, (ii) carpeting, floor covering, draperies, and wall
coverings for the common areas of the building due to ordinary wear and tear.
Building operating expenses shall be calculated on an accrual basis in
accordance with generally accepted accounting principles, consistently applied.
The word "building" as referred to above shall include the building, parking
areas, parking garage (if any), and common areas.
Anything in this Lease to the contrary notwithstanding, building operating
expenses shall not include: principal and interest payments on mortgages; the
cost of capital improvements (except as provided above) and depreciation or
improvements which IRS requires to be depreciated (except as provided above);
expenses of repairing damage of the type normally covered by fire, vandalism,
flood, and EC insurance; any expense paid or reimbursed from insurance proceeds;
costs of repairing damage for which Lessor is entitled to reimbursement from
others; remodeling costs for new or existing tenants; common area improvements
or personal property required by other tenants to be made, purchased, or
furnished to such tenants; utility and air conditioning or heating costs or
other expenses which are separately billed to specific tenants; franchise and
income taxes of Lessor; leasing commissions; expenses of advertising and
marketing vacant space in the building; legal fees; structural repairs to roof,
foundation, and walls; asbestos removal; and installation of sprinklers, fire
alarms, and smoke detector systems and costs of Lessor's general corporate
overhead, and costs of any extraordinary services provided to other tenants of
the building but not to Lessee.
If utilities and taxes included in "Building Operating Expense" are not payable,
billed or otherwise due so as to allow an accurate calculation of said factors
annually, then Lessor, in its reasonable discretion, may estimate and prorate
said expenses on an annual basis, and said factors shall be properly adjusted by
Lessor when they actually become due and payable. Otherwise, expenses must be
supported by invoices and actually paid.
(d) DEFINITION OF PRORATA SHARE. Lessee's prorata share of estimated and
actual building operating expenses is the
Page 21
<PAGE>
percentage result of dividing "Lessee's rentable area" (which is set forth in
Basic Lease Information #4) by the total rentable area in the entire building.
- --------------------------
(e) DELAY IN IMPLEMENTATION. At Lessor's option, adjustments for the then
current year may be delayed. Lessor's delay in implementing such adjustments
shall not waive Lessor's right thereto, and the most recent monthly rental
figures shall continue to be paid during such delay. If Lessor delays in timely
calculating adjustments, such adjustments shall be retroactive to the respective
date on which Lessor had a right to make such adjustment; and such delayed rent
adjustments shall become due upon written notice to Lessee.
(f) EXAMINATION OF RECORDS. Upon reasonable notice to Lessor in writing,
Lessee may examine or audit Lessor's accounting records for building operating
expenses for the year immediately preceding and other data used in calculating
additional rents or rent adjustments. Examination or audit of building operating
expenses for a particular year may be conducted no later than 120 days after
Lessee's receipt of a reconciliation notice or statement of building operating
expenses for that year. If not examined or audited within the 120 day period,
such reconciliation shall be deemed as accepted and agreed to by all parties.
Page 22
<PAGE>
EXHIBIT "D": ACKNOWLEDGEMENT OF LEASE
(To be signed at move-in)
The undersigned parties acknowledge that the lease described below is in full
force and effect and that Lessee has taken possession of the space.
Date of lease: July 8, 1999
-------------
Lessor: Plaza 7000, Ltd.
-------------------------------------------------------------------
Lessee: drkoop.com, Inc.
-------------------------------------------------------------------
Guarantor, if any (not Lessee's name): N/A
------------------------------------
Building name: Plaza 7000
------------------------------------------------------------
Suite No.: 400
-----------------------------------------------------------------
Building address: 7000 N. MoPac
----------------------------------------------------------
City/County/State/Zip: Austin / Travis / Texas / 78731
-----------------------------------------------------
Legal description of property: See Exhibit "B" of Lease
---------------------------------------------
Rentable Area: 40,629 Square Feet
----------
The commencement date, annual anniversary date, and ending date of the initial
lease term as defined in paragraph 4.1 of above lease are as follows:
Commencement date (month, day, year __________________________________
Annual Anniversary date (month, day):______________________________________
Ending date (month, day, year):____________________________________________
The parties acknowledge that the lease has not been amended or modified and that
this acknowledgment may be filed of record with the Texas Secretary of State or
the county where the building is located in order to record (1) Lessee's
possession rights to the Leased Premises, and (2) Lessor's contractual landlord
lien rights over all personal property therein and any security deposit posted
by Lessee. The entire lease is hereby affirmed and incorporated herein. The
lease will cease to be an encumbrance to Lessor's title if Lessor files an
affidavit of record, stating that Lessee no longer occupies the premises and
that Lessee's right of possession has been lawfully terminated.
LESSOR LESSEE
(To be signed at move-in) (To be signed at move-in)
PLAZA 7000, LTD. drkoop.com, Inc.
- ------------------------------------------------- ----------------------------
Printed name of company or firm (if applicable) Printed name of company or
firm (if applicable)
RON POLASEK SUSAN M. GEORGEN-SAAD
- ------------------------------------------------- ----------------------------
Printed name of person signing Printed name of person
signing
_________________________________________________ ____________________________
Signature Signature
VICE PRESIDENT, 7000 MANAGEMENT, L.L.C.
AUTHORIZED MANAGING AGENT FOR
PLAZA 7000, LTD. CHIEF FINANCIAL OFFICER
- ------------------------------------------------- ----------------------------
Title of person signing (if applicable) Title of person signing (if
applicable)
_________________________________________________ ____________________________
Date signed Date signed
Page 23
<PAGE>
STATE OF TEXAS
COUNTY OF _______________________
This instrument was acknowledged before me on _________________________________
by ____________________________________________ on behalf of the above stated
LESSOR and in the above stated capacity.
_______________________________________________________
Notary Public for the State of Texas
Printed name of notary_________________________________
My commission expires__________________________________
STATE OF TEXAS (S)
(S)
COUNTY OF TRAVIS (S)
This instrument was acknowledged before me on __________________________________
by _____________________________________________ on behalf of the above stated
LESSEE and in the above stated capacity.
_______________________________________________________
Notary Public for the State of Texas
Printed name of notary_________________________________
My commission expires__________________________________
Page 24
<PAGE>
EXHIBIT "E": Work Letter
(see paragraph 5.1 of lease)
Lessor: Plaza 7000, Ltd.
Lessee: drkoop.com
Date of Lease July 8, 1999
Suite Number 400
Building Name/Address Plaza 7000/7000 N. MoPac, Austin, Texas 78731
1. Interior Improvements.
----------------------
Reference herein to "Interior Improvements" shall include all work to be
---------------------
done in Lessee's Office Space and the Must-Take Expansion Space referenced upon
Exhibit "J" attached to the Lease pursuant to the Interior Improvements Plans
(defined in paragraph 2 below), including, but not limited to, partitioning,
doors, ceilings, floor coverings, wall finishes (including paint, wallpaper,
fabric and all other coverings), electrical (including lighting, light
switching, outlets, etc.), plumbing, heating, ventilating and air conditioning,
fire protection, cabinets, and other millwork, and any other improvements
required by Lessee which are not part of the "Base Building Condition" (as
hereinafter defined). Lessor and Lessee hereby agree that unless otherwise
agreed to, the design architect for the Interior Improvements will be STG (the
"Interior Design Architect") and the construction manager for the construction
-------------------------
of the Interior Improvements will be MoPac Construction Management, Inc. (the
"Construction Manager"). Subject to Lessor's approval (which may not be
--------------------
unreasonably withheld), Lessee shall select the general contractor for the
construction of the Interior Improvements (the "Contractor"). Lessor shall bid
----------
out the Interior Improvements to one or more general contractors selected by
Lessee and approved by Lessor, such approval not to be unreasonably withheld.
Lessee will pay a $5,000.00 construction supervision fee to the Construction
Manager, payable periodically against the Construction Manager's invoice, on a
percentage of completion basis. Lessee will not be obligated to pay any other
construction management fee to Lessor or to any other party, unless otherwise
agreed to by Lessee.
As used herein, "Base Building Condition" shall mean the building and all
improvements included in the base building plans kept in Lessor's office, a copy
of which may be reviewed by Lessee and Lessee's consultants and contractors
prior to the execution of this lease and periodically thereafter upon reasonable
advance notice.
2. Interior Improvements Plans.
----------------------------
Immediately after execution of the Lease, Lessee shall meet with
representatives of the Interior Design Architect for the purpose of promptly
preparing a space plan and selecting materials and finishes for the layout and
construction of improvements in the Leased Premises. After the preparation of
the space plan and after Lessee's written approval thereof, the Interior Design
Architect shall prepare final working drawings and specifications for the
Interior Improvements based on the space plan and submit the same to Lessee for
Lessee's approval. Such final working drawings and specifications are referred
to herein as the "Interior Improvements Plans". A copy of the space plan and
---------------------------
the Interior Improvements Plans, and each revised version thereof, shall also be
submitted to Lessor for Lessor's reasonable approval simultaneously with
submission to Lessee. Lessee and Lessor shall promptly review each version of
the space plan and the Interior Improvements Plans and deliver any comments to
the Interior Design Architect expeditiously, and in no event later than five (5)
days after receipt of the same, so that the Interior Improvements Plans are
finally approved by Lessor and Lessee within thirty (30) days after the date of
execution of the Lease to which this Exhibit "E" is attached. After approval of
-----------
the Interior Improvements Plans by Lessor and Lessee, the same shall be
submitted to the appropriate governmental body by the Interior Design Architect
for plan checking and issuance of a building permit. The Interior Design
Architect, with Lessee's cooperation, shall cause to be made to the Interior
Improvements Plans any changes necessary to obtain the building permit. Lessor's
approval of the Interior Improvements Plans shall create or impose no liability
or responsibility on Lessor for their completeness, design sufficiency or
compliance with applicable laws, rules or regulations of governmental agencies
or authorities. Lessee shall work together with the Interior Design Architect,
Lessor and the Contractor diligently to finally approve the Interior
Improvements Plans and the final pricing for the construction of the Interior
Improvements not later than thirty (30) days after the date of execution of the
Lease to which this Exhibit "E" is attached.
-----------
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<PAGE>
3. Final Pricing and Drawing Schedule.
-----------------------------------
Concurrently with the plan checking, Lessor shall have the construction of
the Interior Improvements bid by one or more contractors as provided in
Paragraph 1 of this Exhibit "E" and shall deliver copies of such bids to Lessee
-----------
immediately upon receipt thereof for Lessee's approval, taking into account any
modifications which may be required to reflect changes in Lessee Improvement
Plans required by the city or county in which the Leased Premises are located.
All bids shall be first opened together in the presence of representatives of
Lessor and Lessee. Within five (5) days after the opening of all bids, Lessee
shall select the Contractor by written notice to Lessor. After final approval of
the Interior Improvement Plans, no further changes may be made thereto without
the prior written approval from both Lessor and Lessee, and then only after
agreement by Lessee to pay any excess costs resulting from the design and/or
construction of such changes.
4. Construction of Interior Improvements.
---------------------------------------
After the Interior Improvement Plans have been prepared and approved, the
final pricing has been approved, the Contractor has been selected and a building
permit for the Interior Improvements has been issued, the Contractor shall begin
construction and installation of the Interior Improvements in accordance with
Interior Improvement Plans. The construction manager shall only be responsible
for exercising reasonable efforts in assisting with the coordination of the
prosecution of the work to facilitate Lessee's construction schedule and for
representing the Lessor's interests in connection therewith but shall not be
responsible for securing completion, obtaining substantial completion, obtaining
a certificate of occupancy for Lessee's office space or for meeting any
deadlines, it being understood and agreed that Lessee's selected Contractor
shall be responsible for such matters. Notwithstanding the foregoing, however,
Lessor agrees to place any penalty, liquidated damages or late clauses in the
construction contract with Lessee's selected contractor, for Lessee's benefit,
provided the same are agreeable to Lessee's selected Contractor and Lessee. The
cost of such work shall be paid as provided in Section 5 below. Lessor shall not
be liable for any direct or indirect damages as a result of delays in
construction beyond Lessor's reasonable control or arising as a result of acts
of God or delays by Lessee or Lessee's agents or employees. Lessee and Lessor
agree that time is of the essence in the completion of the Interior
Improvements.
5. Payment for the Interior Improvements.
--------------------------------------
a. Except as may be otherwise provided in this work letter, Lessee shall
be responsible for the entire cost of the design, construction, and permitting
of the Interior Improvements. In order to defray a portion of the cost of the
Interior Improvements, however, Lessor hereby grants to Lessee an "Interior
--------
Improvements Allowance" in the amount of Twenty and No/100 Dollars ($20.00) per
- ----------------------
rentable square foot contained within the primary space (approximately 40,629
r.s.f.) and Twenty and No/100 Dollars ($20.00) per rentable square foot
contained within the Must-Take Expansion Space (approximately 40,629 r.s.f.).
The Interior Improvements Allowance shall be used only for:
(1) Payment of the cost of preparing the Interior Improvements Plans,
including mechanical, electrical, plumbing and structural drawings, and of
all other aspects necessary to complete the Interior Improvements Plans;
(2) Payment of plan check, permit, license and construction
management fees relating to construction of the Interior Improvements.
(3) Construction of the Interior Improvements above and beyond Base
Building Condition, including, but not limited to, the following:
(a) Installation within the Leased Premises of all
partitioning, doors, cabinets, floor coverings, ceiling, wall
coverings and painting, millwork, and similar items;
(b) All electrical wiring, lighting fixtures, outlets and
switches, cabling and other electrical work to be installed within the
Leased Premises;
Page 26
<PAGE>
(c) The furnishing and installation of all duct work,
terminal boxes, diffusers, and accessories required for the completion
of the heating, ventilation and air conditioning systems within the
Leased Premises;
(d) Any additional Lessee requirements, including, but not
limited to, odor control, special heating, ventilation and air
conditioning, noise or vibration control, or other special systems;
(e) All fire and life safety control systems such as fire
walls, halon, fire alarms, including piping, wiring and accessories
installed within the Leased Premises;
(f) All plumbing, fixtures, pipes and accessories to be
installed within the Leased Premises;
(g) Testing and inspection costs; and
(h) Contractors' fees, including but not limited to any
fees based on general conditions, and supervisory fees.
(4) Payment of the construction management fee.
(5) All other reasonable costs to be expended by Lessor or Lessee in
the construction of the Interior Improvements in accordance with the
Interior Improvements Plans.
b. The cost of each item referenced in Paragraph 5 a, above shall be
charged against the Interior Improvement Allowance. In the event that the cost
of installing the Interior Improvements, as established by Lessor's final
pricing schedule, shall exceed the Interior Improvements Allowance, or if any of
the Interior Improvements do not qualify for payment out of the Interior
Improvement Allowance as provided in Paragraph 5 a, above, the excess (the
"Excess") shall be paid by Lessee to Lessor within ten (10) days after Lessee's
------
receipt of Lessor's invoice for such Excess. If upon substantial completion of
the Interior Improvements there remains any unused portion of the Interior
Improvement Allowance, then such unused portion may be applied towards
additional improvements to Lessee's Office Space or Must-Take Expansion Space
which benefit the space and which are agreed upon by Lessor and Lessee.
c. In the event that, after the Interior Improvement Plans have been
prepared and the final pricing therefor has been agreed to between Lessor and
Lessee, Lessee shall require any changes or substitutions to the Interior
Improvements Plans, any additional costs related thereto shall be paid by Lessee
on or before five (5) days from Lessee's actual receipt of Lessor's invoice for
such additional costs; provided, however, that the aggregate amount outstanding
at any one time may not exceed $25,000.00. In the event the aggregate amount of
all unpaid change orders exceeds $25,000.00 at any time, Lessee shall thereafter
be required to pay Lessor in advance for such change orders until such time as
the aggregate amount outstanding drops below the $25,000.00 threshold.
d. No unused portion of the Interior Improvement Allowance shall be
refunded to Lessee or available to Lessee as a credit against any obligations of
Lessee under the Lease.
e. No portion of the Interior Improvements Allowance will be disbursed by
Lessor until such time as the Interior Improvements Plans have been finalized
and agreed to by Lessor and Lessee and the final pricing for the construction
and installation of the Interior Improvements has been agreed to by Lessor and
Lessee.
f. The Interior Improvements Allowance is calculated at the rate of $20.00
per square foot of the rentable square footage of the Leased Premises and the
Must-Take Expansion Space. Subject to section 5(g), Lessor will not disburse any
portion of the Interior Improvements Allowance for space which is not being
finished out. For example, if Lessee elects not to finish out 100 rentable
square feet of the Leased Premises, Lessor will not disburse the portion of the
Interior Improvements Allowance related to such space calculated as follows: 100
X $20.00 = $2,000.00. However, such allowance will be disbursed upon such space
being finished out.
Page 27
<PAGE>
g. In addition to the foregoing, Lessor and Lessee agree to split the cost
of demolition of the fourth floor corridor per the Interior Improvement Plans.
Lessee's share of such demolition will be deducted from the Interior
Improvements Allowance.
6. Completion of Interior Improvements.
------------------------------------
The "substantial completion date" for work described herein shall occur on
---------------------------
the date when all of the work described in the Interior Improvements Plans is
substantially complete as evidenced by a certificate of substantial completion
issued by the Interior Design Architect and by a Certificate of Occupancy for
the Lessee's Office Space and Must-Take Expansion Space issued by the City of
Austin, or the date such work would be substantially complete but for (a)
Lessee's failure to approve any items or perform any other obligation within the
time frames set forth in or contemplated by this Work Letter; (b) Lessee's
changes in the Interior Improvements Plans after the approval by Lessee and
Lessor. The Interior Improvements shall be deemed substantially complete
notwithstanding the fact that minor details of construction, mechanical
adjustments or decorations which do not materially interfere with Lessee's use
of the Leased Premises remain to be performed (items normally referred to as
"punch list" items). Lessor and Lessee shall complete one punch list inspection
----------
and Lessor shall complete and/or correct such punch list items within a
reasonable period of time.
Page 28
<PAGE>
EXHIBIT "F-1": OFFICE BUILDING PARKING RULES
(see paragraph 9.2 of lease)
It is the desire of Lessor to maintain and operate the parking garage and
parking areas in an orderly manner. The following rules and regulations apply
to all tenants in the building and their agents, employees, family, licensees,
invitees, visitors, and contractors unless otherwise stated. Lessor reserves
the right to rescind these rules, make reasonable changes, or make other
reasonable rules and regulations for the safety, care, and cleanliness of the
parking garage, if applicable, and parking areas and for the preservation of
good order.
1. TRAFFIC SIGNS. All persons parking in the parking areas and parking garage
shall observe posted signs and markings regarding speed, stop signs, traffic
lanes, reserved parking, no parking, parking stripes, etc.
2. LESSEE EMPLOYEE AND CUSTOMER PARKING. Lessees and their employees and
customers [ X ]may OR [ ]may not park without charge.
3. TRASH. All persons parking in the parking garage or parking areas shall
refrain from throwing trash, ashtray contents, or other debris on the garage
floor or parking areas.
4. FLAT TIRES. All vehicle owners and all persons parking in the parking
garage or parking areas shall be responsible for promptly repairing flat tires
or other conditions of the vehicle which cause unsightliness in the reasonable
judgment of Lessor.
5. REMOVAL OF UNAUTHORIZED VEHICLES. If vehicles are blocking driveways or
passageways or parked in violation of these rules and regulations or state
statutes, Lessor may exercise vehicle removal remedies under Article 6701g-1 and
6701g-2 upon compliance with statutory notice.
6. SECURITY. Lessor shall use reasonable diligence in the maintenance of
existing lighting in the parking garage or parking areas. Lessor shall have no
duty for additional lighting or any security measures in the parking areas,
including the parking garage.
7. PARKING OF EMPLOYEE VEHICLES. Upon request by Lessor, Lessee shall furnish
Lessor a complete list of license numbers of all vehicles operated by Lessee,
Lessee's employees, sublessees, assignees, licensees, and all concessionaires.
8. PARKING OF TRUCKS AND DELIVERY VEHICLES. Without Lessor's prior written
approval, no trailers or large trucks may be parked in the parking areas except
for temporary loading or unloading. Service and delivery vehicles may be parked
in loading zones only when necessary.
9. TIMELY PAYMENT OF PARKING RENT. If applicable, Lessee shall be entitled to
monthly parking rights in the parking garage only upon timely payment of the
then current monthly parking rent, in advance. Lessee may rent less than the
allowed number of spaces. Lessee may rent more than the allowed number of
spaces if available in the reasonable judgment of Lessor.
10. CONTROL DEVICES. Lessor reserves the right to install or utilize any
reasonable system of entry and exit control devices in the parking garage.
Page 29
<PAGE>
EXHIBIT "F-2": OFFICE BUILDING RULES
(see paragraphs 9.2 and 23.1 of lease)
LESSEE AGREES TO PROVIDE A COPY OF THESE RULES TO EVERY EMPLOYEE
It is the desire of Lessor to maintain in the building the highest standard of
dignity and good taste consistent with comfort and convenience for all tenants.
Any action or condition not meeting this high standard should be reported
directly to the building manager. Cooperation by all tenants will be sincerely
appreciated. The following rules and regulations apply to all tenants in the
building and their agents, employees, family, licensees, invitees, visitors, and
contractors unless otherwise stated. Pursuant to paragraph 23.1 of the lease,
Lessor reserves the right to rescind these rules, make reasonable modification
thereto, and make other reasonable rules and regulations for the safety, care,
and cleanliness of the building and for the preservation of good order.
1. DELIVERIES AND MOVEMENT OF FURNITURE. Movement into or out of the building
of furniture, equipment shall be restricted to hours, stairways, and elevators
designated by Lessor. Unless Lessor notifies Lessee otherwise, only the freight
elevator may be used for such purposes, and such elevator may be used only
during regular business hours without prior approval of Lessor. All such
movement and delivery shall be under the supervision of the building manager and
carried out in a manner agreed between Lessee and the building manager, by
prearrangement. Prearrangement shall include time, method, routing, and any
limitations imposed for reasons of safety or nondisturbance of others. The hold
harmless and indemnification provisions of paragraph 12.3 shall apply to the
foregoing. Lessor may require that movement of furniture or equipment which
interferes with normal building traffic shall be made at hours other than normal
business hours.
2. OBSTRUCTION OF PASSAGEWAYS. None of the passageways, outside entries,
exterior doors, elevators, hallways, or stairways shall be locked or obstructed.
No rubbish, trash, litter, or materials of any nature may be emptied or thrown
into these areas. These areas may be used only for ingress and egress.
3. DOORS AND DOORLOCKS. When Lessee's corridor doors are not in use, Lessee
shall use its best efforts to keep them closed on all floors where Lessee is a
partial tenant on the floor. No additional locks shall be placed on any doors in
Lessee's office space without written consent of Lessor. Lessee shall not
change, alter, or replace locks provided by Lessor on doors in the building,
except with written permission of the building manager. All necessary keys shall
be furnished by Lessor, and Lessor shall be entitled to have a key for every
door in Lessee's office space. Lessee shall surrender all keys upon termination
of Lessee's right of occupancy; and at such time, Lessee shall give Lessor the
combination to all vaults or combination locks remaining in Lessee's office
space after surrender by Lessee.
4. SAFES. Safes and other heavy articles shall be carried onto the Leased
Premises only at such times and in such manner as prescribed by Lessor. Lessor
shall have the right to specify weight limitations and positioning of safes or
other heavy articles. Any damage done to the building by installation, presence,
or removal of a safe or other article owned or controlled by Lessee on the
Leased Premises, shall be paid for by Lessee.
5. REMOVAL OF FURNITURE. Removal of furniture or equipment from Lessee's
office space shall require presentation of written authorization by an
authorized representative of Lessor. Security guards, watchmen, janitors, and
other building employees will have the right to challenge all persons leaving
the building with such items.
6. INSTALLATION AND REPAIR WORK. Lessee shall refer all contractors,
contractors' representatives, and installation technicians who render any
service on or to Lessee's office space, to the building manager for approval and
supervision before performance of any service. This provision shall apply to all
work performed in the building, including installation of telephones, electrical
lines, and other electrical devices where such installation affects the floors,
walls, woodwork, trim, windows, ceilings, mechanical equipment, or any other
part of the building. If Lessee desires telephone or other electronic
connections, Lessee shall notify Lessor; and Lessor shall then direct
installation servicemen as to where and how wires may be introduced. Without
such directions, no such installations shall be permitted.
Page 30
<PAGE>
7. HAZARDOUS MATERIALS. Lessee shall not place or install, on the Leased
Premises or any part of the building, any explosive, gasoline, kerosene, oil,
acids, caustics, or any other inflammable, explosive, or hazardous materials
without written consent of the building manager. Lessee shall not operate
electric space heaters, stoves, engines, or other equipment not typical of an
office building without written consent of the building manager.
8. ENTRY BY LESSOR. Lessor shall have the right to enter for the purposes and
in the manner set forth in paragraph 9.1 of the lease.
9. PLUMBING. Plumbing fixtures and appliances shall be used only for the
purposes for which they were constructed. No sweeping, rubbish, rags, or other
unsuitable materials may be thrown or placed in plumbing fixtures or appliances.
The cost of any stoppage or damage resulting from negligence or improper use of
these fixtures and appliances by Lessee or Lessee's agents, employees, family,
invitees, licensees, or visitors shall be paid for by the Lessee.
10. WINDOWS. Lessee shall not allow windows within Lessee's office space to be
opened at any time, except in emergencies. Nothing shall be thrown out of the
windows of the building or down the stairwells or other passages. Lessor
reserves the right to cause any or all windows of the building to be locked,
sealed, closed, or otherwise made inoperable, or to install permanent or
temporary screens thereon, and to include the cost thereof with the operating
expenses of the building.
11. THEFT AND DAMAGES. Lessor shall not be responsible for lost or stolen
personal property, equipment, money, or jewelry from Lessee's office space or
from the public areas of the building, regardless of whether such loss occurs
when the area is locked against entry. Lessor will not be liable to Lessee, or
Lessee's employees, customers, or invitees for any damages or losses to persons
or property caused by other Lessees in the building or for damages or losses
caused by theft, burglary, assault, vandalism, or other crimes. Lessor shall not
be liable for personal injury or loss of Lessee's property from fire, flood,
water leaks, rain, hail, ice, snow, smoke, lightning, wind, explosions, or
interruption of utilities unless such injury or damage is caused by negligence
of Lessor. LESSOR STRONGLY RECOMMENDS THAT LESSEE SECURE LESSEE'S OWN INSURANCE
TO PROTECT AGAINST THE ABOVE OCCURRENCES.
12. ANIMALS. No birds, fowl, or animals (except guide dogs for handicapped
persons) shall be brought into or kept in or about the building or common areas.
13. BICYCLES AND OTHER VEHICLES. No bicycles, motorcycles, or similar vehicles
shall be allowed in the building. No trailers or large trucks may be parked in
the building parking areas except for temporary loading or unloading.
14. RESIDENTIAL USE. No sleeping, cooking (except in microwave ovens), clothes
cleaning, or laundering is permitted on the Leased Premises without written
consent of Lessor.
15. INTOXICATION. Lessor reserves the right to exclude or expel from the
building any person who in the reasonable judgment of Lessor, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any act in
violation of any rules of the building.
16. DISTURBANCES. Lessee shall not obstruct, disturb, or interfere with the
rights of other Lessees or occupants or in any way injure or annoy them. Lessee
shall not make any noises by any means which, in the reasonable judgment of
Lessor, are likely to disturb other Lessees or occupants of the building.
17. COMPLIANCE WITH SAFETY AND SANITATION LAWS. Lessee shall comply with all
laws relating to fire, safety, and sanitation, and shall comply with any
requirements of Lessor's insurance company with respect to fire prevention,
safety standards, and sanitation.
18. CLEANING. Lessee shall not employ any person or persons without written
consent of Lessor, for the purpose of cleaning or maintaining of the Leased
Premises. Lessee shall cooperate with Lessor's employees, agents, and cleaning
personnel in keeping Lessee's premises neat and clean. Any special cleaning
requested by Lessee and performed by
Page 31
<PAGE>
Lessor or Lessor's employees, agents, or contractors shall be paid for by
Lessee.
19. SOLICITING. Canvassing, soliciting, or peddling in the building is
prohibited without written permission of Lessor, and Lessee shall cooperate to
prevent same.
20. SIGNS. No signs, fixtures, or notices of any kind may be displayed except
by written consent of Lessor. All signs shall conform to the requirements of
paragraph 28.1 of the lease.
21. NOTICE OF PERSONAL INJURIES OR UTILITY OR MECHANICAL PROBLEMS. Lessee shall
give prompt notice to the building manager, to the best of Lessee's knowledge,
of any significant accidents involving injury to persons or property, including
plumbing, electrical, heating, air conditioning, stairwell, corridor, and
elevator problems and/or personal injury and property damage caused thereby.
22. REQUESTS BY LESSEE. Except in emergencies, requests by Lessee shall be
attended to only after written request by Lessee to the building management.
Lessor's employees are not allowed to perform or do anything outside their
regular duties unless pursuant to special orders from Lessor. Lessee may not
contract with Lessor's employees for the performance of paid or free services to
Lessee. If, at the request of Lessee, Lessor or Lessor's agents furnish
services, goods, labor, or material to Lessee which are not required to be
furnished by Lessor under this lease, Lessee shall pay for same upon delivery of
a written statement therefor to Lessee.
23. BUILDING ACCESS. Anyone who does not reasonably satisfy a building security
guard (if any) that he has a right to enter the building may be excluded by the
guard. Lessor shall not be liable for damages for any good faith error with
regard to admission or exclusion from the building of any person. In case of
fire, destruction, invasion, mob, riot, or other commotion, Lessor reserves the
right to prevent access to the building by closing the doors or otherwise.
24. INTENTIONALLY DELETED
25. LEASE PROVISIONS REGARDING LESSEE'S CONDUCT. Lessee shall comply with all
the provisions of paragraph 9.2 regarding parking and paragraph 10.1 regarding
occupancy, nuisance, and hazards.
26. ELEVATORS. Lessor shall not be liable for damages from stoppage of
elevators for repair, service, or improvements. Nor shall Lessor be liable for
delays of any duration in connection with elevator repair, service, or
improvements.
27. SMOKING. This is a non-smoking building; smoking is not permitted anywhere
inside the building.
28. ICE, SLEET, SNOW, OR WATER. Lessor shall have no duty to remove, in whole
or in part, ice, sleet, snow, or water from parking lots, walkways, sidewalks,
or stairs, regardless whether they are covered, uncovered, inside, or outside of
buildings. At Lessor's option, Lessor may remove such ice, sleet, snow, or
water at any time, in whole or in part, with or without notice to anyone.
Page 32
<PAGE>
Page One of Two
This form is not to be executed at time of lease execution.
---
EXHIBIT "G": ESTOPPEL CERTIFICATE
(see paragraph 30.1 of lease)
The purpose of this certificate is to confirm the current status of matters
relating to the lease described below. It is for the benefit of the owner or
prospective purchaser or mortgagee of the building in which the Leased Premises
are located.
1. The undersigned is the Lessee under a lease between _____________________,
as Lessor, and ___________________________________ , as Lessee, dated
_____________________ on Leased Premises locally known as the __________________
building and located at _______________________, in _______________, Texas. A
copy of the fully executed lease and any amendments or modifications thereto are
attached. There are no other modifications or amendments to the above described
lease. The dates of any amendments or modifications are: (put "none" if
inapplicable) _________________________________________.
2. There are no unfulfilled written or verbal promises, representations, or
warranties by Lessor.
3. There are no subleases of the Leased Premises or any portions thereof.
4. The lease (together with any amendments or modifications referred to above)
is in good standing and in full force and effect. Lessor is not in default.
Lessee agrees to give notice of any Lessor default to any purchaser or lender
making written requests to Lessee for same.
5. Except for rents (if any) which may be due under the lease for the current
month, there are no rents or other charges which have been prepaid by the
undersigned Lessee to Lessor under the lease other than the following:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________.
6. The amount of security deposit currently posted by Lessee with Lessor is
$____________ in the form of ( ) cash or ( ) an irrevocable, unconditional
letter of credit issued by _____________________________ in favor of Lessor
which is still valid.
7. Lessee acknowledges that the space being leased consists of __________
rentable square feet according to the lease, that the improvements to be
constructed by Lessor have been satisfactorily completed, that the lease space
has been accepted by Lessee, that Lessee now occupies the lease space, and that
the commencement date for the lease term was
_______________________________________.
8. There are no rentals which are due and unpaid. Rentals are fully paid (if
required by the lease) through the last day of the month in which this estoppel
certificate has been executed.
9. There are no known offsets or credits against rentals except as expressly
provided by the terms of the lease. There is no known right of rescission and
no known defense to Lessee's future obligations to pay the specified rentals at
the times and in accordance with the lease terms. Lessee has not received any
concession (rental or otherwise) or similar compensation not expressed in the
lease which is presently in effect.
10. Lessee has no options or rights of refusal regarding the Leased Premises or
additional rental space other than as set out in the lease.
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<PAGE>
EXHIBIT "G" (cont'd)
Page Two of Two
11. Lessee has not: (a) made a general assignment for the benefit of creditors;
and (b) commenced any case, proceeding or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution, or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization, or
relief of debtors; or (c) had any involuntary case, proceeding, or other action
commenced against it which seeks to have an order for relief entered against it,
as debtor, or seeks reorganization, arrangement, adjustment, liquidation,
dissolution, or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization, or relief of debtors; or (d) concealed,
removed, or permitted to be concealed or removed, any part of its property, with
intent to hinder, delay, or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance, or similar law; or made any transfer of its
property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or (e) had a trustee, receiver, custodian
or other similar official appointed for or take possession of all or any part of
its property or had any court take jurisdiction of any other of its property.
12. Lessee agrees to furnish Lessor with estoppel letters on this form within
10 days (stating the then-current facts) after written request by Lessor or
subsequent owners of the building.
13. Lessee acknowledges that, upon 10 days' prior written request of Lessor's
mortgagee at any time after foreclosure proceedings or a deed in lieu of
foreclosure, Lessee shall attorn to the mortgage or foreclosure purchaser by
recognizing such new owner as Lessor under the lease provided that such
purchaser shall recognize the rights of tenant under the lease as long as tenant
is not in default. The agreement of Lessee to attorn shall survive any
foreclosure sale or deed in lieu of foreclosure. Lessee shall, upon 10 days'
written notice from Lessor's mortgagee anytime before or after foreclosure sale,
execute, acknowledge, and deliver to Lessor's mortgagee all instruments and
certificates that in the reasonable judgment of Lessor's mortgagee may be
necessary or proper to confirm such attornment.
14. Lessee acknowledges that this estoppel certificate and the statements
therein may be conclusively relied upon by Lessor and by any prospective
purchaser or lien holder of the Leased Premises.
15. The form of this estoppel certificate may vary, depending on lender or
purchaser requirements. It is agreed that this certificate may be modified to
conform to reasonable requests by lenders or purchasers.
16. This agreement shall be binding upon and shall inure to the benefit of the
Lessor, any present or future mortgagee, any prospective buyer or master Lessee
of the property, and their successors and assigns.
Dated this ________________ day of ___________________, 19____.
LESSEE____________________________________________
By _______________________________________________
Printed name of signatory_________________________
Title_____________________________________________
Page 34
<PAGE>
EXHIBIT "H": OFFICE LEASE GUARANTY
(see paragraph 37.1 of lease)
INTENTIONALLY DELETED
Page 35
<PAGE>
EXHIBIT "I": CERTIFICATE OF CORPORATE RESOLUTION AUTHORIZING LEASE OR GUARANTY
(see paragraphs 37.1 and 39.1 of lease)
The undersigned, as secretary of the corporation named below, certifies that at
a special meeting of the board of directors of the corporation, duly called and
held on the _____ day of ________________, 19____, at which a quorum of the
directors were present and acting throughout, the following resolutions were
unanimously adopted and are still in force and effect:
RESOLVED that the president, the vice president, or the chief financial officer
of the corporation shall be authorized to execute a lease for office space on
behalf of the corporation and/or to guarantee performance of a lease for office
space, described below:
Date of lease: July 8, 1999
-------------------------------------------------------------
Lessor: Plaza 7000, Ltd.
--------------------------------------------------------------------
Lessee: drkoop.com, Inc.
--------------------------------------------------------------------
Guarantor, if any (not Lessee's name): N/A
--------------------------------------
Building name: Plaza 7000
-------------------------------------------------------------
Suite No.: 400
-----------------------------------------------------------------
Building address: 7000 North MoPac
----------------------------------------------------------
City/County/State/Zip: Austin / Travis / Texas / 78731
-----------------------------------------------------
RESOLVED FURTHER, that the president or vice president is authorized on behalf
of the Corporation to execute and deliver to the Lessor all instruments
reasonably necessary for the lease. Lessor is entitled to rely upon the above
resolutions until the board of directors of the corporation revokes or alters
same in written form, certified by the secretary of the corporation, and
delivers same, certified mail, return receipt requested, to the Lessor. The
corporation is duly organized and is in good standing under the laws of the
State of _________________________________, and there are no proceedings pending
to forfeit the corporation's charter or right to do business in Texas. The
undersigned further certifies that on the meeting date referred to above, the
names and respective titles of the officers of the corporation were as follows:
President
- --------- ----------------------------------------------------------------------
Vice President
- -------------- -----------------------------------------------------------------
Secretary
- --------- ----------------------------------------------------------------------
Treasurer
- --------- ----------------------------------------------------------------------
Chief Financial Officer
- ----------------------- --------------------------------------------------------
WITNESS MY HAND this _________ day of __________________________, 19_______
__________________________________________________
Typed name of corporation
__________________________________________________
Signature of secretary of corporation
__________________________________________________
Printed name of secretary
STATE OF TEXAS (S)
Page 36
<PAGE>
(S)
COUNTY OF TRAVIS (S)
This instrument was acknowledged before me on ____________________________
by ________________________________________________ on behalf of the above
corporation and in the above stated capacity.
______________________________________________________
Notary Public for the State of Texas
Printed name of notary _______________________________
My commission expires _______________________________
Page 37
<PAGE>
EXHIBIT "J": Special Conditions
(see special conditions paragraph 37.1 of lease)
Anything in the Lease (or its Exhibits, Schedules and Addenda) to the contrary
notwithstanding, the following special conditions shall apply to this lease and
shall prevail on any other provisions to the contrary.
1. FINANCIAL STATEMENTS/CONSUMER CREDIT REPORT. From time to time after
execution of this Lease, Lessee shall, upon written request from Lessor,
furnish to Lessor a copy of Lessee's most current financial statements in
the possession of Lessee (such financial statements may be in the form of
Lessee's most current United States Securities and Exchange Commission Form
10-Q Quarterly Report and Form 10-K Annual Report so long as Lessee's stock
is listed stock). If at any time in the future Lessee is no longer a
publicly traded company, such financial statements shall be signed and
dated by Lessee or Lessee's agent and be current within twelve (12) months.
2. TERMINATION RIGHT. If Lessee desires expansion space anytime after the
fifth year of the lease term and requests the space by giving Lessor six
(6) months prior written notice (the "Expansion Space Notice") and Lessor
cannot deliver the requested expansion space on or before the end of the
six (6) month notice period, Lessee may terminate this lease with a ninety
day written notice to Lessor and payment of unamortized leasing commissions
and tenant finish out costs (using a 10% interest, principal balance only
due at that time). Lessor shall give Lessee written notice on or before six
(6) months after actual receipt of the Expansion Space Notice notifying
Lessee whether Lessor can or cannot deliver the expansion space requested
in the Expansion Space Notice, along with a certified lease expiration and
option schedule to confirm such space will or will not be available.
Anything in this Section 2 to the contrary notwithstanding, in the event
Lessor does not give Lessee written notice on or before six (6) months
after actual receipt of the Expansion Space Notice notifying Lessee that
Lessor can or cannot deliver the expansion space requested in the Expansion
Space Notice, along with a certified lease expiration and option schedule
to confirm such space will or will not be available, Lessee may terminate
this Lease upon written notice to Lessor. In the event Lessor gives Lessee
proper and timely written notice that space will not be available, Lessee
shall, as a condition to the exercise of Lessee's right of termination set
forth in this Section 2, show Lessor a fully executed valid lease agreement
signed by Lessee and proposed Lessor, for an amount of space approximately
equivalent to Lessee's then current square footage plus requested expansion
space.
3. SIGNAGE. Lessor shall grant Lessee prominent exterior building signage on
the fourth floor of the building which conforms to the two (2) page
drawings and specifications attached hereto as Exhibit "J-1". As to the
-------------
attachment to the signage to the exterior of the building, the two page
drawings and specifications attached as Exhibit "J-1" provide for the
-------------
signage to be hung without drilling into the granite facia. Nevertheless,
Lessor agrees that Lessee may mount Lessee's building signage to the
building by drilling into the granite fascia if (i) such decision is made
within ninety (90) days after the date of execution of this Lease (ii)
Lessor approves the specific method of attachment, such approval not to be
unreasonably withheld, and (iii) Lessee pays Lessor an amount sufficient to
purchase and replace all granite panels which are drilled in connection
with such exterior signage mounting. Lessee agrees to pay the cost of
purchasing the granite to Lessor within thirty (30) days from Lessee giving
notice to Lessor of intent to drill the granite.
4. ARCHITECTURAL FEES. Lessee shall use its own architect and (at its option)
its own engineer. Lessor agrees to pay Lessee's architect to perform a
test fit up to an amount not to exceed $2,850.00, which amount shall not be
deducted from the Interior Improvement Allowance.
5. MUST TAKE EXPANSION SPACE. The space described on Exhibit "J-2" attached
-------------
to this Exhibit "J" is herein defined as the "Must-Take Expansion Space".
----------- -------------------------
The Must-Take Expansion Space is hereby stipulated to consist of 40,629
square feet of net rentable area, in the aggregate. All of the Must-Take
Expansion Space may be built out for Lessee at one time, along with the
original portion of the Leased Premises, in accordance with the provisions
of Exhibit "E" attached to this lease. Lessee may begin to occupy and make
-----------
use of the Must-Take Expansion Space incrementally after the Commencement
Date for any purpose permitted under the Lease
Page 38
<PAGE>
in its sole discretion; provided, however, that (i) one-third (1/3) of the
Must-Take Expansion Space (13,543 r.s.f.) will be incorporated into the
Leased Premises, and Lessee shall be required to commence the payment of
rent on such portion thereof beginning on the fifth (5th) month after the
Commencement Date (as such term is defined in Section 1 of the Lease) (ii)
---------
the second one-third (1/3) of the Must-Take Expansion Space (13,543 r.s.f.)
will be incorporated into the Leased Premises, and Lessee shall be required
to commence the payment of rent on such portion thereof beginning on the
eighth (8th) month after the Commencement Date, and (iii) the final one-
third (1/3) of the Must-Take Expansion Space (13,543 r.s.f.) will be
incorporated into the Leased Premises, and Lessee shall be required to
commence the payment of rent on such portion thereof beginning on the
eleventh (11th) month after the Commencement Date. Anything in this Exhibit
-------
"J" or in the Lease to the contrary notwithstanding, Lessee shall not be
---
required to pay base rent, additional "pass through" rent, or any other
rent payable under the Lease on the Must Take Expansion Space until the
dates and in the increments set forth in the immediately preceding
sentence, notwithstanding that Lessee has begun to occupy part or all of
the Must-Take Expansion Space prior to the applicable rent commencement
dates. Subject to the abatement of rent as provided above, upon the
Lessee's use on any portion of the Must-Take Expansion Space for any
purpose whatsoever, including, without limitation, storage, such portion of
the Must-Take Expansion Space shall become and be incorporated into the
Leased Premises, and the term "Leased Premises", as used in this Lease,
shall thereafter include the portion of the Must-Take Expansion Space so
used by Lessee.
On the applicable rent commencement date for each increment of the Must-
Take Expansion Space:
(a) the Leased Premises shall be deemed to include such incremental
portion of the Must-Take Expansion Space;
(b) the Base Rent will automatically be increased by the amount per square
foot amount set forth in Basic Lease Provisions #7 multiplied by the
-------------------------
rentable square footage contained in such incremental portion of the
Must-Take Expansion Space; and
(c) Lessee's Prorata Share, as defined in Basic Lease Provisions #4, will
-------------------------
automatically be recalculated to equal the product of dividing the
total square footage of the building (153,694) into the total rentable
area of the Leased Premises (including all incremental portions of the
Must-Take Expansion Space theretofore incorporated into the Leased
Premises.
The Must-Take Expansion Space shall be leased for a term which is
coterminous with the Term of the original Leased Premises. The Rent shall
escalate on the entirety of the Leased Premises (including the entirety of the
Must-Take Expansion Space) on each anniversary of the original Commencement Date
as provided Basic Lease Provisions #7 at the per square foot rental rate
-------------------------
provided for in Basic Lease Provisions #7.
-------------------------
Upon the inclusion of all or any portion of the Must-Take Expansion Space
into Leased Premises, Lessor and Lessee shall execute, at the request of either,
an instrument delineating and describing such portion of the Must-Take Expansion
Space and confirming the inclusion thereof into the Leased Premises under the
Lease.
The Must-Take Expansion Space shall not be severable from the Lease.
6. PREMISES. Approximately 40,629 rentable square feet located on the fourth
floor(s) of the building. This is based upon an add-on factor not to
exceed 5.88% (subject to verification by Lessee's architect as provided in
Section 1.3 of the Lease). All measurements of usable and rentable square
footage, must be computed in accordance with the American National Standard
method of measuring floor are in office buildings of the Building Owners
and Managers Association International (ANSI Z65.1-1996).
7. ESCALATION. Lessee will not be required to pay as additional "pass-
through rent" Operating Expenses in 1999 in excess of $8.50 per rentable
square foot of space in the Leased Premises, (subject to the rent abatement
provisions of paragraph 7, above, regarding the Must Take Expansion Space),
and in no event will Lessee be obligated to pay additional "pass-through"
rent in excess of such amount during calendar year 1999.
Page 39
<PAGE>
Thereafter, controllable operating expenses (this is all those operating
expenses excepting taxes, insurance and utilities) shall be capped at 107%
of the previous year's controllable operating expenses.
8. ACCESS/HVAC. Lessor shall allow Lessee to have twenty-four (24) hour per
day access to Lessee's office space and overtime HVAC. The building hours
are Monday through Friday, 7:00 a.m. to 7:00 p.m. and Saturday from 8:00
a.m. to 1:00 p.m. At the sole cost and expense of Lessor, Lessor shall
provide to Lessee the ability to access overtime HVAC by card key device
without the assistance of Lessor or any other party. Afterhour HVAC charges
shall be no more than $15.00 per hour per half floor (subject to adjustment
for any increases in electrical charges by utility provider, but only to
the extent of such increase as reasonably demonstrated by Landlord).
9. PARKING. Lessee's parking ratio is one (1) parking space per every 250
square feet of rentable area within the Leased Premises. Lessor shall
allow Lessee to have reserved parking (within the above ratio) at a ratio
of one (1) reserved parking space per every 2000 square feet of space
within the Leased Premises at preferential locations in the garage at rates
that are being charged other tenants in the project, but not to exceed
$100.00 per space on the first level, $75.00 per space on the second level
and/or $50.00 per space for levels three or higher during the initial term
of this Lease. If Lessee does not lease all of Lessee's allotment of
reserved parking spaces within (30) days after the Commencement Date (or,
as to any allocation of reserved parking spaces attributable to any
expansion space, within thirty (30) days after the date of occupancy of
such expansion or additional space), Lessor shall be free to lease such
unsubscribed reserved parking spaces to other tenants in the Building on
month to month leases so that they can be recaptured by Lessee upon 45 days
advance written notice.
10. SECURITY DEPOSIT. Lessor shall allow Lessee a period of two (2) weeks
after full execution of this Lease to deliver the letter of credit referred
to in Section 3.3 of the Lease. So long as Lessee is not then in default,
the security deposit shall be reduced to $89,700.00 when Lessee achieves a
net profit (after tax) for any fiscal year.
11. ADDITIONAL LESSEE TERMINATION RIGHTS. Lessee may terminate this Lease upon
written notice to Lessor in the event Lessor does not obtain a Certificate
of Occupancy from the City of Austin for the building on or before October
1, 1999. Notwithstanding the foregoing, Lessee shall not be entitled to
terminate this lease pursuant to this paragraph after Lessee takes
possession of Lessee's office space. In addition, Lessee agrees to confirm
the expiration of this provision in an estoppel certificate at any time
after Lessee's move in.
12. RENTAL ABATEMENT. Anything in this Exhibit "J" or in the Lease to the
contrary notwithstanding, (i) all base rent, additional "pass through"
rent, and any other rent payable under the Lease for the Leased Premises
shall be abated for one (1) month from the Commencement Date, (ii) Lessee
shall receive a credit of $10,460.00 against the second month's base rent,
and (iii) all base rent, additional "pass through" rent and any other rent
payable under the Lease for each incremental portion of the Must-Take
Expansion Space shall be abated for the periods set forth in paragraph 5 of
this Exhibit "J", above.
-----------
Page 40
<PAGE>
EXHIBIT "J-1"
-------------
APPROVED PLANS AND SPECIFICATIONS OF EXTERIOR BUILDING SIGNAGE
--------------------------------------------------------------
TWO PAGE EXHIBIT FOLLOWS THIS PAGE
Page 41
<PAGE>
EXHIBIT "J-2"
-------------
SCHEMATIC DRAWING OF MUST-TAKE EXPANSION SPACE
----------------------------------------------
Page 42
<PAGE>
EXHIBIT "K": HAZARDOUS SUBSTANCES
1. Lessee's Obligations. Lessee shall not cause or permit any Hazardous
--------------------
Substance to be used, stored, generated, or disposed of on or in the Building or
the Leased Premises by Lessee, Lessee's agents, employees, contractors,
subcontractors, licensees, guests, subtenants or invitees. If Hazardous
Substances are used, stored, generated or disposed of by Lessee on or in the
Building or the Leased Premises, or if the Building or the Leased Premises
becomes contaminated in any manner by Lessee or any of Lessee's agents,
employees, contractors, subcontractors, licensees, guests, subtenants or
invitees, Lessee shall indemnify, defend and hold Lessor harmless from any and
all claims, damages, fines, judgments, penalties, costs, liabilities, or losses
(including, without limitation, a decrease in value of the Building, damages
caused by loss or restriction of rentable or usable space, or any damages caused
by adverse impact on marketing of the space, and any and all sums paid for
settlement of claims, attorneys' fees, consultant and expert fees) arising
during or after the Term hereof and arising as a result of that contamination.
This indemnification includes, without limitation, any and all costs incurred
because of any investigation of the site or any cleanup, removal, or restoration
mandated by a federal, state, or local agency or political subdivision.
Without limitation of the foregoing, if Lessee or any of Lessee's agents,
employees, contractors, subcontractors, licensees, guests, subtenants or
invitees causes or permits the presence of any Hazardous Substance in the
Building or the Leased Premises which results in contamination, Lessee shall
promptly, at its sole expense, take any and all necessary actions to return the
Building and the Leased Premises to the condition existing prior to the presence
of any such Hazardous Substance in the Building or the Leased Premises. Lessee
shall first obtain Lessor's approval for any such remedial action.
2. Lessor's Representations and Obligations. Lessor hereby represents
----------------------------------------
and warrants to Lessee that, to the best of Lessor's current actual knowledge,
and based solely upon that certain Phase I Environmental Site Assessment
prepared by Law Engineering and Environmental Services, dated March 5, 1997,
there are no Hazardous Substances present or stored on, in or about the Building
or the Leased Premises and there is no Hazardous Substance contamination on the
Building, the Leased Premises or any portion thereof. Lessor shall not cause or
permit any Hazardous Substance to be used, stored, generated, or disposed of on
or in the Building or the Leased Premises by Lessor or Lessor's agents,
employees, guests, invitees, contractors, or subcontractors. If Hazardous
Substances are used, stored, generated or disposed of by Lessor or Lessor's
agents, employees, guests, invitees, contractors, or subcontractors on or in the
Building or the Leased Premises, or if the Building or the Leased Premises
becomes contaminated with Hazardous Substances in any way by Lessor or Lessor's
agents, employees, guests, invitees, contractors, or subcontractors, Lessor
shall indemnify, defend and hold Lessee harmless from any and all third party
claims, damages, fines, judgments, penalties, costs, liabilities, or losses
(including, without limitation, and any and all sums paid for settlement of
claims, attorneys' fees, consultant and expert fees) arising during or after the
Term hereof and arising as a result of Hazardous Substance contamination caused
by the use, storage, generation, or disposal of Hazardous Substances on or in
the Building or the Leased Premises by Lessor or Lessor's agents, employees,
guests, invitees, contractors, or subcontractors.
This indemnification includes, without limitation, any and all costs incurred
because of any investigation of the site or any cleanup, removal, or restoration
mandated by a federal, state, or local agency or political subdivision.
3. Definition of "Hazardous Substance". As used herein, "Hazardous
-----------------------------------
Substance" means any substance that is toxic, ignitable, reactive, or corrosive
and that is regulated by any local government, the state of Texas, or the United
States Government. "Hazardous Substance" include any and all material or
substances that are defined as "hazardous waste," "extremely hazardous waste,"
or a "hazardous substance" pursuant to state, federal, or local government law.
"Hazardous Substance" includes but is not restricted to asbestos,
polychlorobiphenyls ("PCBs"), and petroleum.
----
Page 43
<PAGE>
EXHIBIT "L": ACKNOWLEDGMENT OF RECEIPT OF AGENCY DISCLOSURE
Approved by the Texas Real Estate Commission for Voluntary Use
Texas law requires all real estate licensees to give the following
information about brokerage services to prospective buyers, tenants,
sellers and landlords.
________________________________________________________________________________
Information About Brokerage Services
________________________________________________________________________________
Before working with a real estate broker, you should know that the duties of a
broker depend on whom the broker represents. If you are as prospective seller
or landlord (owner) or a prospective buyer or tenant (buyer), you should know
that the broker who lists the property for sale or lease is the owner's agent.
A broker who acts as a subagent represents the owner in cooperation with the
listing broker. A broker who acts as a buyer's agent represents the buyer. A
broker may act as an intermediary between the parties if the parties consent in
writing. A broker can assist you in locating a property, preparing a contract
or lease, or obtaining financing without representing you. A broker is
obligated by law to treat you honestly.
IF THE BROKER REPRESENTS THE OWNER:
The broker becomes the owner's agent by entering into an agreement with the
owner, usually through a written listing agreement, or by agreeing to act as a
subagent by accepting an offer of subagency from the listing broker. A subagent
may work in a different real estate office. A listing broker or subagent can
assist the buyer but does not represent the buyer and must place the interests
of the owner first. The buyer should not tell the owner's agent anything the
buyer would not want the owner to know because an owner's agent must disclose to
the owner any material information known to the agent.
IF THE BROKER REPRESENTS THE BUYER:
The broker becomes the buyer's agent by entering into an agreement to represent
the buyer, usually through a written buyer representation agreement. A buyer's
agent can assist the owner but does not represent the owner and must place the
interests of the buyer first. The owner should not tell a buyer's agent
anything the owner would not want the buyer to know because a buyer's agent must
disclose to the buyer any material information known to the agent.
IF THE BROKER ACTS AS AN INTERMEDIARY:
A broker may act as an intermediary between the parties if the broker complies
with The Texas Real Estate License Act. The broker must obtain the written
consent of each party to the transaction to act as an intermediary. The written
consent must state who will pay the broker and, in conspicuous bold or
underlined print, set forth the broker's obligations as an intermediary. The
broker is required to treat each party honestly and fairly and to comply with
The Texas Real Estate License Act. A broker who acts as an intermediary in a
transaction:
(1) shall treat all parties honestly;
(2) may not disclose that the owner will accept a price less than the
asking price unless authorized in writing to do so by the owner;
(3) may not disclose that the buyer will pay a price greater than the
price submitted in a written offer unless authorized in writing to do
so by the buyer; and
(4) may not disclose any confidential information or any information that
a party specifically instructs the broker in writing not to disclose
unless authorized in writing to disclose the information or required
to do so by The Texas Real Estate License Act or a court order or if
the information materially relates to the condition of the property.
With the parties' consent, a broker acting as an intermediary between the
parties may appoint a person who is licensed under The Texas Real Estate License
Act and associated with the broker to communicate with and carry out instruction
so one party and another person who is licensed under that Act and associated
with the broker to communicate with an carry out instruction of the other party.
If you choose to have a broker represent you,
you should enter into a written agreement with the broker that clearly
establishes the broker's obligations and your obligations. The agreement should
state how and by whom the broker will be paid. You have the right to choose the
type of representation, if any, you wish to receive. Your payment of a fee to a
broker does not necessarily establish that the broker represents you. If you
have any questions regarding the duties and responsibilities of the broker, you
should resolve those questions before proceeding.
Page 44
<PAGE>
________________________________________________________________________________
Real estate licensee asks that you acknowledge receipt of this information about
brokerage services for the licensee's records.
________________________________________________________________________________
Lessee Signature Date
________________________________________________________________________________
Page 45
<PAGE>
EXHIBIT "M": RENEWAL OPTION
RIGHT OF RENEWAL. At the end of the original lease term, Lessee will have the
- ----------------
option to renew the Lease for a period of sixty (60) months provided that Lessee
delivers to Lessor written notice of Lessee's exercise of such right at least
120 days prior to the end of the original lease term. But Lessee shall not have
such right of renewal if Lessee is in default beyond any applicable cure period
allowed by the lease - either at the time of such notice of renewal or at the
end of the lease term. When Lessee exercises its option 120 days or more prior
to end of the original term, Lessee will definitely be committed to lease the
space for the first renewal term, with rent being determined as set forth below.
The terms of the lease during such renewal term shall continue unchanged except
as follows: Base rent shall be at ninety-five percent (95%) of fair market
rental rate as determined in accordance with the following paragraph for such
renewal term, with no tenant finish.
In the event Lessee exercises its right of renewal hereunder, Lessor and Lessee
shall attempt in good faith to agree upon the fair market rental for the
Premises during the renewal term within ten (10) days of the date of Lessee's
exercise of the renewal option. If Lessee and Lessor are unable to so agree
upon the fair market rental for the renewal term within such ten (10) day
period, then Lessor or Lessee, by written notice given to the other (the
"Valuation Notice") may commence the valuation process specified below.
Notwithstanding the foregoing, Lessor and Lessee may at any time reach a good
faith agreement with respect to any matter which is the subject of the valuation
process specified below, including, but not limited to, the fair market rental
for the Premises during the renewal term.
Within three (3) business days following the delivery of a Valuation Notice,
Lessee and Lessor shall each select an appraiser or real estate broker
experienced in the valuation of commercial lease interests and other real
property interests in the Austin, Texas area and unaffiliated with either Lessor
or Lessee, and the appraisers or real estate brokers selected by Lessor and
Lessee shall together select a third appraiser or real estate broker (such
appraisers or brokers being collectively referred to as the "Valuing
Appraisers"). Each Valuing Appraiser shall determine the fair market rental of
the Premises for each year of the renewal term as of the first day of the
proposed renewal term (the "Valuation Date"). Fair market rental shall mean the
amount, determined as of the Valuation Date, which the Lessor could lease the
Premises for the length of the renewal term for general office purposes in an
arms' length transaction with a sophisticated unaffiliated third party without
time constraints. Without limiting the Valuing Appraisers' consideration of any
particular relevant facts in making their determination, Lessee and Lessor
agree that the Valuing Appraisers shall take into consideration all information
that Lessee and Lessor deem relevant in connection with the determinations of
fair market rental. Lessee and Lessor shall deliver to each other and the
Valuing Appraisers within ten (10) days of the appointment of the Valuing
Appraisers, any and all information reasonably requested by the Valuing
Appraisers with respect to the determination of fair market rental for the
Premises.
The Valuing Appraisers shall make their determinations of the fair market rental
of the Premises for each year of the renewal term as of the Valuation Date no
later than thirty (30) days after the delivery of the Valuation Notice. If the
determinations of the fair market rental for any year in the renewal term by the
two Valuing Appraisers selected by Lessee and Lessor are identical, the fair
market rental for the Premises for such years in the renewal term shall be an
amount equal to such identical determinations. If the determinations of the fair
market rental for the Premises during any year of the renewal term by the two
Valuing Appraisers selected by Lessee and Lessor differ and the higher of such
two determinations (expressed as the aggregate amount of base rental for the
year) does not exceed the lower by an amount greater than ten percent (10%) of
the lower of such two determinations, then the "fair market rental" of the
Premises for such years during the renewal term shall be an amount equal to the
average of such two determinations for the subject year. If the determinations
of the fair market rental of the Premises for any year during the renewal term
from the Valuing Appraisers selected by Lessor and Lessee differ and the higher
of the two determinations(expressed as the aggregate amount of base rental for
the year) exceeds the lower by more than ten percent (10%) of the lower of such
two determinations, then the "fair market rental" of the Premises for such years
in the renewal term shall be an amount equal to the average of the two fair
market rental determinations of the three Valuing Appraisers closest to each
other, or, if the highest and the lowest of such three determinations are equal
distance from the middle of such three determinations, the middle fair market
rental determination.
Page 46
<PAGE>
All fees and costs of the Valuing Appraisers and any other expenses associated
with the determination of fair market rental in accordance with this Exhibit
shall be paid fifty percent (50%) by Lessor and fifty percent (50%) by Lessee.
Page 47
<PAGE>
EXHIBIT "N": RIGHT OF FIRST OFFER
---------------------------------
Provided that Lessee is not then in default under the Lease, Lessee shall have a
continuous right from time to time to lease additional office space within the
building according to the terms and conditions set forth below.
1. RIGHT OF FIRST OFFER. Lessor shall not renew or extend the lease term
--------------------
(including entering into a new lease following the expiration of a primary or
renewal term) nor permit the exercise of a renewal or extension term by any
building tenant leasing on the first floor of the building without first
offering to lease any such space to Lessee; provided, however, that any building
tenant leasing more than 7,500 rentable square feet on the first floor of the
building may exercise any renewal option granted in such tenant's lease
agreement with Lessor and the space to be leased under any such renewal option
shall not be subject to Lessee's right of first offer. The space on the first
floor or the building described in the preceding sentence that is subject to
Lessee's right of first offer is referred to hereinafter as the "Offer Space".
-----------
Lessor shall notify Lessee in writing not less than 180 days prior to the
expiration of any primary, renewal or extension term of any tenant leasing any
portion or all of the Offer Space. Lessee shall have ten (10) business days from
receipt of such notice from Lessor to give Lessor notice of its decision to
lease the portion of the Offer Space so offered. If Lessee does not elect to
lease such space within such time period, Lessor shall be free to enter into a
renewal or extension term on such portion of the Offer Space with such tenant or
to enter into a new Lease of such space with any other tenant. The rental rate
for such additional space shall be at the prevailing market rate (determined
with respect to the building and similar office complexes in the Austin, Texas
area), which market rate shall be determined substantially in accordance with
the provisions set forth on Exhibit "M" attached hereto for the determination of
-----------
market rent. The lease term for such additional space shall commence on the
sooner of the date such space is available for lease or the date the premises
are ready for occupancy by Lessee, and such term shall continue for the then
unexpired current term of this Lease, whether it be the original lease term or a
renewal term, provided, however, if less than three (3) years remain in the
primary term of the Lease at the time Lessee exercises a right to lease Offer
Space, the primary term of the Lease shall be extended for an additional three
(3) years. The lease term and conditions for such additional space shall be the
same as set forth in this Lease except for commencement date and rental rates.
Lessee's rights under this Section 1 shall be continuous and shall apply as to
each availability of any portion or all of the Offer Space, notwithstanding any
prior election not to exercise its rights hereunder to lease part or all of
Offer Space.
To facilitate and effect this Section 1, Lessor agrees that each lease agreement
with any tenant of the building (other than Lessee and Ivy, Crews & Elliott,
P.C.) leasing 7,500 or less rentable square feet on the first floor of the
building shall include a subordination provision subordinating the rights of the
tenants and Lessor to the Lessee's rights set forth herein.
Anything in this Lease to the contrary notwithstanding, the provisions of
Section 1 shall not become effective and Lessee may not exercise its rights of
first offer under this Section 1 unless and until Lessee achieves the profit
level required in Section 10 of Exhibit "J" to the Lease that is necessary to
-----------
reduce Lessee's security deposit under the Lease.
This Right of First Offer is not applicable to the initial lease up of the
building.
2. AMENDMENT TO LEASE. If Lessee elects to lease space in accordance with
------------------
Sections 1 above, Lessor shall submit a lease amendment to Lessee within five
(5) business days after receiving Lessee's notice of such election. Lessee shall
have five (5) business days after receipt of the amendment to execute and return
same to Lessor. If the amendment accurately reflects the provisions of this
Exhibit and is not executed by Lessee and returned to Lessor within such time
period, the right of first offer granted herein with respect (and only with
respect) to the particular space then being offered shall terminate
automatically and without further notice. The amendment shall only amend the
particular lease paragraphs or provisions which are affected.
Page 48
<PAGE>
EXHIBIT "O": Satellite Dish/Antenna
-----------------------------------
Lessor agrees to allow Lessee to install and operate during the term of the
lease a single (one) communications antenna or satellite dish and appurtenant
equipment on the roof of the parking garage adjacent to the Building. Such
antenna must conform to the specifications and drawings, and be in the location
designated by Lessor, on Exhibit "O-1" attached to this Exhibit "O". Such
------------- -----------
antenna may not be placed on any other portion of the roof of the parking
garage, including, without limitation, any portion thereof that is exclusively
for the use of any third party or other tenant of the Building. Such antenna
shall be further subject to all applicable laws, regulations and ordinances, the
rights of other tenants of the Building to install such equipment, and the
obligation of Lessor to maintain the general appearance of the project,
including the roof-top of the parking garage. Lessee shall ensure that such
antenna does not interfere with any communications equipment or other equipment
of Lessor, other tenants in the Building or of other antenna licensees. In the
event of any such interference, Lessee shall take all steps necessary to cause
such interference to cease, including, if necessary, removal of such antenna.
Lessee shall pay as additional rent for such antenna or satellite dish the sum
of Two Hundred Fifty and No/100 Dollars ($250.00) per month, and the cost of the
installation of any such antenna or satellite dish shall be borne solely by
Lessee. Lessee shall indemnify Lessor for any liens, damage, loss, cost,
expense and liability incurred as a result of such antenna and the operation
thereof and all costs or expenses incurred by Lessor in connection with the
installation or use of such communications antenna or satellite dish. Lessee
agrees that Lessee's antenna will be directed to the southwest and will be
pointed upward approximately 20 degrees from the horizon. Lessor covenants that
it will not obstruct the site-line of Lessee's satellite dish with other
antennas or improvements on the parking garage roof and shall not permit the
obstruction by other tenants of the building or antenna licensees upon the
parking garage roof of the site-line of Lessee's satellite dish.
Page 49
<PAGE>
BASIC LEASE INFORMATION
The following Basic Information is incorporated into and made a part of this
lease. Each reference in this lease to any of the Basic Lease Information shall
mean the respective information set forth below and shall be construed to
incorporate all of the terms provided under the particular lease paragraph(s)
pertaining to such information. In the event of a conflict between any Basic
Lease Information and the lease, the lease shall control.
IDENTIFICATION DATE OF LEASE: 07/08/99 [X] New [_] Renewal [_] Expansion
[_] Other
1. Name of Building: Plaza 7000 Address: 7000 North Mopac / Austin,
------------------ ---------------------------
Texas 78731
------------
2. Owner/Lessor: Plaza 7000, Ltd. Address: 7200 North Mopac #420 /
---------------------- ---------------------------
Austin, Texas 78731
---------------------
3. Suite Number: 400
----------------------
4. Usable SF: 38,373 Add-On Factor: 5.88% Rentable SF: 40,629
------------- --------- -------
Total Bldg. SF: 153,694 Pro Rata Share: 26.43%
-------- --------
5. Lessee Name: drkoop.com, Inc.
---------------------------------------------------------------
a) Lessee is, [X] a corporation, (check one).
b) Lessee Address for Notice:____________________________________________
c) Lessee Contact Person:____________ Phone: _____________ Fax:__________
d) Lessee Taxpayer ID#:______________ SS#:________________ DL#/State:____
6. Lease Term: eighty-five (85) full calendar months
------------
Commencement Date: 09/01/99 Expiration Date: 09/30/06
-------- --------
Rent and Pass Thru Commencement Date: 09/01/99 Expiration Date: 09/30/06
-------- --------
<TABLE>
<CAPTION>
7. Base Rent: Term Monthly Rent Term Rent Annual Rent psf of NRA
---- ------------ --------- ----------------------
<S> <C> <C> <C> <C>
Month 1 $ 0.00 $ 0.00 $ 0.00
Months 2 through 13 $60,943.50 $731,322.00 $18.00
Months 14 through 25 $62,636.38 $751,636.56 $18.50
Months 26 through 37 $64,329.25 $771,951.00 $19.00
Months 38 through 49 $66,022.13 $792,265.56 $19.50
Months 50 through 61 $67,715.00 $812,580.00 $20.00
Months 62 through 73 $69,407.88 $832,894.56 $20.50
Months 74 through 85 $71,100.75 $853,209.00 $21.00
Late Charge: 3% of monthly base rent. Date assessed: Five (5) days after due date.
-------------------------- ----------------------------
</TABLE>
8. Expense Stop: $0.00 (NNN) per square foot per year
------------
a) Estimated Operating Expenses Per Budget $ 8.50 / sq.ft./year
--------------------
b) Less Expense Stop $ 0.00 / sq.ft./year
--------------------
c) Estimated Initial Pass-Thru $ 8.50 / sq.ft./year
--------------------
d) Estimated Monthly Pass-Thru (actual) $28,778.88/mo
--------------------
(Subject to annual adjustment for actual expenses)
<TABLE>
<S> <C>
9. Parking: Number of Reserved Spaces: 1:2000 Rate Per Space: See Special Conditions
--------------------- ----------------------
Number of Unreserved Spaces: 1:250 Rate Per Space $ 0.00 / month
------------------- ----------------------
Customer parking changes ( ) are or ( X ) are not allowed.
</TABLE>
10. Security Deposit: c) Irrevocable Letter of Credit: $250,000.00
-----------
Rec'd: _________ Yes _________ No
11. Tenant Finish Out Provisions:
Page 1 of 2
<PAGE>
a) ____________ As Is
b) $20.00 /sq. ft. of net rentable area allowance
------------
c) $812,580.00 (plus allowance for must take space) total allowance
------------------------------------------------
(actual amount)
d) Amount of overage owed by Tenant $__________ Payment Schedule:_________
e) Notes:_________________________________________________________________
12. Special Conditions (Exhibit J)
a) Current Financials received: _____ Yes ____ No
b) Consumer Report received: _____ Yes ____ No
c) OT HVAC charge: X Yes ____ No; $15.00 per hour per
----- ------
half floor
d) Notes:_________________________________________________________________
13. Guaranty Information
This lease [_]is or [X]is not (check one) guaranteed by others. The name
and title of each guarantor is shown below and on the signature page(s) at
the end of this lease.
14. Lessee Signature Requirements
Lessee is [X]a corporation, (check one).
Such partnership, joint venture, unincorporated association, or corporation
is organized or chartered under the laws of the State of Delaware.
--------
Lessee's name stated at the beginning of this lease [_]is or [X]is not
(check one) an assumed name. If so, has an assumed name certificate name
been received? [_]Yes or [_]No
<TABLE>
15. Broker Information:
<S> <C>
a) Listing Broker Company and Agent: The Kucera Company / Steve McMillon and Jeff Henley
---------------------------------------------------
b) Leasing Co-Broker Company and Agent: Insignia/ESG / Bart Matheney
---------------------------------------------------
c) Tenant Rep letter attached: _______ Yes X No
-----
d) Written agreement for renewal commission: _______ Yes X No _______ %
-----
</TABLE>
16. This Basic Lease Information Form is a part of the above described lease.
17. Signatures:
LESSOR LESSEE
PLAZA 7000, LTD. drkoop.com, Inc.
-------------------------------- -----------------------------------
Printed name of company or firm Printed name of company or firm
RON POLASEK Susan M. Georgen-Saad
-------------------------------- -----------------------------------
Printed name of person signing Printed name of person signing
_______________________________ ___________________________________
Authorized Person's Signature Authorized Person's Signature
VICE PRESIDENT, 7000 MANAGEMENT, L.L.C.
AUTHORIZED MANAGING AGENT FOR
PLAZA 7000, LTD. Chief Financial Officer
-------------------------------- -----------------------------------
Title of person signing Title of person signing
________________________________ ___________________________________
Date signed (must be filled in) Date signed (must be filled in)
Page 2 of 2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DRKOOP.COM,
INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> SEP-30-1998 SEP-30-1999
<CASH> 345 49,077
<SECURITIES> 0 0
<RECEIVABLES> 0 2,818
<ALLOWANCES> 0 (100)
<INVENTORY> 0 0
<CURRENT-ASSETS> 514 75,009
<PP&E> 271 6,861
<DEPRECIATION> (40) (740)
<TOTAL-ASSETS> 756 96,493
<CURRENT-LIABILITIES> 1,407 15,787
<BONDS> 0 0
0 0
0 0
<COMMON> 10 30
<OTHER-SE> 641 80,676
<TOTAL-LIABILITY-AND-EQUITY> 756 96,493
<SALES> 0 4,333
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 996 28,643
<OTHER-EXPENSES> 0 12,438
<LOSS-PROVISION> 4,489 100
<INTEREST-EXPENSE> 26 587
<INCOME-PRETAX> (5,460) (62,663)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,460) (62,663)
<EPS-BASIC> (1) (4)
<EPS-DILUTED> (1) (4)
</TABLE>
